Provident Capital managing director Michael O’Sullivan ran separate financing company for defaulters: hearing
Michael O’Sullivan ran a separate financing operation while managing director of collapsed debenture issuer and mortgage lender Provident Capital, to provide “financial accommodation” to clients who had defaulted on their high-interest loans, a court has heard.
The company O'Sullivan ran as sole director was called PCL Holdings.
In 2008, PCL Holdings had a loan on its books of $4 million to Marcia Raheb - O’Sullivan’s wife, which he told the court was for “tax purposes”.
PCL Holdings allegedly used Provident company information to offer Provident clients first and second mortgage loan accommodation, receivers PPB Advisor claimed as part of its examination of O’Sullivan and othe company directors last week in a public hearing at the federal court, reported on by financialobserver.com.au.
O’Sullivan told the court that PCL Holdings improved Provident’s liquidity by provided financial accommodation to a borrower in arrears with Provident Capital receive that money “dollar-for-dollar”.
He claimed the directors of Provident were fully aware of the activities of PCL Holdings, which he said was well documented in the company’s conflict register.
O’Sullivan was also grilled over recycled loans funded by wholesale provider Bendigo & Adelaide Bank .
Provident Capital acted as a lender of last resort on risky development, charging very high interest rates and fees.
It collapsed in July last year following an application by Australian Executor Trustees Limited (AET), a trustee for Provident Capital debenture holders. It then emerged that 85% of loans were six months or more in arrears.
Around 3,500 debenture holders had invested around $96 million in Provident Capital when it collapsed.
A second interim distribution to debenture holders was paid on June 21 representing 2 cents in the dollar.
This takes total distributions to debenture holders over the course of receivership to date in excess of $7 million.