Monday, July 9, 2012

Hastie early exit advice ignored, says report. Claim that Deloitte urged board to consider employee dismissal issues a year ago.

By Business editor Peter Ryan

A draft report into the collapse of the Hastie Group's Middle East operations says a proposal made last year for a "managed wind-down" was ignored.

Listen to the report from this morning's edition of AM.

According to the report, the accounting firm Deloitte recommended a "controlled closure" and warned that employee dismissal issues needed to be considered.

The review - conducted by remaining Hastie managers on the ground - slams the Hastie board for mishandling the company's exit which has left a thousand local labouring staff without entitlements.

The executive summary obtained by AM reveals that Hastie appointed Deloitte to provide proposals on reducing its exposure in the Middle East, well before the group's 44 companies collapsed in May.

Deloitte told the Hastie board on August 17 last year that there was an opportunity to exit the Middle East and to ensure employee matters were handled appropriately.

The report says the Deloitte recommendation "clearly highlighted that a managed wind-down required a controlled closure of the Middle East businesses and that there were employee issues to be considered."

"This advice was disregarded by the Hastie Board, their banking syndicate and authorised senior management in the UAE and Hastie have subsequently completely mismanaged their exit from the Middle East."

Charles Lever, a former Hastie executive manager who authored the report, says Hastie bungled an opportunity for a clean exit that protected staff and creditors.

"They took it upon their own remit to close the business down without having taken into account what Deloittes had obviously advised them and what we and other people from the Middle East management had advised them was necessary," Mr Lever told AM.

"The people providing the food to the labour camps refused to provide food. The labourers didn't get paid from May, and that of course causes them problem in terms of getting funds back to their families, whether it be in Bangladesh, the Philippines, India or even if it's western expats getting back to their family."

The ultimate collapse of Hastie in the UAE left around a thousand labourers out of work, and while some have been redeployed, none have received their termination entitlements as required under law. The collapse initially claimed 2,700 jobs in Australia although many workers have now been redeployed.

Local managers in the UAE were left to deal with distressed employees after A$3 million was drained from Hastie's Dubai bank account days before administrators were appointed on May 28.

Post-dated cheques, written before the collapse, are starting to bounce opening the prospect of arrest and imprisonment for staff.

Already, one former senior manager, Gavin Appleby, has fled to Norway to avoid arrest after he had signed a number of cheques.
The report also slams a decision by the administrator PPB Advisory to allow a senior Hastie executive, Gary Allen, to flee the UAE with the equivalant of A$100,000 which was an emergency fund meant to cover staff payments.

Joint administrator and PPB partner Craig Crosbie has defended the decision to allow the emergency funds to be taken.

"PPB Advisory was happy to make available company funds to Hastie International management who required the funds for expenses on the condition it was properly accounted for," Mr Crosbie said in a written statement.

"We left it up to the general manager to make a judgment as to how the funds would be used."

PPB says it had no involvement in Hastie affairs prior to its appointment and could not comment on claims that advice from Deloitte had been ignored.

PPB has previously said it is working to manage "a complex situation" but is constrained because the Middle East is not covered by Australian law.

Twitter: @peter_f_ryan

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