6.5 X 11 Threelines.P65

Cambridge University Press 978-0-521-82684-6 - Corporate Collapse: Accounting, Regulatory and Ethical Failure, Second Edition Frank Clarke, Graeme Dean and Kyle Oliver Index More information

Index

a pretium, 164 effectiveness of, 106 AAS 25, 38 equity, 138 AAS 3, 34, 193, 194 failure, 13, 14, 64, 211, 233, 295 AAS 6, 149 feral, xxiii, 30, 196, 291, 294, 327 AASB 1003, 39, 40 GAAP-based, 25–42, 241, 243, 261, AASB 1008, 38, 39 310, 311 AASB 1009, 39 group, 64, 65, 70, 117–18, 150 AASB 1010, 32, 37, 39 historical cost, 53, 89, 239, 272, 296, AASB 1011, 39 301 AASB 1013, 39, 232 reform of, xxiv, xxv, 7, 14, 20, 30, AASB 1014, 38 49, 52, 219–20 AASB 1015, 39 role of, xxii, 13, 22, 41, 51, 52, 64, AASB 1018, 35, 39, 53 106, 186–97 AASB 1019, 39 accounting practices, 216, 303 AASB 1020, 39, 240, 241, 271 Adsteam, 165, 167 AASB 1021, 39, 240 Bond Corporation, 193, 196–7 AASB 1022, 39 Cambridge Credit Corporation, AASB 1023, 38, 39, 98, 239, 320 113–22 AASB 1024, 158, 163, 256, 262, 268, diversity of, 26, 27 269, 270 HIH, 234–7 AASB 1038, 38 Reid Murray, 60–5 AASB 1040, 35, 53, 239 utility of, 90, 125, 219 AASB 1041, 37, 39, 53, 239, 285 Westmex, 206–8 Abedi, Aghan, 16, 22 Accounting Principles Board, 298 accounting: see also compliance; Accounting Standards consolidation accounting; compliance with, 23, 25–42, 89, profession, accounting; 190–1, 300–1, 311, 318, 327 serviceability; tax effect accounting compulsory compliance with, 241–2, and consumers, 296–7, 303–5, 326 294, 296, 310, 328–30 Continuously Contemporary, 278, and consolidation, 165, 187, 256, 280, 283 270, 272–3, 281 creative, xxiii, 25–42, 291, 294–5, looseness of in Australia, 184–5 300, 311, 327 manipulation of, 17, 33 criticism of, 16–18, 22–3, 117–22, proliferation of, xxvi, 18, 21, 23, 30, 131, 151, 219–20, 232, 329 47, 84, 237, 297, 298

371

© Cambridge University Press www.cambridge.org Cambridge University Press 978-0-521-82684-6 - Corporate Collapse: Accounting, Regulatory and Ethical Failure, Second Edition Frank Clarke, Graeme Dean and Kyle Oliver Index More information

372 INDEX

Accounting Standards cont’d Ansett, Sir Reginald, 85, 137 serviceability, 22, 40, 234, 239, 300, AOL Time-Warner, 6, 34 307 APA/Unity, 276 setting, xxiv, 36, 211, 298, 304, 315, appreciation, 167 328 APRA, 237, 316 Accounting Standards Committee, and HIH, 3, 222, 227, 232, 238–9, UK, 19 242–3, 325 Accounting Standards Review resources of, 14, 18 Committee, NSW, 25, 27, 38, 89, Argenti, John, 29, 30, 32, 58, 72, 222, 266, 294 224, 263 Accounting Standards, setters of, 149, Argyle Diamond Mining, 173 150 Ariadne, 7, 27, 138, 150 Adelaide Brighton, 36 Arizona Baptist Foundation, 216, 242 Adelaide Steamship see Adsteam Arnott’s, 174 Adelphia Communications, 3, 4, 5, 6 art works, investment in, 177 adjustments, 35, 36, 40 artifacts of consolidation, 47, 84, 99, Adler, Rodney, 5, 15, 22, 64, 66, 226, 187, 270, 272, 310 244, 296 Asarco, 167 action against, 218, 228 ASC, 216, 267–8, 301, 316, 331 Adsteam, 153–68, 111 and Adsteam, 153, 160, 161, 165, accounts, 30, 138, 151, 242, 261, 242 301, 323 class order deeds, 225, 255–6 acquisitions, 155–61 major investigations, 146–8 balance sheet summary, 156–7 resources of, 18 collapse of, 7, 27, 141, 220, 237, 308 ASCPA, 290 group structure, 109, 154, 158, 172, ASIC, 7, 23, 192, 216, 237, 242, 300, 210 314, 316 success, 8, 15 and Adsteam, 167 write-downs, 34 and Ansett, 264–5 Adsteam Marine, 167 and compliance with standards, 192, Air New Zealand, 249, 257, 264 301, 323, 331 Airship Industries, 174 and HIH, 228, 231, 325 Allied-Lyons, 183 resources of, 14, 18 Amalgamated Industries Ltd, 170 ASL, 41, 90, 91, 126–40, 149, 264 American Institute of Certiﬁed Public accounting, 30, 136 Accountants, 297 borrowing, 126, 130–3, 140 AMP Society, 8, 79, 208 capital structure, 130–1 Andersen, 17, 24, 216, 219, 307, 308 collapse of, 237 Bond Corporation, 195, 323 debts, 136–9 Enron, 6, 22, 259 diversiﬁcation, 127, 129, 130, 133–5 HIH, 22, 23, 224, 242, 324 liquidity, 133 Ansett, 15 real estate investment, 129, 130, and Air New Zealand, 249, 257, 133–5, 136, 137 264–5 role of accounting, 136–9 and ASL, 41, 129, 139–40 valuation of assets, 136, 137 auditor independence, 309 ASRB 1012, 194 collapse of, 5, 27, 216, 279 assets Ansett, Bob, 8, 146, 149 aggregation of, 251

