Mossgreen in Melbourne
Former Mossgreen staff volunteering to help with vendor returns in Armadale, Melbourne.

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Paul Sumner, former CEO of Mossgreen, described BDO’s allegations as “baseless and vindictive”.

Among the claims made by BDO is an allegation that Mossgreen traded while insolvent and operated a ‘Ponzi’ scheme to pay vendors.

The firm “knowingly utilised vendor sale proceeds to fund the repayment of prior auction vendors and the ongoing trading losses of the company”, the report claims.

It states that “old vendors could only be paid from the proceeds from sales of new vendor goods. The Ponzi scheme effectively came to an end… [when] there was insufficient ‘new’ vendor funds to meet fixed overheads and pay out old vendors.”

Sumner strongly disputes the administrator’s claims. “I welcome the opportunity in due course to prove wrong the baseless and vindictive allegations that were contained in BDO’s highly inaccurate report,” he asserted to ATG. Referring to one transaction cited in BDO’s report, Sumner claimed: “BDO might do well speaking to the vendor in this case before they make such allegations.”

Former shareholders Jack Gringlas and Charles Leski were co-directors of Mossgreen until they left in July 2017.

Appeal rejected

BDO’s report was published days after the administrator lost its appeal to overturn a court ruling that it could not charge fees to consignors.

BDO had originally asked owners to pay a Aus$353.20 (£200) collection fee for each item stored when Mossgreen went into administration.

Twelve former Mossgreen staff, including Sumner, have volunteered to assist in the return of items from two properties in Melbourne. Sumner said he was “working with a large team of former senior Mossgreen staff, all unpaid” to return consignments to vendors.

Consignors to Mossgreen have told ATG they are worried that the removal of Mossgreen’s computer systems and records as part of a wider investigation will cause difficulties in identifying property.

Antony Davies, who is awaiting the return of 78 lots, said: “While we welcome Paul Sumner’s efforts in recovering property, it is not yet clear what he can do. There are now legal complications involving the owners of the premises, thanks to BDO’s action.”

BDO recommends the formal liquidation of the company but creditors will vote on this at a meeting on May 4. The administrator estimates secured creditors, such as Gringlas, will get between 1-2 cents in the dollar, vendor creditors will get between 0-20 cents in the dollar and unsecured creditors will receive nothing.