Insurer’s liquidator to investigate transactions

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Liquidators will investigate the transactions of failed Queenstown insurer Western Pacific, including those linked to co-owners Graham Smolenski and Jeff McNally. 

“It’s commonplace for a liquidator to look at all those things but I haven’t yet,” Simon Thorn of Grant Thornton Christchurch says. 

“The focus is on securing and realising assets, the investigation will follow.” 

Mountain Scene has obtained Western Pacific’s financial accounts for 2008 and 2009, suggesting shareholding 
companies linked to Smolenski and McNally took $872,983 out of Western Pacific over those two financial years. 

Dividends of $250,540 were paid in 2008 and a share buyback the following year saw Western Pacific pay $592,433 to the Smolenski and McNally entities. 

Although legal, the payouts reduced shareholder funds by roughly $350,000. 

A local accountant believes the share buyback was probably “part of the way” Smolenski repaid a $550,000 loan granted to him by Western Pacific in the 2008 financial year. 

The accountant also points to confusion over whether some Western Pacific share capital remains unpaid – if so, the liquidator can demand payment from shareholders. 

The 2009 financials show “unpaid shares” at $7.8 million yet Companies Office records show these shares as being cancelled. 

There could be a simple explanation, the accountant says, and liquidator Thorn confirms he’ll get to the bottom of things. 

“I must admit [share capital] is not something I’ve looked at closely yet but it will be looked at – as it is always,” Thorn says. 

“I’m concentrating on the here and now, the investigation will follow.” 

GL Smolenski Investments Ltd is also listed as an unsecured creditor, Thorn confirms, but he doesn’t yet know why or for how much. 

Mountain Scene asked Thorn to comment on statements from ratings agency Standard & Poors – who issued Western Pacific with a B or “weak” rating. 

S&P credit analyst Michael Vine blamed Western Pacific’s collapse on “the shareholders’ failure to inject sufficient capital to maintain solvency at a time of stress”, saying its reinsurance required the Queenstown firm to pay the first $1m of claims from each of the two Christchurch quakes. 

Thorn: “I don’t disagree.” 

Vine also spoke of Western Pacific getting “an interim injection of $500,000 in late 2010” – but the liquidator says he can’t confirm that injection yet.