INDEX 373

ASL, 132 Australian Factors group, 50, 67 Cambridge Credit, 118, 125 Australian Finance Conference, 123, HIH, 239–41 130–1, 132–3, 134–5 marked-to-market, 115, 131, 175, Australian Petroleum Fund, 200 239, 306 Australian Shareholders’ Association, mechanisms for valuation of, 32, 36, 237 84, 90, 161, 168, 216, 240 Australian Society of Accountants, Reid Murray, 57, 61, 63 51–3 write-offs, 40 Australian Taxation Office, 160 Associated Securities Ltd see ASL Avram, John, 147 ASX, 18, 185, 204–5, 210, 237, 256, 300, 302, 314 back-to-back financing, 100, 178, 248, Statex, 115, 122, 138, 304 279 audit committees, 220, 237, 242, 301, balance sheets, 35, 36, 40, 53, 299 312, 314 Banco Ambrosiano, 22, 100 audit failure, 13, 14, 233, 309–12 Bank of England, 105 Auditing Independence Supervisory Bankers Trust, 207 Board, 312 Barber, Bernard, 326 auditing practices, 24, 125, 216, 223 Barings Bank, 80, 107, 318 changes to, 5, 307 Barry, Paul, 169, 171, 175, 195, 263 criticism of, 125, 151, 295 Barton, Alexander, 30 effectiveness of, 90, 106 Basin Oil N.L., 172 HIH, 227–8, 234–7 Battery Group, 7 auditing profession, 12, 223 Baxt, R., 254, 257, 258, 264 liability, 218 BCCI, 16, 21, 22, 220, 308 negligence claims against Beckwith, Peter, 181 auditors/accountants, 13, 292–3 Bell Resources, 160, 178, 185 no-win situation of, 24, 39, 324–5; ‘cash cow’ role, 70, 170, 178, 180, see also mission impossible 251, 271, 274, 280 Auditing Standards, 17, 18, 21, 23, 30, Berle, A.A., 30 237, 297, 305 BHP, 36 compliance with, 242 Big Five accounting firms, 216, 309 auditor independence, 168, 218, 242–3, Big Four accounting firms, 6, 216, 309, 295, 307, 309, 311–2, 321 324 auditor rotations, 19, 220, 242, 312 Birkett and Walker, 49, 50 AUS 202, 305 Blaxland, Christopher, 146 Auspet, 200 blimp, Bond Corporation, 142, 173–4 Aust-Wide Trusts, 7 Blunt, John, 21 Austmark International, 173 Bolte, Sir Henry, 85 Austotel Trust, 175 Bond, Alan, 64, 142, 178, 183, 204, Austral, 116 291, 296 Australia 2000 Pty Ltd, 149 broadcasting licences, 182, 185 Australian Accountancy Research criminal charges, 146, 170, 180, 280 Foundation, 66 success, 4, 8, 15, 66, 149, 169–70 Australian Accounting Standards Board, Bond Brewing, 177, 180, 181, 185 234 Bond Corporation, 3, 4, 111, 125, 146, Australian Bankers Association, 51 169–97 Australian Broadcasting Tribunal, 185 accounting, 186–97, 208, 249, 327

