will asic finally take action against this shocking phoenix company in turnbull's own electorate?

The real test for any improvement to ASIC, includes solving Australia's $3 billion problem of phoenix companies. This letter below was recently provided by the Deputy Opposition Leader Tanya Plibersek to Prime Minister Malcolm Turnbull, on behalf of Australian Entrepreneur & Inventor Costa Koulis, in light of the National Innovation Agenda and the issue of phoenix companies...

​
Malcolm Turnbull MP  
PO Box 545  
​Edgecliff NSW    
14 March 2016    

Dear Prime Minister,    

The Deputy Leader of the Opposition and the Shadow Minister for Foreign Affairs and International Development, The Hon Tanya Plibersek MP, has provided this letter to you on my behalf, in support of Australian Innovation and in support of ending the practice of illegal ‘phoenix companies’, which remains an ongoing threat to innovation and our economy.    

I am writing to you in particular Mr Turnbull, to let you know of a phoenix company matter involving Australian Innovation, that continues to unravel more each day.
   
What makes this worse Mr Turnbull, is that this has unfolded right in your very own Wentworth  Liberal backyard.    

It involves a man who only as recently as this past weekend, continues to mislead the public, at the expense of innovation in Australia, using a phoenix company to do it.    

You may even know this person, but I don’t know how well you know him.    

This phoenix company is located just down the road from your office.  

‘Phoenix company’ activity is described by ASIC as serious and costs the Australian economy up to
$3 billion per year. Phoenix companies affect countless Australians every day.  

Our precious court system cannot solve the problem of phoenix companies on its own, which is why we have ASIC to assist, but ASIC does not always assist.    

Without ASIC intervention, innovative companies that find themselves faced with misconduct by directors or administrators that execute phoenix company schemes are at serious risk, because challenging misconduct or anything at all in the civil court, requires a company to have funds.

Innovative companies are typically rich in Intellectual Property assets, but low in funds to fight effectively in court, and this makes them the perfect target for phoenix company schemes, especially when ASIC does not assist.    

Mr Turnbull, we need to fix ASIC.   
 
I am an Australian entrepreneur and inventor, I created a product known as ‘Live Board’ for the  real estate industry, which is the world’s first digital real estate ‘for sale’ sign. My innovation  however, was taken through a phoenix company and renamed to ‘Cody Live’.    

This brief summary below, starts off with a lie.    

The Cody Lie    

In 2012, I appointed a director named Pierce Cody to assist with commercialising my invention,  but instead of fulfilling his appointment contract, he illegally diluted my majority shareholding, enticed creditors to pursue bankruptcy against me, renamed the product after himself, from ‘Live  Board’ to ‘Cody Live’ and created a deliberate voluntary administration to take the company’s assets, through a newly created phoenix company ‘Cody Live Pty Ltd’.    

Cody Live is a Cody lie.    

Whittens & McKeough Lawyers    

Mr Cody could not do this on his own. There is a law practice that helped Mr Cody create this phoenix company. It is a Sydney law firm, Whittens & McKeough. Its directors include Alistair McKeough, Andrew Whitten and Ray Whitten, a former Wentworth Liberal Vice President.    

Whitten’s law firm used to be the lawyers of Live Board Holdings Limited, but instead of  protecting Live Board Holdings as their client, they actively acted ​against ​their own client, to assist Mr Cody with executing a scheme to take the assets of Live Board Holdings ­and transfer  them to phoenix company Cody Live Pty Ltd.    

The Friendly Administrators    

Mr Cody simply caused a voluntary administration at Live Board Holdings Limited by issuing shares illegally and then spending the majority of $1.05 million investment funds obtained. He appointed friendly administrators Manfred and Justin Holzman to sell him back the assets of Live Board Holdings, who also actively assisted Mr Cody and his co-­directors with their misconduct and this phoenix scheme.  

Collectively, Mr Cody, Whittens & McKeough Lawyers and administrators Manfred & Justin Holzman, not only assisted with taking the assets of Live Board Holdings, but they also set the  unfortunate precedent that any Australian Innovation can be taken through a phoenix company,  using a 'friendly administrator’ and civil court procedures to do it.    

This is what can happen in the absence of ASIC.   
  
