Employees from collapsed telco Commander Communications hit out at receivers

Leading insolvency firm McGrathNicol has suffered a blow to its reputation from its management of the receivership of collapsed telco services company Commander Communications.

Former Commander employees have accused the firm of incompetence, lacking empathy and failing to communicate basic information about entitlements. Some claim they have not been paid entitlements from December last year.

The firm has also come under fire for its botched sale of Commander’s primary telco business, which employs about 300 people. The controversial sale was announced in November and scrapped in January.

The Commander episode raises doubts about the capacity of the handful of leading insolvency firms favoured by the country’s banks to cope with the workload from a wave of corporate collapses.

Between 2007 and 2008 the number of companies entering voluntary administration jumped by 10.3% to 8300 and the number of insolvency appointments rose by 6% to 12,770, according to PricewaterhouseCoopers.

McGrathNicol and Ferrier Hodgson are winning the lion’s share of Australia’s insolvency work. They are handling the high profile collapses such as ABC Learning and Allco Finance Group.

Commander was placed in voluntary administration in August last year owing $380 million to a syndicate comprising Commonwealth Bank, Westpac and National Australia Bank. Ferrier Hodgson was appointed voluntary administrators, but the banks appointed McGrathNicol as receivers.

Before its collapse, Commander was in the midst of a turnaround plan led by chief executive Amanda Lacaze. She was brought in after a rapid expansion plan under former CEO Adrian Coote went awry. At its peak Commander had $1 billion in revenue and 1200 employees.

It was obvious from the start of the receivership that Commander would not have enough floating charge assets to pay employee entitlements. Redundant employees were told to apply for the Federal Government’s General Employee Entitlements and Redundancy Scheme (GEERS).

However, to keep employees motivated while the receivers tried to sell various businesses, a deal was agreed with the receivers that entitlements not covered by GEERS would be paid by the banks as a “top up” payment.

McGrathNicol’s management of the GEERS payments was a debacle.

Phill Harding, a former Commander employee, lodged his GEERS application on 19 December when he was made redundant. He has still not been paid.

Over the past three months, Harding has racked up $25,000 in credit card bills to meet day-to-day financial commitments. He sold his family boat to pay the mortgage.

He says he has not received a letter, phone call or email from McGrathNicol about the status of his GEERS payment.

Another Commander employee, who did not wish to be named, says the insolvency firm’s “slackness” in processing employee entitlements had made her very angry. She lodged her GEERS forms on 19 December, but was not paid until 5 March.

She called in her union, the CPEU, to put pressure on McGrathNicol to speed up its processing of GEERS claims. She has now demanded that McGrathNicol honour the commitment made in September to make the “top up” payment.

Another former employee in Melbourne, who did not wish to be named, said it appeared McGrathNicol had one employee responsible for handling hundreds of GEERS claims.

“This is a major reputational issue for McGrathNicol,” he said. “I suppose the longer the GEERS money sits in their bank account, the more the banks get back.”

Under the law, a receiver has 14 days to distribute GEERS payments.

Inquiries by have revealed that any delay in the distribution of GEERS money cannot be sheeted home to the Department of Education, Employment and Workplace Relations.

The department has advanced $6.5 million to McGrathNicol to cover the GEERS entitlements of 454 people employed by seven different companies in the Commander group.

The GEERS claims were paid within several days of the claims being verified by McGrathNicol.

It took the receivers several months to verify data related to redundancy entitlements that had been lodged in December. Commander kept good books and records and it continues to have a human resources department.

Former employees of Commander Australia and Commander Communications, including Phill Harding, did not have their entitlements verified by McGrathNicol until 16 March. The department paid the funds to McGrathNicol on 19 March but Harding had not been paid as of Monday this week.

The receivers of Commander are Peter Anderson, Chris Honey and Joseph Hayes. Anderson blamed the Commander payroll department for delays in verifying the correct entitlements. He also said the number of different companies in the group had complicated the GEERS payment process.

Hayes said that the circumstances involved in the Commander collapse had not been “ideal”. He said it can take a while for GEERS payments to be made if the “information is hard to process”.

“The information needs to be available from the company’s records and secondly you need to be working with the department to get the information processed quickly,” he said.

However, he said any delays in payment were not due to McGrathNicol being overstretched.

The receiver successfully sold Commander’s managed services business to Darwin-based IT services company CSG in October last year. CSG took over the employment of 220 staff.

Anderson defended his handling of the botched sale of Commander’s telco business including the selection of a controversial bidding syndicate (Commander in grief).

He said it was a difficult environment for selling assets. “We were not quite able to get that deal over the line,” he said. “Hopefully we will have a deal to announce in the next one to two weeks.”

He said the “top up” payment to employees would not be paid until the business was sold or the remaining company was wound up.

It is believed that rival bidders for the business warned McGrathNicol in November last year that the bid from CTG would not be completed because of lack of funding. A rival bidder said “it was obvious they picked the wrong horse”.

About $3 million in top up payments are owed to Commander’s former employees. If the remaining business is wound up then the banks will fund this payment.

That raises the question as to why they don’t pay the money now. It would certainly help to soften their image.

McGrathNicol is not likely to win back the confidence of former Commander employees who have been without income for four months. Several have said they were disgusted with their treatment.

But the receiver does get some grudging respect from a former employee, Brian Fitzpatrick, who migrated to Australia from America. “I am fairly pleased with the experience. If this happened in my country we would have been out the door, looking for work and left to fend for ourselves. There is no safety net.”

This article first appeared on Business Spectator

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