374 INDEX

Bond Corporation cont’d Budget Corporation, 7, 146, 317 and Andersen, 24, 216, 323 Burhead, 118 asset sales, 182 Burke, Brian, 180 back-to-back financing, 100, 179, Burmah Australia Exploration, 172 248, 279 Burmah Oil Australia, 172 balance sheet summary, 188–9 Bush, George W., 4, 6, 12 and Bell Resources, 70, 170, 178, Business Council of Australia, 19 180, 251, 271, 274, 279 collapse of, 7, 27, 220, 237, 308 Cadbury Committee, 299, 300, 301 criminal charges, 317 CAL Resources, 200 debt, 186–7 California Insurance, 224 diversification and divestment, Calvi, Robert, 22; see also Vatican 172–80 Bank; Banco Ambrosiano growth strategy, 170–2, 177, 187 Cambridge Credit Corporation, 90, 91, and Lonrho, 183–6 107–25, 135, 159, 275 reported results, 30, 138 accounting, 113–22, 249, 261 restructuring, 182 borrowing, 119, 123 structure of, 176, 184 cash flows, 122 write-offs, 34, 151 collapse of, 27, 106, 122–5, 149, Bond Corporation Finance, 180 171, 220, 237, 308 Bond Media, 177 debts, 116–17, 119 Bond Mining and Exploration Pty Ltd, domination by one person, 111, 124 172 front-end sales, 113–16 Bond Television, 177 growth of, 108 Bond University, 175 reported results, 30, 138 bonds, convertible, 191–3 valuation of assets, 120–1 Borg, L.A., 63 Campbell’s Soup Company, 174 Bosch Codes, 300 capital boundary problem, 257, 258–9, Bosch, Henry, 264, 278, 283 Accounting Standards, 297, 301 capitalisation of expenditure, 151, 239, creative accounting, 29, 31–2 245, 301, 329 criticism of accounting system, capitalisation of expenses (costs), 22–3, 28, 124, 205–6, 294 61–2, 216, 310 deregulation, 208 Carbir, 116 ethics, 291, 317 Carsberg, Sir Bryan, xxv, 19 Boskovitz, Katy, 148 Carter, Gary, 146 Brash Holdings, 210 Carter, Louis, 148 Bremer, 118 CASAC (Companies and Securities Bresciani-Turroni, 136 Advisory Committee), 58, 198, Brickworks Ltd, 256, 257 249, 254, 268, 274, 275 Brierley, Sir Ronald, 30, 141, 155, 160, Castlemaine Tooheys, 15, 175, 190 162–3, 178, 198–9, 206 Catel brothers, 296 Briloff, Abe, 28, 30 C.E. Heath Insurance, 224 British Vitamin Products Ltd, 175 Cendant, 12 broadcasting licences, 177, 182, 185 Centaur, 5, 216, 218 Brown-Wilkinson, Sir Nicholas, 184 Chambers Committee, 90, 92 Brunt, M., 55 Chambers, Ray, 145, 234, 277–8, 280, Buckley J., 161 283, 286, 290, 313

INDEX 375

and Accounting Standards, 27–8, 89 Continuously Contemporary criticism of accountancy, 30, 51 Accounting, 278, 280, 283, 286 Chanticleer, 163 control, 158, 262, 275, 277, 279 Charterhall Plc, 199, 200 Control Securities Ltd, 78 Cheney, Richard, 4, 5, 6, 12 Cooper, Brad, 4, 5, 22, 244, 296 Chevron, 50, 66, 68, 69 Corporate Affairs Commission, NSW, Chong, F., 187 89, 123 CIC Insurance, 224 corporate collapses, 7–13, 233 Clarke, F.L., 238 unexpectedness of, 5, 7, 16–17, 23, class action, 123, 124 27, 28, 220, 302, 331 Class Order Deeds, 208, 211, 225, 249, ‘corporate cowboys’, 9, 294, 318 255, 269, 275 corporate governance, 4, 13, 20, 237, CLERP 9, 18, 168, 217, 254, 300, 302, 243, 291, 298–300, 313, 316–17, 309, 312, 322 319 closed group, 200, 255–7, 267 Corporate Governance Council, 314 Code of Best Practice, Cadbury corporations law, 19, 32, 105, 247, 254, Committee, 299, 300 274 Coleman, Michael, 20 ‘black letter’, 19 Coles Myer Ltd, 7, 249 ﬁnancial reporting, 38, 256, 269, Companies Auditors Liquidation Board, 272, 301, 311 206 true and fair criterion, 38, 84, 314–15 companies, family, 75, 109–13 Costello, Peter, 12, 217 company law see corporations law Cotesworth, 224 Compass Airlines, 93, 151 Cowdroy Investments Pty Ltd, 112 complexity, 150, 165, 184, 197, 247, Cox Brothers, 15, 47, 71 248 CPA Australia, 12, 290, 326 compliance, 32–42, 328–30; see also Craven, James, 148 Accounting Standards Credit Sales Act, 78 Componia de Telefonos De Chile, 177, cross guarantees, 76, 175, 198–211, 196 249, 255–7, 258, 269, 275 conﬁdence, 17, 28, 100, 259, 275, 308 cross-shareholding, 158–9 conglomerates, 109, 158, 160, 163, cult of the individual, 4, 5, 14–20, 226, 172, 177 296, 319 Connell, Laurie, 4, 148, 149, 180, 181, Cummins, Joseph, 147 251, 253, 296 Currie, D.H., 127, 128, 129 consolidation accounting, 163, 247, 249, 253, 259, 266–82 Daiwa, 80, 318 alternatives to, 274–82, 283–8 Dallhold Investments Pty Ltd, 171, artifacts of, 47, 84, 99, 187, 270, 180, 183 272, 310 Daly, M.T., 129, 134, 135 Cambridge Credit, 117–18, 125 Darling, John, 129 faith in, 247, 256 David Jones, 155, 167 Minsec, 98–9 David Murray Holdings Ltd, 55 problems of, 62, 100, 114–15, 163, Davis, Carl, 147 211, 259, 262 Davis-Raiss, 109 treatment of subsidiaries, 102, 187 de Angelis, Tino, 21, 80 Westmex, 210–11 de pretium, 35, 164 consumer protection, 296, 300–7, 331 Dean, G.W., 238, 308

