Edition: 1 - First with the news Section: Finance, pg. 035 'ASIC suspects that the defendants, as executive directors of One.Tel, may have concealed the true financial position of One.Tel from the market . . . and from at least one of the non-executive directors -- ASIC senior investigator Peter Connor' COLLAPSED telco One.Tel may have been insolvent up to six months ago, joint administrator Peter Walker swore in an affidavit released by the Supreme Court of New South Wales yesterday. In his court statement Mr Walker, a partner of Ferrier Hodgson, said he had found One.Tel had serious working capital problems in December despite glowing public statements from the company and was ``clearly insolvent'' when he was appointed on May 29. Other papers which Justice Robert Austin made public yesterday, despite a legal battle by One.Tel's former joint managing director Jodee Rich to have them suppressed, showed the Australian Securities & Investments Commission suspects serious Corporations Law breaches. One.Tel was placed in voluntary administration on May 29 with 3000 creditors owed more than $600 million after a cash crisis was discovered during due diligence into the company by major shareholders News Limited and Publishing & Broadcasting. The two companies, led by One.Tel non-executive directors Lachlan Murdoch and James Packer, had been considering underwriting an emergency $132 renounceable rights issue for working capital. This would have followed almost $1 billion the two had previously invested. Mr Packer and Mr Murdoch issued a joint statement on May 30 saying that they had been ``profoundly misled'' over the company's financial situation. The papers released yesterday were evidence in ASIC's case to freeze $45 million of assets owned by One.Tel co-founders Mr Rich and Brad Keeling and chief finance officer Mark Silbermann. Mr Silbermann's lawyer has argued ASIC did not get files which showed Mr Packer's PBL was kept informed. ASIC senior investigator Peter Connor said in his affidavit that Rich, Keeling and Silbermann were suspected of serious Corporations Law breaches including falsification of books and insolvent trading. The corporate watchdog also suspected false statements had been made, failure to notify the Australian Stock Exchange of matters and the lodgment of misleading statements with ASIC. ``ASIC suspects that the defendants, as executive directors of One.Tel, were in a position to know the true financial position of One.Tel,'' Mr Connor said. ``The defendants may have concealed the true financial position of One.Tel from the market . . . and from at least one of the non-executive directors,'' his statement said. When it should have been clear that it was not true between December and May, the three men made, or allowed others to make, false and misleading public statements including that One.Tel was ``on track'', ``fully funded'' and ``expected a cash balance of $75 million'' by June 30. These statements duped investors, customers and creditors. ASIC suspected the three may have purposely presented false and misleading financial information and cash flow projections to the board as far back as January 25, Mr Connor's affidavit said. He said in any case they ``ought to have known'' that data were wrong if they were carrying out their moral and legal duties as directors. Continued Page 36 One.Tel collapse Breaches suspected From Page 35 He said other suspected breaches included sections of the Corporations Law which required directors to exercise their powers with care and diligence and prohibited them from improperly using their positions. ASIC would seek fines be imposed for any breaches it established as well as compensation paid for losses and damages suffered as a result of any wrongdoing, and orders prohibiting them from managing corporations. Among the papers released yesterday was a legal analysis on May 25 by News Limited's chief general counsel, Ian Philip, which first identified One.Tel's alarming cash shortfall and alleged management problems. The privileged memo to News executive chairman Lachlan Murdoch said: ``It appears that board papers may have intentionally misrepresented cash flows and profitability.'' Big five firm Ernst & Young was called in to do a review to uncover One.Tel's true position.Within 24 hours, Ernst & Young told One.Tel's shocked board it would need $170 million in cash immediately to meet its obligations. Administrators were appointed minutes later. Mr Rich's legal counsel, Bret Walker, argued the papers should not be released because they could be prejudicial to his client, Mr Keeling and Mr Silbermann, who would not have a chance to contest the evidence before they were released to the public. Copyright 2001 / Courier Mail