UPDATE: A lawsuit filed in the Federal Court has thrown the spotlight on KordaMentha, as rival advisory firm PKF claims it misused confidential information during its review of SKM Recycling. This serious allegation could have far-reaching implications for Cleanaway Waste Management and Commonwealth Bank, both of which are implicated in the unfolding drama.
The lawsuit, lodged last week, accuses KordaMentha of failing to establish necessary “Chinese walls” to protect sensitive data obtained while conducting a financial review for CBA. PKF asserts that KordaMentha then used this information to position SKM as an enticing acquisition target for Cleanaway, a move that raises ethical questions and could shake the foundations of trust in financial advisory practices.
According to court documents, KordaMentha was privy to critical financial data, including cashflow budgets and forecasts, after its appointment by Commonwealth Bank in 2019. PKF alleges that this information was subsequently leveraged by 333 Capital, a KordaMentha subsidiary, to pitch a “loan-to-own strategy” to Cleanaway just three months later, in August 2019. This strategy allegedly allowed Cleanaway to acquire SKM under more favorable terms than would otherwise have been possible.
The crux of PKF’s argument hinges on the assertion that Cleanaway would not have acquired CBA’s debt without KordaMentha’s alleged breach of confidentiality. Cleanaway ultimately picked up SKM’s assets for $66 million, following the acquisition of a $60 million debt facility tied to the failing recycling company.
“No information barriers or Chinese walls were established by KordaMentha or 333 Capital,” PKF’s filing states, indicating a blatant disregard for confidentiality protocols. KordaMentha, however, has labeled these allegations as “entirely without merit,” asserting that they acted ethically and professionally throughout the process.
In a significant twist, the lawsuit names not only KordaMentha but also Cleanaway and Mark Korda, one of its co-founders, as defendants. Cleanaway has pledged to “vigorously defend the claim.” The legal battle could further embroil Commonwealth Bank, which commissioned KordaMentha to conduct its review just two years after SKM made headlines due to a massive fire at its Melbourne facility that lasted over a week.
This case underscores a critical moment for KordaMentha, which has handled high-profile insolvencies, from Ansett to Network Ten. As PKF moves forward with liquidation efforts for SKM, the firm alleges that KordaMentha neglected to sell SKM’s assets at market valuations, leading to potential losses for creditors.
As this case unfolds, watchers are keenly observing the implications for corporate governance and the ethical responsibilities of advisory firms. The stakes are high, not just for the parties involved but for the industry as a whole, as confidence in financial advisory practices hangs in the balance.
With Cleanaway’s shares closing at $2.90, a slight increase of 3¢, the market remains sensitive to the ongoing developments. What happens next could reshape the landscape of corporate advisory ethics and practices in Australia.
Stay tuned for further updates as this urgent legal battle progresses and the implications for all parties become clearer.