376 INDEX

Debelle, Mr Justice, 211 Entity Group, 146 debt, 47, 63, 74, 191, 219 entrepreneurs, 4, 149, 169, 199, 296, deeds, class order, 208, 211, 225, 249, 318 255, 269, 275; see also cross Equiticorp, 8, 147, 210 guarantees Equity Funding, 80, 220, 308 Deloitte & Touche, 6, 324 Equity Trustees Executors and Agency Deloitte, Plender and Griffiths, 228 Co. Limited, 57 Denning, Lord, 268 Ernst & Young, 6, 24, 232–3, 302, 324 depreciation, 34–5, 164, 165, 167 Estate Mortgage, 7, 147, 317 deregulation, 208–11, 330–2 ethics, 13, 19, 20, 51, 233, 299, 313–32 Dextran Pty Ltd, 155, 160 D.H.N. Ltd v. Tower Hamlets, 267 FAI Insurances Ltd, 182, 225–7, 232, Dimbula Valley (Ceylon) Tea Co Ltd v. 238, 241 Laurie, 161 Fedora, Dominic, 218, 228 directors, duties of, 38, 302, 311 Fell & Starkey, 124 Disney, 3, 17 Fielding, John, 207 diversification, 59, 126, 172–80, 260 Finance Corporation of Australia, 135 Dominion Pty Ltd, 68, 69 Financial Accounting Standards Board, domino effect, corporate, 247, 249 298 dot.com companies, 3, 27, 215, 216 financial performance and position, Duke Group, 7, 146, 317 statements of, 35–6, 47, 237, 279, Dunlap, Al (‘Chainsaw’), 4, 6, 8 299 financial reporting, 6, 7, 238; see also earnings management, 28, 33 serviceability Ebbers, Bernie, 4, 6, 22, 64 misleading, 32–3, 61, 295 education, 14, 19, 50 quality of, xix, 38, 40, 299 Eisenberg, M.A., 247, 248, 272 reliability, 47, 80, 125, 237, 312 Elliott, John, 4 system, 13, 16, 35–6, 74, 75 Endeavour Resources Ltd, 172, 173 Financial Reporting Council, 302 Enron 4, 12, 17, 32, 111, 259–62 First Australian Growth and Income accounting, 25, 49, 216, 279–80, Fund, 103, 104 329–30 Fischel, David, 315 and Andersen, 219, 259, 307, 323 FITB, 34, 151, 158, 161, 162, 194, audit committee, 301 241, 310 and auditor independence, 295 Fitzgerald, Tom, 71, 74 collapse of, 9, 22, 27, 242, 257, 260, foreign operations, 26, 39, 40, 190, 290 194–7 diversification, 260 Fork Manufacturing Co. Ltd, 267 group enterprise action, 58 Fox, Loren, 262 mark-to-model, 38, 113, 261–2 Fuller, Michael, 147 Special Purpose Entitites, 113, Fusaro, P. 261, 262 260–1, 262, 281 structure of, 260, 261 G. Heileman & Co., 177 success of, 5, 8, 16 GAAP, 25–42, 241, 243, 261, 310, 311 ‘Enronitis’, 259, 262 Garnsey, G., 257 enterprise action, 58, 178, 180, 184, Gaz Prom, 6 197, 251, 259 Gazal group, 258 entity action, 178, 184, 251, 258 gearing, 60, 131, 135

INDEX 377

Gemstar, 233 Hawke, Bob, 169 Geneen, Harold, 30 Hawkins, Allan, 147, 149, 296 Girvan Corporation, 7, 147 H.C. Sleigh, 155 Gladstone Committee of Enquiry, 314 Heath, Edward, 10, 275 Global Crossing, 3, 6, 12, 216, 324 hedging, 126, 136–9, 140 ‘going concern’, 133–4, 223 Herscu, George, 66, 147, 149, 296 Gold Mines of Kalgoorlie, 36 H.G. Palmer, 11, 47, 48, 70, 71–84, Goldberg, Abe, 4, 66, 148, 149, 296 149, 175 Golden Bounty Resources, 147 accounting, 82–4, 330 Goldsmith, James, 30 collapse of, 27, 237 Gollins Holdings Ltd, 27, 30, 90, 91, credit control, 82 122, 138, 220 debts, 78, 83, 84, 117, 191 Goodman Fielder, 36 financing, 57, 74–8, 81 goodwill, 150, 232, 240, 310 legal issues, 105, 191 Gorton, John, 86 and MLC, 73–4, 75, 79, 80–4, 249, Gottliebsen, R., 135, 161, 162 264 Goward, Russell, 141, 198, 206, 208, prospectuses, 80, 81 291, 296 reported results, 30 success, 4, 15, 149, 199–200, 204–5 success, 15, 159 Gower, L.C.B., 267 takeovers, 73 GPI Lesiure Ltd, 275 trading activities, 78–80 Grace Brothers, 173 H.G. Palmer (Finance) Pty Ltd, 72 Greatorex, D., 13 H.G. Palmer Pty Ltd, 72 Griffiths, I., 31, 32 H.G. Palmer (Victoria) Pty Ltd, 78 groups, 68, 247, 254, 258, 264, 267–71 H.G. Palmer (Wollongong) Pty Ltd, 72 closed, 200, 255–7, 267 HIH, 8, 171, 222–45, 249, 317 complexity of, 64, 109, 150, 219, accounting, 25, 37, 49, 138, 234–7, 248, 274 279, 310 group enterprise action, 58, 178, acquisition of FAI, 222, 225–7, 232, 180, 184, 197, 251, 259 241 intra-group transactions, 99, 160, and APRA, 325 219, 228, 249, 253, 273, 275, 280 auditing, 12, 219, 242–3, 234–7, market price accounting, 277–82 295, 307, 309 groupthink, 58, 223–5, 247–65, 266–82 and auditor independence, 295, 309 growth by acquisition, 73, 75, 172, 175 capital adequacy, 238, 243 Guttmann, W., 136 collapse of, 3, 5, 18, 23, 218, 233–4, 237–8, 290, 308 Halliburton, 4, 6 domination by one person, 111, 224 Halwood Corporation, 147, 210; see financial reports, 27, 61, 229–31, 320 also Hooker Corporation group structure, 58, 125, 223–5 Hamley, Stanley, 146 growth, 175, 224 Harken, 4, 6 liquidation, 210, 227–33 Harlin/Fosters Brewing, 7 provision for debts, 228 Harriet Oil, 182 solvency, 227, 238–42 Harris Scarfe, 15, 216, 309, 317 HIH Royal Commission, 5, 9, 168, 218, collapse of, 5, 18, 27, 61, 218, 290 222, 227, 241, 242, 244–5, 253 financial reporting, 138, 320 accounting, 228, 275, 291, 321, 327 Hattersley & Maxwell, 98 capital adequacy, 238, 243

