Disgraced businessman Geoffrey Edelsten has suffered a major legal setback in the United States after a judge stripped him of control of his financial affairs and authorised a selloff of his luxury homes.
The move has come amid claims Mr Edelsten has been repeatedly caught out misrepresenting his financial position and concealing assets from creditors.
But The Sunday Age can also reveal that Mr Edelsten – despite his bankruptcy – has allegedly found the money to make a secret payment to a former lover to buy her silence after she threatened to expose his alleged ‘‘sexual peccadillos’’.
A US judge this month ordered the appointment of an independent trustee to oversee management of Mr Edelsten’s estate, dashing his claims that declaring bankruptcy was just a tactic and his ‘‘affairs are under control’’.
In another sign of his financial distress, an emergency motion was granted last week allowing Mr Edelsten to sell off a number of his Australian assets. The National Australia Bank is threatening to foreclose after one of Mr Edelsten's companies overdrew its cheque account, defaulted on two mortgages and failed to make payments on two cars, a McLaren and a Range Rover.
The homes set to be sold include a $2.7 million Versace-branded penthouse on the Gold Coast and a $1.1 million apartment in The Rocks, Sydney.
But Mr Edelsten could also be facing renewed scrutiny by the trustee and creditors over new evidence suggesting he passed money to an ex-lover that was not authorised or reported to the US bankruptcy court.
The Sunday Age has seen a draft copy of a legal agreement drawn up between Mr Edelsten and Shirley Moore, an American woman he met in 2007 through a ‘‘sugar daddy’’ website and dated for about two years.
It appears a dispute broke out between the two in early 2013 and Mr Edelsten sought an injunction barring Ms Moore from disclosing any information about their relationship.
After months of legal wrangling, they agreed to $39,000 payout that would permanently gag Ms Moore and allow an ‘‘agent’’ of Mr Edelsten to erase a trove of emails, pictures and videos relating to Mr Edelsten she had allegedly obtained.
‘‘Moore shall disclose, provide and allow destruction of any and all Confidential Information, including, but not limited to any and all information in her possession regarding 'other women' and sources of allegedly embarrassing emails or other media relating or referring to Geoffrey Edelsten and alleged sexual peccadillos or conduct,’’ it said. ‘‘Moore hereby disavows any claim of sexual deviancy by Geoffrey Edelsten.’’
But the agreement hit a snag when Mr Edelsten filed for bankruptcy in the US in early January, putting the final $19,000 instalment of the payout in doubt.
The Sunday Age understands Mr Edelsten missed the deadline amid uncertainty over whether he could legally fund the settlement through one of his accounts frozen in the bankruptcy. A payment was believed to have been made in mid-February.
The source of the funds could become a legal issue as Mr Edelsten has testified under oath he had only $90 in cash when he declared bankruptcy and was living on money borrowed from his mother.
Mr Edelsten said he believes the appointment of the independent trustee would be "helpful" but denies he personally made any payments to Ms Moore. "You have attempted to induce breach of contract for juicy information. Obviously she received what was required under the terms of the contract," he said.
Ms Moore declined to comment.
The reporters are listed on Mr Edelsten’s website Australia’s Worst Journalist.