DIRECTORS of Lismore Private Hospital may have breached the law by trading while insolvent, according to the findings of a report by the hospital’s administrators.
The Australian Securities and Investments Commission will also be asked to determine if the directors – Kerry Ferguson and Daniel Owen – should also be prosecuted for failing to maintain proper financial records.
Receivers closed the 66-bed Lismore Private Hospital late last month, with many patients transferred to St Vincent’s and Lismore Base Hospital. It was one of four owned by Owen Ferguson Health – all of which are now in receivership.
The scathing report by administrators HLB Mann Judd will be delivered at a creditors’ meeting on Tuesday.
It estimates that once receivers are able to conduct a full audit, there may be as little as $1000 remaining from the hospital’s assets.
“From what we have been able to glean from the books and records there appears to have been a general lack of financial control over the operations of the hospital as a whole,” the administrators found.
“At this stage it appears unlikely that there will be any funds available for creditors or employee creditors of the company.”
It said that, had the hospital remained open, it would have lost $25,000 a week.
The report said the poor state of the hospital’s financial records made it impossible, at this stage, to determine its total debt but added it was likely to be $2.1 million as of December last year – more than previously thought.
The administrators, Andrew Needham and Barry Taylor, recommended the hospital be wound up.
The report found the company was in default with its lender ANZ and estimated that the hospital owed more than $204,000 in staff superannuation after not making payments since late 2008.
It also had an outstanding tax bill of $100,000 and owed about $680,000 in rent.
The report warned it would be ‘some time’ before administrators would know if there was enough money to pay the hospital’s 64 employees their full entitlements, adding staff records were ‘far from complete’.
The hospital also owes more than $345,000 to trade creditors, which rose by 72.5 per cent from June 30 last year until receivers were appointed last month.
The hospital’s woes started soon after it opened in 2008 and was only able to operate at half capacity because of problems with air conditioning, the report said.
The report also said that the company was undercapitalised.
After exhausting its overdraft with ANZ, the directors considered a number of options including possible mergers with other operators and a straight sale of assets.
It also attempted to prop up its ailing hospitals by diverting funds from then-profitable hospitals.
“Unfortunately, none of the restructure options were successful resulting in management making the decision to close one of the loss making hospitals (at Sydney’s Canada Bay) in December,” the report said.