378 INDEX

HIH Royal Commission cont’d investments, value of, 47, 279; see also group enterprise dealings, 197, 268 assets legal actions, 222, 236, 238, 242 investors, 318 philanthropy, 316 IOL Petroleum, 200 HIH Winterthur, 224 Irises, 146, 177 Hill Samuel, 102 ISOYD method, 150 Hilmer, 300, 301 ITC Entertainment, 182 Hilton, Conrad, 43 Hire Purchase Act, 78 Jackson, C.H.R., 84, 123 Hire Purchase Securities Ltd, 78 Jameson, M., 30, 32 Hirst, R.R., 75 Jamison, J.H., 86, 105 Hodgson, Allan, 218 J.N. Taylor Finance, 178 Holmes à Court, 181 J.N. Taylor Holdings, 180, 182, 210 Hooker Corporation, 7, 8, 111, 147, Johnson, R., 178, 180 210, 211, 289, 317 Joint Committee of Public Accounts closed group structure, 251–2 and Audit, 168, 217, 220, 309, collapse of, 7, 27, 287 320–1 House of Palmer, 54, 71–84 Jordan, P., 147 Hughes, Davis, 83 Jowitt, Sir William, 84 Hungerford, Spooner and Kirkhope, Judge Corporation, 7 123, 139 Hunter, 112–13, 116, 117 K-mart, 6 Hutcheson Conglomerate, 110 Karmel, P.H., 55 Hutcheson, R.E.M. (Mort), 107, 109, Kathleen Investments, 96, 100, 101 111, 112, 124 Keeling, Brad, 4, 5, 22, 263 Keynes, John Maynard, 219 IASB, 12, 19 Killen, H., 29 ICAA, 290 King & Yuill Investments, 100, 103 Icarus paradox, 159, 170 Kirch, Leo, 22 IFAC, 312 Knott, David, 23, 314 indemnity, 208, 211, 255–6, 256, 321 Korman Round Robin, 65, 66–70 Independent Resources, 147, 317 Korman, Stanley, 43, 50, 54, 64, 66, Industrial Equity Limited (IEL), 155, 138, 296 160, 162, 198–9, 206 Koshin, Tony, 139 Industrial Equity Ltd v. Blackburn, 267 Kozlowski, Dennis, 4, 6, 8, 22 inﬂation, 136, 137, 140 KPMG, 6, 20, 227, 242 insolvency administration, 254 Kreuger, Ivar, 21, 184, 251 Institute of Chartered Accountants Kurtzen, 260 in England and Wales, 20, 228, Kylsant, Lord, 11, 21, 64, 107, 193, 298 228, 251, 274 Insull, Samuel, 21, 114, 153, 164, 166, 167, 175, 251 La Promenade, 146, 170, 177 Insurance Council of Australia, 15 Landall Holdings, 171 International Accounting Standards, Lane, T., 254, 257, 264 302, 307, 331 Lang Corporation Group, 258, 259 International Financial Reporting Larsen, Greg, 12 Standards, 330, 331 Latec Investments, 30, 47, 48 Interwest Group, 147, 317 Laventhal & Howarth, 323

