Fed: Tax staff warned Groves months before ABC collapsed: court

AAP General News (Australia)
12-08-2009
Fed: Tax staff warned Groves months before ABC collapsed: court

By David Barbeler

BRISBANE, Dec 8 AAP - A public examination into ABC Learning has heard the senior taxation
manager had warned company founder Eddy Groves that his business owed the Australian Taxation
Office (ATO) nearly $15 million seven months before its collapse.

Craig Howard, the group taxation manager for ABC Learning, told the Federal Court in
Brisbane on Tuesday that he was so concerned by the tax debts that he handed in his resignation
in July, and left in August.

Four months later, ABC Learning went into receivership.

The court heard about several group emails sent to and from Mr Groves in which senior
finance staff began warning him in May of a growing $15 million ATO debt for both ABC
Learning and its associated regional management companies (RMCs).

The court heard that Mr Groves asked Mr Howard in June to stall the ATO until they
freed up their cashflow by selling 60 per cent of ABC Learning's stake in a deal with
Morgan Stanley.

Mr Howard said he made a deal with the ATO to pay the 2006/07 tax debt with the 2007/08
tax debt in early July, at a penalty of $1.5 million.

"OK, but I want to give us some wiggle room," Mr Groves said when he ticked off the
deal in an email.

The deal was made with the ATO to make the payments by July 28, he said.

Mr Howard said Mr Groves was warned by staff members that if he didn't pay the debt
on time the ATO could order an audit, begin legal action and impose much higher fines.

Mr Groves was sent another email after the deal's expiry date, copied to several key
staffers, to advise him the now $18 million debt still hadn't been paid.

"I thought I asked John to pay this yesterday," was Mr Groves' email reply.

When asked by lawyer for the administrators John Baird if this was a joke, Mr Howard
replied: "That's classic Eddy".

The examination continues.

AAP djb/pjo/cdh

KEYWORD: ABC LEARNING COURT

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