Court refuses to strike out application to restrict former concrete director

The High Court has refused to strike out an application to restrict from directorships the former chief executive of a liquidated concrete products group over what a liquidator described as his knowledge of alleged fraud "on an enormous scale".

John McKeogh was chief executive and finance director in the Whelan Group, with offices in Limerick and Ennis, Co Clare, until it collapsed in 2010. Whelan was one time one of the country's biggest concrete product suppliers.

Liquidator Carl Dillon later brought proceedings under company law seeking to restrict certain former directors, including Mr McKeogh, from acting as company directors for five years subject to certain conditions.

Mr Dillon said records indicated there was an estimated deficiency in the statement of affairs of €41.3 million.

There was an alleged failure to address the cause or consequences of the company’s insolvency at any time prior to a failed attempt by the group in December 2010 to petition for examinership. The examinership application itself revealed to some degree “the serious management failings” that contributed greatly to losses, Mr Dillon said.

There was particular concern over alleged fraud involving the books of two of the five companies in the group, the quarrying firm, Whelan Limestone Quarries, and the contracts firm, Whelan Limestone Quarries (Contracts).

Mr Dillon said Mr McKeogh was “or should have been aware of a fraud of the most serious kind that was perpetrated over an extended period of time, on an enormous scale”.

Restriction declarations have already been made against three directors but Mr McKeogh contested the application against him.

Resigned

Mr McKeogh, who is also an accountant, resigned as a director in November 2010 just prior to the company being put into liquidation. Mr Dillon was satisfied from his investigations Mr McKeogh had “an integral role” in the running of the company and this did not absolve him from responsibility.

The allegation concerning fraudulent management of book debts related to the notification to the commercial finance arm of Bank of Scotland Ireland (BOSI) of invoices which, although notified as sales by the quarrying company, were in fact generated by the contracts company for work done by that company. The contracts company, the liquidator said, was not a party to the agreement with BOSI.

The quarries company had been keeping two debtor ledgers, one for the bank and an accurate one for a lesser sum, Mr Dillon said. This “systematic duplication of invoices was both deliberate and dishonest”, he said.

The restriction application came before Mr Justice Michael Quinn who was told by Mr McKeogh he had been provided with very little information (regarding books and records) by the liquidator which meant he was not in a position to respond to the allegations with the precision they require.

In relation to the allegations of fraud concerning BOSI, Mr McKeogh said his recollection was that no invoices were issued by the contracts company to any party and then submitted to BOSI for payment.

He needed access to certain information in relation to the allegation of trading while insolvent and believed that the position in relation to secured and unsecured creditors improved during 2009 and 2010.

He said it was unjust that the liquidator should be permitted to “throw out the grenade” of a fraud allegation and then not make available the documents which would enable him to respond to the proceedings.

Mr Justice Quinn refused Mr McKeogh’s application to strike out or stay the restriction proceedings.

Sworn evidence

However, he was not closed out from making his case in response to the proceedings by giving sworn evidence as to his conduct when he was a director of the company, the judge said.

He was also not closed out from referring to any deficiency in documentation. The court heard some of the relevant documentation may have been destroyed following the sale of the company’s former premises by a receiver.

Insofar as Mr McKeogh claimed to be prejudiced in advancing any documentary evidence he needs, he had been found to have contributed materially to that deficit by not taking opportunities offered to him to examine the documents when they were available, he said.