INDEX 379

law; see also corporations law MBF of Australia, 79 black letter, 19, 31, 218 McBlane, John, 84 consumer protection, 305 McGrath, Tony, 222 fuzzy, 19 McKay, Hugh, 319 principles based, 218 McKesson and Robbins fraud, 21 trade practices, 322 McLelland, Mr Justice, 198, 330 Law, John, 21 McMahon, Kenneth, 85, 93, 105 Lawson, D., 331 Meagher, M., 187 Lay, Kenneth, 4, 5, 6, 22, 64 Means, G., 30 Lee Justice, 84 Meehan, P., 136 Leeson, Mark, 318 Menzies, Robert, 58, 77 Leibler, Mark, 20 Merchant Capital, 180 Lew, Reuben, 147 Merck, 3, 17 Lew, Richard, 147 Merrill Lynch, 6 liability, 290, 291, 321–3, 329 Messier, Jean-Marie, 22 Linter Group, 7, 147, 151, 210, 249, Metallgesellschaft, 318 253, 275, 317 Metro Meats, 167 liquidations, group, 257 Metrogrowth Property Trust, 148 Lloyds Insurance, 224 MicroStrategy, 6 Lonergan, Wayne, 20 Mid-East Minerals, 173 Lonrho, 10, 183–6 Milken, Michael, 8, 22, 185, 199, 316 Lucas, Peter, 148 MIM, 36 Lucent Technologies, 6 Mineral Securities Australia Ltd, see Minsec Mainline Corporation, 90, 91, 171, Ministerial Council for Corporations, 220, 237 321 management failure, 13, 50, 51, 295 Minsec, 90, 93–106, 249, 275 Manly Electric and Radio Company Pty borrowing, 102 Ltd, 75 collapse of, 11, 27, 86, 91, 103–4, Mann Judd, 206 149, 220, 237, 308 mark-to-market, xx, 261–2, 312 criminal charges, 105–6 and Accounting Standards, 39, 53 growth of, 94–101 and assets, 62, 98, 239, 302 reported results, 30, 85, 122, 138, and securities, 96 167 and serviceability of data, 106, 115, success, 15, 93 131, 175, 302, 306 Minsec Investments Pty Ltd, 94 mark-to-model, 261–2 mission impossible, 309, 323 market prices, 47, 114, 232, 277–82 Mississippi Scheme, 21 Markland Investments, 180 Mitchell, Peter, 146 Marley, P., 30 MLC, 73–4, 75, 79, 80–4, 249, 264 Martin QC, 227 Monet, Claude, 146, 170, 177; see also Mason Justice, 248, 267 La Promenade Maxted, Lindsay, 20 Monstrot Pty Ltd, 191 Maxwell Communication, 16, 21, 109, Mount Warren, 118 220, 275–6, 308 MUA, 257, 258–62, 271 Maxwell Pension Funds, 275 Murdoch, Lachlan, 4, 5, 22, 263 Maxwell, Robert, 8, 16, 64, 274 Murdoch, Rupert, 34, 171 May, George O., 51 Murphy, Peter, 68, 69

380 INDEX

Murray, B.L., 55, 60, 61, 63 reported results, 138, 320 Murray J, 248 success, 4, 15–16 Music Masters Radio Pty Ltd, 75, 78 Opentel, 215 Musica, Philip, 21 opinion, emphasis on matter of, 227, Mutual Acceptance Corporation Ltd, 78 228, 231, 235, 236 Myer Emporium, 173 opinion-shopping, 31 Ord-BT, 100 Nadir, Asil, 8, 16, 22 oversubscription, 57, 77, 81 National Australia Bank, 33, 35, 60, 181 P152, 276 National Consolidated, 155, 167 Pacific Copper, 173 National Mutual Life, 79 Pacific Dunlop, 150 National Safety Council of Australia, 7 Packer, James, 4, 5, 22, 263 NCSC, 23, 124, 181, 192, 297, 301, Packer, Kerry, 177 316 Palfam Investments Pty Ltd, 75 class order deeds, 208, 210, 211, 255 Palmer, H.G., 44, 71, 72, 84, 159, 296 criticism of accountancy, 28 Pancontinental Petroleum Ltd, 200 valuation of assets, 41 Parry Corporation, 7, 149 negligence claims against Pascoe Limited, 180 auditors/accountants, 13, 292–3 Pasminco, 5, 216, 218 Neon Signs, 27, 50 Patrick Stevedores, 257, 258–62, 264, Nestel, Tom, 93, 105 271 net present values, 37, 38, 262 Patrick Stevedores v. MUA, 271 New Investments, 47, 48 Payne, Michael, 224 Newcastle Acceptance Company Ltd, 107 Paynes Properties, 63 News Corp, 6, 33, 34, 35, 233 Penn Central, 220, 307 Nine Network, 177 Pergamon, 220, 308 Nock, Sir Norman, 79 Perpetual Trustees Company, 139 Nolan, A., 182 Perry, C.J., 127, 128, 129 non-audit services, 13, 24, 218, 220, Perth Stock Exchange, 171 242, 307, 309 Peters, T.J., 263 Norausam Pty Ltd, 94 Petro Energy, 173 Norman Ross Discounts Ltd, 172 Petrochemical Industries Corporation Northern Mining Corporation N.L., 173 Ltd, 181 Northumberland Insurance Co. Ltd, Petroleum Securities of Australia Ltd, 111, 112–13, 116, 117 98, 99 NRMA, 39, 320 Pitt, Harvey, 7 NSW GIO, 79 Pittsburgh Brewing Company, 175 Nu Signs Pty Ltd, 170 Plender, Lord, 228 Polly Peck, 16, 21, 22 Oates, Antony, 146 ponzi technique, 70, 177, 186, 208 O’Grady, Oswald, 55, 57, 58, 63, 64 Poseidon, 95, 96 One.Tel, 58, 111, 249, 263 Postman, Neil, 4 accounting, 49, 61, 233, 290 Pratten, 20 audit committee, 301 PricewaterhouseCoopers, 6, 324 and auditor independence, 295, 309 profession, accounting, xx, xxii, xxiii, collapse of, 5, 18, 27, 93, 215, 218, 53, 96, 164–5, 220, 295, 327–30 257, 308 confidence in, 17, 28

