First shadow director jailed in insolvent trading case
Liam WalshReporter
Feb 9, 2020 – 2.50pm
A groundbreaking case has seen a shadow director jailed for criminal insolvent trading, with the founder of collapsed whitegoods outfit Kleenmaid behind bars.
Andrew Eric Young, 66, was sentenced on Friday afternoon after trials facing many hurdles and 11 years after the business collapsed owing $100 million.
Kleenmaid's Andrew Young has been found guilty by a jury of 19 offences. Glen Hunt
Young had been found guilty by a jury of 19 offences, ranging from fraud to insolvent trading.
The fraud incurred a nine-year sentence, but Young also received three years of imprisonment for insolvent trading to be served concurrently.
"The damage to the businesses of others and the mental health of others is a very serious risk," Justice Brian Devereaux said. "People in the commercial community must be put on notice that dishonesty will bring commensurate punishment."
He must serve at least five years in jail.
One of the main hurdles for Australian Securities and Investments Commission investigators and prosecutors was in presenting insolvent trading.
"Insolvent trading is a very difficult case to prosecute and there have only been a handful of cases brought by ASIC," a spokeswoman for the regulator told The Australian Financial Review.
It was also the first criminal case ASIC had brought against a shadow director. A shadow director is not officially listed as a company officer, but is deemed to be acting or giving instructions in the background.
The jury had accepted – despite Young's protestations – that he was a "de facto director" of a key company, Justice Devereaux said.
Sunshine Coast-based Kleenmaid employed about 200 staff and had 22 stores, offering kitchen appliances and importing and distributing whitegoods. But its failure in April 2009 sparked an uproar with customer deposits of almost $26 million among debts tallied by liquidators Deloitte at $97 million.
The insolvent trading charges included two counts on incurring debts of $3.5 million in July 2008, and 15 counts on debts worth more than $750,000 for between October 2008 and April 2009.
Deloitte liquidator Richard Hughes said the jury's conclusion had confirmed "the findings of our investigations, and in particular … regarding insolvent trading".
Young was found guilty of defrauding Westpac in 2007 for a $13 million loan facility.
Crown prosecutor Lincoln Crowley made submissions about money flowing between companies in the group, with Young involved in trying to keep the business operating "by hook or by crook".
"Ultimately, it was by crook," he said.
Mr Crowley also outlined steps taken to avoid reality – to in effect "change red into black" in accounts.
The Brisbane District Court was overflowing with supporters and family of Young, whom the court heard was an active member of the Church of Jesus Christ of Latter-day Saints.
The trial started in September last year and finished in January, featuring a myriad of setbacks including Young at one stage arguing he needed to have a colonoscopy mid-trial.
Even his day of sentencing featured hurdles for the self-represented Young, who was granted additional time after saying he had not had a chance to read prosecution submissions.
ASIC had embarked on a series of prosecutions, charging Young first in December 2011. This marked Young's third trial. An initial action in 2016 stopped in a mistrial and a subsequent 2017 action saw the jury discharged due to health ailments striking Young.
Another formal Kleenmaid director, Gary Collyer Armstrong, pleaded guilty in October 2015 and received a sentence of 5½ years.
A second formal director, Andrew's brother Bradley Wendell Young, was found guilty of 18 offences and was given a nine-year prison sentence in 2016.
Liam Walsh is a reporter with the Australian Financial Review Email Liam at liam.walsh@fairfaxmedia.com.au
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