Abc Founders Split Along The Margins

The Age

Monday January 19, 2009

COLIN KRUGER, SYDNEY

YOU can't accuse ABC Learning founder Eddy Groves of being a pessimist. He signed on for his second marriage last Thursday to long-time partner, Viryan Collins-Rubie, in a characteristically lavish affair on the Gold Coast attended by close friends and family.

The sunset ceremony at The Villa, an exclusive venue complete with its own nine-hole golf course, drew howls of outrage from the many victims of ABC Learning's multibillion-dollar collapse.

Dr Le Neve Groves, who finalised her divorce from Mr Groves late last year, may not have been impressed either.

A battle royal is brewing in the Queensland Supreme Court between the two ABC Learning founders, Westpac's BT Securities, and Citigroup over margin loans she allegedly guaranteed for her former husband that led to their collective shareholding in ABC Learning being wiped out early last year by margin calls.

In a steady drip of documents lodged with the Queensland Supreme Court in recent months, Dr Groves has denied claims by her former husband, and the two margin lenders, that she guaranteed his margin loans, which totalled more than $40 million.

Dr Groves went as far as to claim in the court documents that her signature was forged on the guarantee documents with BT Securities. This is despite statements from the margin lender that its officers witnessed Dr Groves signing the documents.

At stake is $64.2 million, which is the amount Dr Groves is seeking from her former husband and the margin lenders. The figure covers the loss of shares allegedly lodged as security for her former husband's margin loans, which exceeded $40million, plus more than $10 million in dividends owed to her that were pocketed by her ex-husband, according to Dr Groves.

In its statement of defence, BT provided details of meetings with the ABC Learning founders where Dr Groves was allegedly briefed on the guarantees she was asked to provide, was handed documents, and returned them directly to the BT officials fully signed.

BT said that one of its representatives met the Groves in June 2005 when Dr Groves "executed" the documents giving the guarantee before she handed the documents back to the BT official.

At a second meeting at a Westpac office in Brisbane, BT claims Dr Groves met two bank officials where she completed the guarantee by signing the lodging shares form that put the shares offered as security into a BT trust.

In reply to this defence, Dr Groves denies attending either meeting or providing her signature authorising the transaction. "The signature appearing on the documents referred to ... which purport to be that of Dr Groves, were not written by Dr Groves," she says in a reply to BT's defence.

She also alleges that one of the BT officials present at both meetings falsely signed a document purporting to witness Dr Groves signing the guarantee document when the official "did not in fact see Dr Groves signing the said document".

Dr Groves also accused BT of "unjust or unconscionable" conduct in that the company did not discuss the alleged guarantee with her, or "take any steps to ascertain whether the effect of the alleged guarantee had been explained to Dr Groves by an independent third party".

Mr Groves' defence statement, lodged just before Christmas, supports the version of events provided by the margin lenders and also defends himself against allegations that he "unjustly enriched" himself at his former wife's expense.

The documents state that the $40million worth of loans secured by Dr Groves' guarantee "were applied" to the benefit of both himself and Dr Groves.

Mr Groves also denies that he pocketed $10.7 million worth of dividends paid on the shares owned by his former wife between 2002 and 2008. He said the dividends "were paid into an account in the joint names of" himself and Dr Groves.

Dr Groves countered that she did not have access to this account despite requests to her former husband to gain access.

The shares, of course, are ultimately worthless, with ABC Learning investors expected to lose everything from the child-care operator's collapse.

But the transactions show how Mr Groves managed to fund a dream lifestyle that appears to be unaffected by the company's collapse.

Mr Groves' loans with BT eventually totalled more than $25 million.

© 2009 The Age

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