INDEX 381

and consolidation accounting, 211, regulation, xx, 4, 7, 20–4, 237, 243, 266 249, 274, 301; see also APRA, ethics, 314, 315–16, 320 ASC, ASIC, NCSC negligence claims against and creative accounting, 27, 31 auditors/accountants, 13, 292–3 deregulation, 208–11, 330–2 professional bodies, xxv, 14, 19–20, effectiveness of, 124, 298, 319, 51, 326 328–9 professional indemnity, 321–3 failure of, 118, 125, 211, 233 professional judgement, 297–8, 322 reform of, 90, 221, 234, 307–8 reform of, 221 resources of agencies, 5, 14 response to crisis, 17, 19, 49–54 responses to collapses, 216–21 profession, legal, 266 and Standards, 192, 298, 301, 311 professionalism, of accountants and Reid Murray, 44, 47, 55–70, 125, 149, auditors, 13, 291, 310, 322, 323–7, 249, 275 329, 330–2 accounting, 20, 60, 61, 101 Proﬁt and Loss Account, 35, 36, 53 collapse of, 27, 48, 237 proﬁtability, 71, 74, 103 reported results, 30, 138 public disclosure, 249 success, 15, 53, 159 Public Oversight Board Report (US), 17 takeovers, 56–7 Pyramid Building Society, 7 related-party transactions, 99, 160, pyramiding, 114, 166, 251 219, 228, 249, 253, 273, 275, 280 R.E.M. Hutcheson Pty Ltd, 107 QBE, 39, 320 Remlap Electric Pty Ltd, 72 Qintex, 7, 8, 30, 148; see also Skase, Rennie, Philip, 190 Christopher Reserve Bank of Australia, 123 collapse of, 27, 220, 237 Rich, Jodee, 4, 5, 16, 22, 263, 296 criminal charges, 317 ‘Rich Kids’, 5, 22, 263 domination by one person, 111 Rigas family, 4 quality assurance, 19, 303, 305 Ripley, W.Z., 30 Queensland Mines, 96, 100, 101 Robe River, 96, 98, 99, 100, 101, 102, Queensland Television, 174 103, 171, 249 Qwest Communications, 3, 5, 6, 17, Robert Reid & Co. Ltd, 55 216 Rogers CJ Comm. Div., 254; Rogers, Justice, 116, 117, 124 Radio Rentals, 61 Roosevelt, F.D., 220 Rae Senate Select Committee on Rothwells, 138, 148, 180–3, 249, 251 Securities and Exchange, 93, 96, collapse of, 7, 150–1, 253, 275, 317 100, 103 round robin transactions, 58, 65, 151, Ramsay, I., 247, 312 219, 249, 251, 275 Ramsay Report on Auditor Rowland, Tiny, 10, 178, 183–5 Independence, 168, 309, 311; Royal Bank of Scotland, 129, 137, 140 see also Ramsay, I. Royal Mail Steam Packet Co, 21, 64, Raw, Charles, 100 105, 107, 220, 325 Re Enterprise Goldmines NL, 248 accounting, 84, 190, 193, 197 Re J.N. Taylor Holdings Ltd (In liq.) collapse of, 10–11 (No. 7), 211 secret reserves, 41, 228, 251, 274 realisation principle, 206 structure of, 109, 250 Reef Oil N.L., 172 Rule of 78, 61, 62, 79, 83, 84

