The directors of Sons of Gwalia appear to have been running a sort of movie-set township, with painted facades of profitability propped up by rickety hedging deals that were destined to fall. Ernst & Young will undoubtedly have a different version of events that will be put in court, but the administrators are alleging that for five years, year after year, the auditors signed books that had been cooked. Like their company, the Lalors were steeped in mining history. Hargovan and Harris, ‘Sons of Gwalia and Statutory Debt Subordination’, above n 78; Jason Harris and Anil Hargovan, ‘Sons of Gwalia: Navigating the Line between Membership and Creditor Rights in Corporate Insolvencies’ (2007) 25 Company and Securities Law Journal 7; Hargovan and Harris, ‘Sons of Gwalia: Policy Issues Raised’, above n 94. The administrators say Ross-Adjie used a series of off balance sheet accounts to house the profits and losses from his gold and foreign exchange trading activities. This almost always comes up after companies collapse and the auditors complain that too much is expected of them and that they don't have eyes in the back of their heads, you know. All this helped to make the collapse of Sons of Gwalia last year so spectacular. In addition, the administrators say the Lalors may have breached the corporations law by failing to keep adequate financial records in the six years to 2003; failed to ensure those financial reports complied with accounting standards; failed to meet the stock exchange's continuous disclosure obligations and failed to understand the nature of the financial derivative products being traded and the imprudent financial risk associated with them. But the Sons of Gwalia administrators' report makes one wonder what is the point of having auditors at all. Pyramid, Geelong and Countrywide Building Societies in the . When Sons of Gwalia shares traded above $10 in 2001, the Lalors' company had broken into the $1 billion league. The mining company the Lalors founded in 1981 built its fortune reviving one of WA's most famous mines, the old Sons of Gwalia mine near Leonora, north of Kalgoorlie. The situation is similar for Ross-Adjie, Sons of Gwalia director Thomas Lang and auditor Ernst & Young. In yesterday's press briefing the lead administrator, Andrew Love, from Ferrier Hodgson, refused to comment on the role of the auditor, beyond referring to the writ that has been lodged. In 1900 work on the Sons of Gwalia mine was completed with a 50-head mill, and production soared to more than 90,000oz of gold. Sons of Gwalia Limited was a gold mining company that collapsed in 2004 with over $850 million of debt. A reconciliation of the trading accounts revealed Sons of Gwalia was exposed to losses of $125 million. He claimed he was a victim of misleading and deceptive conduct violating the Trade Practices Act, the Corporations Act and the Australian Securities and Investments Commission Act. When Sons of Gwalia shares traded above $10 in 2001, the Lalors' company had broken into the $1 billion league. Ask the Lalor brothers. Well-known ones include Oroton and Quintis. Alan Kohler also presents finance on ABC TV news and is the host of ABC TV's Inside Business. Their report says Ross-Adjie was suspended from duties by the Sons of Gwalia board on May 8, 2000, soon after he informed the company in a letter that he believed those trading activities were "out of control". A serious fire in January 1921 destroyed half of the mine and about 400 men (nearly the entire workforce) were laid off. The report says the Lalors' possible breaches include failing to install effective internal controls over the company's treasury operations; failing to supervise those operations; failing to ensure Ross-Adjie abided by the trading limits set by the board; and failing to tell the board how those treasury operations were being conducted. www.alankohler.com mail@alankohler.com, Why did Gwalia fail? Sons of Gwalia was a Western Australian mining company that mined gold, tantalum, spodumene, lithium and tin. Margaretic alleged that Sons of Gwalia had engaged in misleading or deceptive For example, as at June 2007, some 5,344 shareholder claims had been made in the Sons of Gwalia administration, claiming a total of $250.5 million.9 The administrators of a deed of … A federal committee has endorsed a High Court decision related to the collapse of WA miner Sons of Gwalia that allows certain shareholders to rank equally with creditors. Over the next few years a new shaft was sunk, but ore grades were decreasing and by 1910 most other mines in the Leonora district had closed. Sons of Gwalia was Australia's third-largest gold producer and also controlled more than half the world's production of … With a reputation for conservatism, the Lalors only appeared to become confrontational when stockbrokers put a sell recommendation on their stock or the press portrayed Sons of Gwalia in a negative light. In their report, the administrators say they believe Messrs Ernst & Young may have breached their duty to Sons of Gwalia in six ways: they failed to discover or warn adequately about the conduct of the treasury operations, failed to warn that there were insufficient internal controls over treasury operations, failed to report that the company's books and records were insufficient, failed to detect or warn that trading limits were being exceeded, failed to ensure that gold put and call options were adequately reported in the company's accounts and failed to ensure that the financial statement correctly recorded trading profits and losses in the years ended June 1998 to June 2003. Market darling disappears in a year The little settlement that grew up around the Sons of Gwalia Mine in the late 1890s thrived until the final whistle blew on 28 December 1963, closing the mine and putting 250 men out of work. Sons of Gwalia went into administration on 30 August 2004, following a financial collapse, with debts exceeding $800 million after suffering from falling gold reserves and hedging losses. Sons of Gwalia was Australia's third-largest gold producer and also controlled more than half the world's production of tantalum, before entering administration in August 2004 following a financial collapse. The chairman of the Australian Securities and Investment Commission (ASIC) says a report into the collapse of the Perth-based gold mining company, Sons of Gwalia, contains major issues of concern. So what did bring Sons of Gwalia down? The High Court determined in Sons of Gwalia Ltd v Margaretic, that a compensation claim by a shareholder against a company was not subordinated by section 563A of the Corporations Act. The long-running saga of the Sons of Gwalia collapse has reached another milestone with the former mining company's auditor Ernst & Young agreeing to pay $125 million. Essentially the company used a hedging operation that involved selling gold forward using put options. Put options are assets (because you get to a sell at a pre-determined price) but call options are obligations (because the other party has the right to buy). Ernst & Young appears to have merely strolled down main street looking at the nice facades; the firm is now being sued by the administrators for breach of duty. 23 likes. Quite the same Wikipedia. Sons of Gwalia was a Western Australian mining company that mined gold, tantalum, spodumene, lithium and tin. Sons of Gwalia was Australia's third-largest gold producer and also controlled more than half the world's production of … At least the other Peter Lalor had a stockade. Unfortunately for them, the Sons of Gwalia administrators have opened a new chapter. It is also why the conclusions drawn by the Sons of Gwalia administrators, after almost a year of investigations, are so explosive. 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