ASIC targets building contractors over falsifying stat decs for pay

The Australian, September 28, 2016:

Contractors on major construction projects may be falsifying statutory declarations when claiming payment for work, an investigation by the Australian Securities and Investments Commission into illegal phoenix activity has found.

The investigation targeted 40 building contractors working on eight big commercial construction projects across NSW, Queensland and Victoria.

ASIC surveillance focused on the requirement that contractors pay money owed to workers and subcontractors before they can be paid by the head contractor.

ASIC found two contractors may have provided principal contractors with statutory declarations that falsely claimed secondary contractors had been paid at the time the declarations were signed. They subsequently paid secondary contractors the amounts owing.

Both were issued warning letters about their conduct and ­advised to review internal compliance systems and processes.

ASIC launched the investi­gation following complaints about the “endemic” use of false statutory declarations in the building and construction industry. It said falsifying statutory declarations to obtain payment from a head contractor could indicate contractors were experiencing cash-flow problems and might be in financial distress. This might subsequently lead to illegal phoenix activity.

ASIC is also investigating two contractors engaged by local councils who allegedly provided false statutory declarations before they paid subcontractors.

ASIC Commissioner Greg Tanzer said while falsifying statutory declarations might improve the cash flow of contractors, “the flow-on effect is likely to cause significant detriment to other operators in the supply chain … in particular secondary contractors (who) are often small business operators engaged by contractors to complete building works”.

“The viability of their businesses is often dependent on being paid in a timely manner. They usually are not in a position to carry cash flow risk imposed upon them by contractors.”

Company officers who knowingly make a false statement regarding payments to creditors may find themselves facing criminal or civil action by ASIC.