Queensland Nickel for Dummies – Clive Palmer Trial Explained

If you’re feeling confused about Clive Palmer’s Queensland Nickel trial that’s all over the news, fear not – we’re here to explain. Next time you’re making water-cooler chit-chat, you’ll be 100% up-to-date on the nickel refinery investigation and what it means for Palmer and his close circles, QNI workers, Townsville, ASIC and AUSTRAC.

What’s Queensland Nickel?

Queensland Nickel (also sometimes called QNI, QN or Yabulu Nickel Refinery) is a nickel refinery in Northern Queensland, near Townsville. Founded in 1971, it was run by BHP Billiton until purchased by Clive Palmer in 2009. It went into bankruptcy in January 2016, after suffering massive losses. Evidence now shows that prior to the bankruptcy, Palmer used the refinery as a “personal piggy bank”, paying for vacations, funding his then-political-party PUP, making non-refundable “loans” to friends and family, supporting his other businesses, companies and entities and paying mystery women in Eastern Europe and Asia.

Simultaneously, Palmer fired hundreds of skilled workers and slashed maintenance and safety budgets, which caused several high-risk incidents and accidents involving untrained employees and faulty equipment.

In January 2016, the company went into administration and in April, creditors voted to go into liquidation. The trial against Clive Palmer is ongoing since 2016 and focuses on the effort to recover over $300m from him; $77m in taxpayer money, which was paid to creditors and workers by the State on Palmer’s behalf, and another $200m in unpaid entitlements to creditors and workers. The $7m trust Palmer allegedly set aside to pay the workers’ entitlements before the last elections is a fraction of the sum he owes.

Palmer has since claimed he has no responsibility for Queensland Nickel; the company’s listed director was Clive Mensink, Palmer’s nephew who has fled Australia to Bulgaria following the collapse and never returned. For a brief time, Palmer’s wife, Anna Palmer, was made director in his stead. Either way, this pre-meditated technicality allows for Palmer to claim no liability. However, liquidators believe they can prove to the court that Palmer was what’s called a ‘shadow director’; someone who holds a majority of shares of a private firm, and although he/she is not technically a director, his/her instructions are routinely complied with by employees or other directors. In the eyes of law, this person is a de-facto director and is held equally liable for the obligations of the firm.

Apart from the liquidation trial, there is an ASIC criminal investigation as to whether or not Palmer and accomplices traded while insolvent and mismanaged company funds. As of now, no advances have been made in that investigation, putting ASIC under massive pressure. Sources claim an AUSTRAC investigation is also taking place, as over $200m were siphoned off to Kyrgyzstan, China and Bulgaria from Queensland Nickel in cash prior to the liquidation.

What’s going on in the trial right now?

The trial finally began in mid-July 2019 after 3 years of delays. Such delays were caused not only by the long process of liquidation, evidence gathering, financial analysis and testimonies, but also by close to 100 bids to delay the trial which were filed by Clive Palmer. Close to 80 of those bids failed, incurring legal costs on Palmer. Over the years, Palmer managed to get 2 judges recused, missed dozens of court hearings (citing illness, senate duties, lavish vacations and business matters) and made various bids to postpone advancements, the last of which was right before the trial began – Palmer claimed an incapacitated key witness for the defense was cause enough to delay the trial by 4 months. This claim was, of course, shut down by the judge.

Here is what you may have missed from the first week of the trial;

1. The court heard QN was trading insolvently months before administrators were called, losing close to $5m a month and $15m in total. These massive losses mean Palmer knew he was headed for liquidation and failed to make proper preparations, such as putting aside money to compensate the workers and creditors and give them due notice.
2. Not only was Palmer knowingly trading while insolvent, he also made sure to sign a $135 million deal to pay himself ahead of workers and suppliers. The financial antic entailed Anna Palmer (then director) selling $135m worth of worthless shares in a non-existing coal project to QNI in exchange for prioritising Palmer’s payment ahead of employees and suppliers. The shares bought by QNI belonged to China First, a company wholly owned by Clive Palmer and valued by a team of mining experts at $1. A similar $100m deal was struck with Waratah Coal, another Clive Palmer entity.
3. Liquidators presented a green notebook containing entries documenting QNI’s financial transactions. Many of the handwritten entries, in Palmer’s handwriting, "can be shown to be false". This means Palmer falsified evidence as early as 2013, preparing for a later investigation he knew would come.
4. Another issue is money transfers overseas; Palmer had the company financial controller transfer $8 million to his father-in-law Alexander Sokolov and another $1 million to a woman in Kyrgyzstan in 2012 — but no company records justified the claim they "represented" the enterprise.
5. To prove that Palmer was indeed a shadow director for QNI, liquidators presented an email sent to fugitive QNI director Clive Mensink on November 29, 2015, during the time the company was allegedly insolvent, which read: “I told you what to do. Do it. Do not send me anything to cover your arse or you f..k everything. Do not contac­t me by email again.”

What’s next?

Palmer struggles to replace his financial key witness who was supposed to testify in his favor to try to prove he was not a shadow director. As we mentioned earlier, the expert witness, now investigated by ASIC on a different matter, claimed sickness and has stepped down from the trial. It seems Palmer is having a hard time finding a replacement for this central part of his defense.

The trial is scheduled to continue until August. Experts assess the liquidators will continue to pursue two major channels; experts, witnesses and QNI books will be presented to prove mismanagement of funds. If it could be proved that Palmer knowingly sucked Queensland Nickel dry by making poor business decisions, transferring funds for his personal use and operated illegally to arrange for himself to be paid before the workers and suppliers, the court could force him to return the $300m he owes.
Secondly, financial records, emails, and testimonies will be admitted to prove Clive Palmer was, in fact, a shadow director for QNI. This is crucial, as without it, even if proven that the QNI management traded while insolvent and mismanaged funds, Palmer could not be held responsible and made to compensate the workers, suppliers and the state.

Proceedings could implicate not only Clive Palmer, but also his business partners and associates, family members and friends and his other companies, like Waratah Coal, China First, Mineralogy and others. Especially vulnerable is Palmer’s wife, Anna Palmer. She was finally questioned in March over a $180 million loan to Palmer Investments in Bulgaria in 2018, while she was named director of Mineralogy. Liquidators questioned her to try and follow the QNI money trial and find out what happened to the company’s money even after it closed.

We will continue updating as the trial develops.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.