We have shared with you before stories of theft against our company. In the last 12 months, we’ve had three theft events against our business. We are proud that in two of those events, we managed to track down the stolen goods and perpetrators ourselves (the third one we aren’t sure, because the victim never gets told the outcome from all the information you provided). Good processes and security systems, great engagement from employees and swift action worked. But these were “old school” crimes of physically stealing goods, where we used some modern tools (computers, internet, surveillance etc) to achieve the result.
It seems like the Police and Court system is somewhat behind in terms of the speed and community attitudes towards crime. Property theft is not a victimless crime, even against a business, as it creates discomfort to all the people affected by it, and substantial lost time for the business (investigating, replacing items, unproductive downtime etc). I really feel for the Police, because they have to go to great lengths to provide evidence beyond doubt, and even when they manage to prove it all, an out of touch legal system (and overcrowded prison sector) gives the criminals a slap on the wrist and a warning not to do it again. Maybe the judges are concerned that if they actually locked these people up, the work would dry up for them?
However, there is an even bigger class of “new school” crimes that are flourishing. Not only do our laws struggle to even identify internet related fraud (such as scams and hacks, many which occur across legal boundaries or even from overseas), finding proof is that much harder. You can hide behind a keyboard almost anywhere (which I’ve never understood, as every computer or device has a unique IP address).
But the biggest thefts against our business have been by those protected by the very same legal system. I am of course referring to unpaid debts, and even more so those perpetuated by the insolvency industry. When was the last time you received any kind of “cents in the dollar” back when a company went belly up? Somehow, magically, the costs of the administration is the same as the value of any remaining assets in the company. There was a legal case against insolvency firm Sheahan & Lock recently that took them to task for overcharging, and made them repay one third of their fee’s ($1.9 million) in a liquidation job they conducted.
And the worst part is if you have been on the receiving end of any preferential payment claim. In other words, if you managed to obtain any payment in the 6 months prior to your customer going broke, then you may be required to repay that money. The worst part of this is the reverse onus of proof that applies to the business that received the payment. You have to prove that you didn’t have any reason to suspect that your customer was insolvent. How is an external party supposed to be able to verify such a thing? As many businesses can’t defend that accusation, they have to refund the money, which then gives the liquidator more money to spend on themselves to continue managing the liquidation process towards the mirage of giving creditors some money at the end of the process.
There is a very simple way the law can address this issue. If the liquidator, who has full access to all the books and records of the insolvent company, hasn’t been able to prove insolvent trading after say a month of the liquidation process commencing (verified by taking actions to bring the owners/directors/managers of the failed business to court on insolvent trading charges), then the liquidator can’t take action to recover preferential payments from external parties, who obviously received the payments in good faith through sound business practices.
Secondly, banks establish themselves as secured creditors, meaning they are third (after the liquidator and employee entitlements) to get paid. That too, must change, because the bank is one of very few suppliers to the business that actually can check the financial health of the business and underlying assets (they do this any time they approve a loan). Banks and financial institutions should at best rank exactly the same as any other creditor in the process.
There is a lot more to be done to protect employees and suppliers when companies go broke, but the above is a simple starting point to help right some wrongs.
As always, onwards and upwards!
Fred Carlsson
General Manager