382 INDEX

SAC 3, 304 Stamp, E., 30 SAC 4, 328 Standards, Auditing, 17, 18, 21, 23, 30, sales, front-end, 113–16 237, 297, 305 Salomon v. Salomon, 264, 277 Stanhill Consolidated Ltd, 54, 57, 67, Sanmcentre Pty Ltd, 173 178 Santos Ltd, 172 Stanhill Development Finance, 47, 66, Sarbanes-Oxley Act (US), 312, 314 125 Savings and Loans scandals, USA, 28, collapse of, 48, 65, 149, 237 105, 174, 220, 308 reported results, 30 Savoy Corporation, 171, 172 round robins, 68–70, 275 scapegoats, 4, 5, 6 structure of, 67, 103 Scarlett, Stipendiary Magistrate, 82 Stanhill Estates, 68 Schneider, Jurgen, 22, 64 Stapledon, G., 247 Schneider, Stanley, 147 State Bank of South Australia, 7, 268, Schuetze, Walter, xxv, 13 327 SEC, xxv, 5, 6, 7, 115 State Bank of Victoria, 7 Second Australian Growth and Income State Government Insurance Fund, 103, 104 Commission (WA), 181, 182 secret reserves, 41, 228, 251, 274 Statement of Accounting Concepts, separate legal entity principle, 180, 328; see also SAC 3, SAC 4 255, 258–9, 264, 267–8, 279 Statements of Financial Performance serviceability, 18, 22, 25, 238, and Position, 35, 47, 53, 237, 287, 290–312, 326–7, 330–2 299 of financial reports, 28, 220, 268 Statex, 115, 122, 138, 304 and mark-to-market, 131 Stewart, Martha, 12 Shanahan, Reginald, 129 structures, corporate, 165, 172, 197, Shaw, B.J., 55, 60, 61, 63 242, 247–65, 272 Shield Enterprises, 174 subsidiaries, wholly-owned, 274–5, Shield Life Assurance Ltd, 170 277–8 Shvets, Viktor, 162 substance-over-form, 149, 270, 297 Silbermann, Mark, 263 success, 8, 15, 159, 169, 204 Skase, Christopher, 4, 66, 148, 149, Sumitomo Corporation, 41, 80, 318 291, 296; see also Qintex Sunbeam, 6, 16, 216, 242, 307, 324 Skilling, Jeffrey, 4, 5, 6, 22 Surveillance project (ASIC), 23 Sol Estes, Billy, 80 Swan Brewery Company Ltd, 172 solvency, 216, 223, 238–42, 254–5 Swan Television and Radio South Sea Company, 21 Broadcasters Ltd, 173 Southern Cross Beverages Pty Ltd, 175 Sydney Guarantee, 54, 66, 178 Southern Equities Corporation, 7, 169 Sykes, Trevor, 64, 161, 227 Southern Pacific, 118 Spalvins, John, 15, 141, 153, 155, takeovers, 56, 75 161–3, 171, 261, 296 tax effect accounting, 26, 34, 190, on profits, 163–5, 204 193–4, 241, 270, 273, 310 success, 149, 159 Taylor, Mr Justice, 102, 105, 106 Special Purpose Entities, 26, 260, 261, tech-wreck, 3, 25, 215 262, 281 The Queen v. Alan Bond, 180 Spedley, 7, 11, 148, 151, 249, 251, Theiss Holdings, 96, 100, 101 275, 317 Thompson, Graeme, 239

INDEX 383

Thorn EMI, 175 Warhurst, Gary, 139 Tokyo Corporation of Japan, 171 Washington H. Soul Pattinson, 256, 257 Tooth & Co, 34, 141, 155 Waste Management, 12, 32, 216, 242, trade practices legislation, 322 307, 324, 329, 330 Treadway Commission, 301 Water Wheel Ltd, 4, 37; see also Tricontinental, 7, 210, 327 Elliott, John true and fair view criterion, xx, 314, Waterman, R.H., 263 319–21, 326 Westfield Holdings, 320 and Accounting Standards, 38–9, Westfield, Mark, 222 167, 300 Westmex, 111, 148, 198–211, 249 override criterion, 19, 84, 207, 295 accounting, 151, 204, 206–7, 210 and published information, 22, 61 Acorn Award, 15, 204–5, 210 Trump, Donald, 8 balance sheet summary, 202–3 trusts, 174, 175 closed group structure, 201, 208–11 Tulipmania, 21 collapse of, 7, 27, 93, 220, 237, 317 Twentieth Century Fund, 30 cross guarantees, 208–11 Tyco, 4, 6, 8, 9, 22, 216 diversification, 204 reported results, 30, 56, 138 Uniform Companies Act, 77 success, 15, 204–5, 210 Unilateral Services Pty Ltd, 107 Westpac, 7, 34, 35 Upton, Eric, 129 white knights, 129, 149 Urgent Issues Groups (UIGs), 150, 301 whiz kids, 15, 30, 199–200 Wilde, Oscar, xxvi Vaisey, Justice, 49 Williams, Ray, 22, 64, 218, 224, 228, valuation of assets, 32, 62, 98, 101, 232, 244, 296 125, 168, 175, 216, 239–41 philanthropy, 9, 316 and Accounting Standards, 36–7, success, 4, 5, 15 161 Winterthur, 224 Van Gogh, Vincent, 146, 177; see also Winthrop Investments ltd, 173 Irises Woolworths, 167 Vatican Bank, 100; see also Banco WorldCom, 24, 32, 111, 216, 219 Ambrosiano; Calvi, Robert accounting, 17, 49, 279 Vickery, Dennis, 146 auditing, 295, 307, 324 Vivendi, 22 capitalisation of expenses, 27, 240, Volcker, Paul, 12 329 collapse of, 3, 5, 6, 9, 22, 27, 290 W. Drabble Ltd, 170 success, 4, 16 WA Inc. Royal Commission, 253 write-offs, 33, 36, 40 W.A. Land Holdings, 170, 171 Wyden, 16 Wallace, R.W., 75 Walker, Bob, 31, 32, 190, 191, 193, Xerox, 3, 5, 6, 17, 32, 216, 295, 329, 268 330 Walker, Frank, 89 Walker, Slater, 30 Yanchep Estates Pty Ltd, 170, 171 Walker v Wimborne, 248 Yanchep Sun City Pty Ltd, 171 Waltons, 172–3, 174, 175 Yonge, James, 180 Wardleys, 180 Yuill, Brian, 4, 148, 149, 296