The problem of appointing ‘friendly administrators’ was highlighted by His Honour Justice  Lindgren back in 2006, but the Government still allows it to happen today. ‘Friendly  administrators’ destroy lives and destroy innovation.    

The ‘Side Deal’ During the Administration    

Just to confirm the extent of this particular phoenix scam, after Mr Cody, through Cody Live Pty  Ltd, ‘purchased’ the assets from the same company he placed into voluntary administration,  Cody Live Pty Ltd subsequently received a series of payments that totalled more than half their  own ‘purchase price’ back into their own bank account from the administrator.    

To top it off, under this ‘deal’, we discovered that Mr Cody had purchased the assets of Live  Board Holdings for $305,000, but was owed back approximately $1.05 million after the sale.
The  phoenix company took the assets for free, with money still owing to it.    

Administrators and directors can do just about anything when we don’t have ASIC intervention.  

Concealment of Documents and Attempting to Avoid trial    

Not only did the phoenix company ‘buy’ the assets of Live Board Holdings, but also all its  documents, right in the middle of civil court proceedings.    

Imagine robbing a bank and then being able to purchase the evidence you left behind.    

The way they used civil court procedures to take the assets of Live Board Holdings without yet  being tried for misconduct, is a method open to anyone appointing a ‘friendly administrator’,  when you don’t have ASIC intervention.    

After deliberately causing a voluntary administration of Live Board Holdings, they then sought  ‘Security for Costs’ against Live Board Holdings, in a ‘procedural hearing’ with missing evidence  against them, in an attempt to stop the case from going to trial.    

We have yet to get to trial for director breaches and it has been over 2 years.    

On 8 December 2015, just a week after a ‘procedural hearing’ decision, throughout which Mr Cody was claiming to have purchased the assets at a ‘legitimate’ price of $305,000, Mr Cody then filed a ​1 year​  ​ overdue ASIC document which confirmed the true value of the Live Board Holdings assets that he purchased, to be valued at approximately $9.7 million all along.    

This would have been used against phoenix company Cody Live Pty Ltd in the procedural hearing, had it not been for their failure to lodge it with ASIC a year earlier.    

This is what can happen to any innovative company when it doesn’t have ASIC’s assistance.    
 
Let’s End Phoenix Companies    

I did not ever anticipate, as part of innovation in the real estate industry that I will also need to  embark on a cause to end phoenix companies in Australia. However, I am now committed to  using what I have learned first hand, to end this practice and to help the countless Australians, who find themselves impacted by phoenix companies every day.  

In order to boost Australian innovation and excel our economy globally, I believe we need to  make the term ‘friendly administrator’ a thing of the past and improve ASIC’s ability to enforce  the corporations law.    

We often hear the same reasoning for a lack of enforcement again and again, for example that  ASIC has limited resources. I say, we either have a corporate regulator or we don’t. We must  improve ASIC.    

We need a corporate regulator that has the ability to protect the electronic cash and intellectual property held by our companies, especially our innovative companies, just like our police force does an excellent job in protecting our physical property or cash held in our homes. It’s the only  way we can truly compete globally as a nation.    

In any case, no matter what the final solution may be, any National Innovation Agenda should come complete with additional ​ law enforcement ​ protection, to ensure we prevent the events at Live Board Holdings from happening ever again to other innovative companies, startups​  ​and entrepreneurs.    

Live Board Holdings has yet to receive assistance from ASIC. It remains open for ASIC to take  action against these former Live Board Holdings directors and administrators, who have used corporate procedures within the civil court system itself and relying on a lack of legal funds, to assist them in executing their phoenix company scheme.    

These former Live Board Holdings directors and administrators are still dealing with the public today.

Mr Turnbull, I ask you to walk out of your office on New South Head Road, Edgecliff, look down  towards the Cody lie in your own Wentworth Liberal backyard, and ask yourself, is this how we are going to encourage our Australian entrepreneurs to innovate?    

We are now able to use what we have learned at Live Board Holdings to formulate policy, help our future entrepreneurs and tackle the ‘phoenix company’ issue head on.    

It’s time we fixed this $3 billion problem.     
 
I am open for consultation to the Government on this matter.    

Yours Faithfully, 
Costa Koulis  
Entrepreneur. Inventor.  
W: innovationmentor.com.au  
E:  ​costa@innovationmentor.com.au