Lightning strikes twice: $7m fraud at firm controlled by family of late BRW Rich Lister Allan Scott
February 25, 2015 – 5:19PM
Lightning does strike twice. In a bizarre turn of events, the ASX-listed transport group K&S Corporation, controlled by the family of the late trucking magnate Allan Scott, has uncovered a $7.1 million corporate fraud with the help of forensic accountants McGrathNicol.
The misappropriation of funds comes more than a decade after the company was in the spotlight after a much larger fraud of $22 million was revealed, with the former financial controller of K&S and other entities in Mr Scott’s empire sent to jail in a totally separate set of events.Mr Scott, who was estimated to have a fortune of $350 million-plus by BRW‘s Rich List when he died in 2008 at the age of 85, was still alive when the first round of corporate fraud was committed. Craig Telford, the company secretary and financial controller of K&S, in 2004 was sentenced to jail for 14 years, with a non-parole period of 9½ years, after admitting to 60 fraud offences to fuel a gambling obsession which involved placing single bets of $300,000 on horse races.
The late trucking magnate Allan Scott.
K&S, which last year merged with Scott Corporation to form a transport group with annual revenues of $360 million, revealed on Wednesday it had been the subject of a “fraudulent misappropriation” of $7.1 million, spanning the period of 2007 to 2014.
Victorian Police have arrested and charged two former employees of K&S and their investigations are still continuing.
K&S’s new managing director Paul Sarant, who took up the position in April, 2014, was at pains to emphasise that K&S has a “comprehensive crime insurance policy”.
McGrathNicol provided a preliminary forensic accountants report on February 17 this year and based on the contents of that document, K&S has started the process to recover funds from its insurer.
K&S, which on Wednesday reported a 16 per cent increase in net profit after tax to $6.55 million for the first half of 2014-15, said that about $400,000 of the fraudulent misappropriations happened in the current financial year.
The company has made a provision of $1.9 million for expenses, claim costs and potential liabilities arising from the fraud. It wouldn’t comment on where the fraud occurred but the investigation by the Victorian police indicated it was in that state.
K&S is now headquartered in suburban Melbourne. Mr Scott, who built his business empire from his home base of Mount Gambier in the south-east of South Australia after starting out in 1952, was one of the richest people in South Australia at the time of his death. He had owned retail and media businesses also, and had extensive real estate holdings. He was a passionate supporter and backer of the Port Adelaide Football Club in the Australian Football League.
His family is the largest shareholder in K&S, which also warned on Wednesday that the Western Australian arm of its transport business had been hurt by the reduction in capital spending in the mining sector.