Luxury life of dotcom flash in the pan
September 27, 2003
The house is ring-fenced from creditors.
Picture: Andrew De La Rue
Stephen Moignard, a wunderkind of the internet craze, is offering $350,000 to settle debts of $21 million.
Steve Moignard's 355 Ferrari was not yet two years old when it was repossessed. The $350,000 motor was loaded on a truck, never again to be seen at his Brighton house.
The luxurious house is a different story. It is carefully ring-fenced from the creditors Moignard, 39, is due to face on Tuesday, so the wunderkind of the dotcom boom can use it during frequent visits from Hong Kong, where he now works as a sales manager.
It was bought in 1999 by Pure Capital Investments with a $2.49 million interest-free personal loan to Moignard from two Swiss bankers. They were anxious to protect their investment in Moignard's high-tech flash in the pan, Davnet, and wanted to stop him depressing its shares by selling.
Moignard sold the shares anyway, pumping the proceeds into new money-losing ventures until, with creditors circling, he sold Pure Capital Investments to Jame Lewis, a former business associate. The price Lewis paid last November for Moignard's two shares, and effectively the transfer of the $2.5 million house in Brighton, was $2.
And while the Swiss are still owed their money, Moignard has gifted $1.24 million to Chris Stock, a former policeman whom Moignard describes as a lifelong friend, so he could buy a boat, and another $50,000 in cash and $100,000 in jewellery to another friend, Lisa Beygel.
Moignard returns on Tuesday for a creditors meeting adjourned by the federal bankruptcy watchdog, Insolvency and Trustee Service Australia.
ITSA, unhappy about his proposal under Part X of the Bankruptcy Act to pay $350,000 in settlement of debts of $21.45 million, told the creditors and the controlling trustee, Joseph Loebenstein, of Green & Sternfeld Corporate Services, to think again about Moignard's financial affairs.
Several issues annoy ITSA, as a statement from the inspector general of bankruptcy, Terry Gallagher, makes clear. "ITSA's report focuses on Mr Moignard's projected income, his prior interest in luxury motor vehicles, a number of large gifts, property settlements prior to the Part X composition offer, property still controlled by family trusts, and the legitimacy of the related-party creditors."
Stephen Moignard is due to face creditors on Tuesday. When Davnet went public, Moignard and his wife Alice moved into a $2.5 million house in Hawthorn with garage space for the family Mercedes, her Porsche and his Ferrari.
Moignard's statement of affairs show his debts include $8.66 million to various Swiss interests, $7.85 million to three Moignard family trusts for loans, and $5 million to the Tax Office.
In his report to creditors, Loebenstein says he has seen no evidence Moignard transferred property or made gifts in anticipation of insolvency.
Parts of the report are contradicted in notices to the Australian Stock Exchange by companies with which Moignard is or was associated, but neither man would speak to The Age about it. Loebenstein has not returned calls and Moignard slammed down the phone after warning The Age to check with lawyers before publishing, and demanding to know if we knew the difference between a private entity and a corporate entity. It was a direct reference to the seven trusts where homes and other assets have been parked during Moignard's remarkable rise to a life of fast cars and big houses.
Moignard holds arts and law degrees and a diploma in information technology. During the internet craze he came up with a novel scheme to put office towers online using laser technology instead of more costly fibre optic cables.
With $130,000 borrowed from his father, Barry, he set up Davnet in 1996 and went public in December 1998. Davnet's shares reached $6 in April 2000, making Moignard worth $350 million, but a month later they began sliding and his net worth was down to $198 million.
When Davnet went public, Moignard and his wife Alice moved into a $2.5 million house in Hawthorn, with garage space for the family Mercedes, her Porsche and his Ferrari. However, by mid-1999 Moignard's marriage had crumbled, and he made plans to move.
Loebenstein's report shows that under a Family Court order in June 2001, Moignard paid off the Hawthorn house and transferred it, along with the Mercedes, the Porsche, a swag of shares and $300,000 to Alice.
But while the trustee company controlling the Ramsay Street house was sold for $2, the $2.49 million personal loan from Swiss company Agraconsult Anstalt remains unpaid. The Loebenstein report says the company, connected with investment banker Hans Rudolf Moser, made the loan so Moignard could buy the house without liquidating Davnet shares when they were freed from escrow in December 2000.
Moser and associate Jurg Walker, both Davnet investors and directors, need not have bothered. Moignard began tipping his 70 million shares on to a falling market, raising over $16 million.
By July 2001 he had turned to a new venture, the Australian and Asian development of DotWAP, a US-based business that could provide data communications to remote computer terminals and mobile phones. According to the Loebenstein report Clever Country Software, trustees of the Moignard family trust, dissipated its shareholding in Davnet to the tune of $8 million because it bought DotWAP shares from Davnet employees when Moignard, off his own bat, sought to correct a possible breach in prospectus requirements by DotWAP USA.
The DotWAP shares, now worth nothing, are held in the Koshka trust, which is administered by Pure Capital Investments, the company Moignard sold to Lewis for $2.
Five of Moignard's seven trusts still exist but, according to the Loebenstein report, they are discretionary trusts and Moignard has no direct interest. Four have deficiencies totalling more than $3 million.
There is no financial statement on the fifth, called the BTH Trust in the Loebenstein paper. However, reports to the stock exchange show that its trustee company, Bay Terrace Holdings, holds 200 million shares in CBD Energy, a penny dreadful promoting energy-saving installations in Hong Kong. It was founded as CBD Online by Moignard's father to develop and operate websites for city buildings. He retired, and was replaced in the boardroom by his son, who resigned in June this year.
After Stephen resigned from the board on June 30, the company reported that Bay Terrace Holdings would subscribe a further $550,000 for shares, giving Moignard's related interests 56.32 per cent of the votes.
When Loebenstein signed his report on August 25, the Moignard family's interest amounted to $4.25 million.
However, the Loebenstein report seeks to make a case for accepting Moignard's $350,000 settlement offer by warning creditors the most they could expect from his $113,000-a-year job would be $66,000 spread over a three-year bankruptcy.