BREAKING: KordaMentha is under fire as a lawsuit filed in the Federal Court alleges serious breaches of confidentiality linked to its review of a major Melbourne recycling business. The rival advisory firm PKF claims that KordaMentha misused confidential financial information to position the company as an acquisition target for Cleanaway Waste Management.
This urgent case, initiated last week, threatens to implicate the Commonwealth Bank, which engaged KordaMentha for the review of SKM Recycling following its collapse in 2019. PKF, appointed liquidators of SKM, alleges that KordaMentha shared sensitive cashflow budgets and forecasts with 333 Capital, a corporate advisory firm linked to KordaMentha, which then pitched a deal directly to Vik Bansal, SKM’s CEO at the time.
According to court documents, the pitch occurred in August 2019, just three months after KordaMentha finalized its review for CBA. PKF claims KordaMentha’s actions allowed Cleanaway to acquire SKM “on more favorable terms” using a “loan-to-own strategy.” This strategy ultimately enabled Cleanaway to gain control of a $60 million debt facility owed to CBA, leading to KordaMentha’s appointment as receivers for SKM.
PKF is not only suing KordaMentha but also Cleanaway and Mark Korda personally. They argue that “no information barriers or Chinese walls” were established to prevent the misuse of confidential information. A spokesperson for KordaMentha dismissed the allegations as “entirely without merit,” asserting that the firm acted “professionally and ethically at all times.”
The stakes are high, as Cleanaway intends to “vigorously defend the claim.” If PKF prevails, it could have significant implications for the businesses involved and the broader recycling industry. Cleanaway, the largest waste management firm in Australia, recently saw its shares rise to $2.90, a 3¢ increase, amidst this developing situation.
The lawsuit also claims that KordaMentha failed to exercise reasonable care in selling SKM’s assets, potentially resulting in undervalued sales. KordaMentha is expected to counter that assets were properly valued, and some were sold above those valuations.
CBA had hired KordaMentha two years after SKM made headlines for an uncontrolled fire at its Melbourne plant, which lasted over a week. SKM and its director, Robert Italiano, faced fines totaling $1.28 million earlier this year for their part in the incident.
As PKF continues the liquidation of SKM’s remaining entities, this lawsuit could reshape the landscape for corporate advisories in Australia. With KordaMentha’s reputation on the line and Cleanaway’s future in question, all eyes are on the unfolding court proceedings.
NEXT STEPS: The case is expected to shed light on the legal and ethical standards governing corporate advisory practices in Australia. Stay tuned for updates as this story develops.
