'Worthless' share offload stings former Aussie Home Loans boss
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'Worthless' share offload stings former Aussie Home Loans boss

Former Aussie Home Loan boss Stephen Porges has been forced to pay almost $1 million for inducing a private equity firm to buy shares in a “worthless” tech startup.

Mr Porges, who ran Aussie Home Loans from 2008 to 2013, was found to have engaged in misleading and deceptive conduct and failed to disclose to investors that the startup, SecureOne, was in “potentially ruinous litigation”.

Stephen Porges has been forced to pay nearly $1 million for conduct the NSW Supreme Court found to be deceptive and misleading, or likely to deceive or mislead.

Stephen Porges has been forced to pay nearly $1 million for conduct the NSW Supreme Court found to be deceptive and misleading, or likely to deceive or mislead.

Photo: Peter Stoop

NSW Supreme Court Justice Robert McDougall ordered Mr Porges to pay $941,700 in damages and interest to Adcock Private Equity, whom he said Mr Porges acted in a “misleading or deceptive” manner towards.

“Mr Porges had become disenchanted with his investment in SecureOne, had fallen out with the management ... and, in the vernacular, ‘wanted out’,” Justice McDougall said.

“Even if Mr Porges believed, on reasonable grounds, that the lawsuit would fail ... he must have understood that the cost of defending the proceedings would be a crippling burden for SecureOne to carry.”

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Mr Porges led the mortgage broker and non-bank lender through the global financial crisis and its virtual takeover by the Commonwealth Bank, which increased its stake in the business to 80 per cent in December 2012.

‘It could be clusterf---’

In 2015, Mr Adcock agreed to buy 1100 shares in SecureOne worth $942,000, which was incorporated in the British Virgin Islands. Court documents show that, at the time, Adcock had been considering putting Porges in charge of the ASX-listed DirectMoney, which it had a stake in.

Stephen Porges spent almost five years as CEO of Aussie between 2008 and 2013.

Stephen Porges spent almost five years as CEO of Aussie between 2008 and 2013.

But it was a range of alleged misrepresentations made by Mr Porges that the court found to be deceptive and misleading, or likely to deceive and mislead.

Mr Porges said in an email that he believed SecureOne was a “billion dollar business”.

Mr Porges said in an email that he believed SecureOne was a “billion dollar business”.

Photo: Janie Barrett

In one email, sent to representatives of Mr Adcock, Mr Porges said he believed SecureOne was a “billion dollar business”. In another, he said that his share divestment in SecureOne was reluctant, a representation the court considered to be false.

On another occasion, Mr Porges said he was liquidating his shares in the company to appease his wife, Serena. Adcock had also claimed against Mr Porges' wife, but dropped it before the hearing commenced.

In correspondence between the two parties Mr Porges expressed frustration at the dispute, saying he’s been “more than fair to this business over 14 years” and has “invested large amounts of money and reputation” into SecureOne.

“I continue to want to do the right thing but cannot continue to be lied too [sic] and feel disappointed by the actions of both Geoff and yourself over this. My lack of trust concerns me as my word has been given and also my name used to investors,” Porges wrote in emails.

“This should be an easy and small matter or it could be clusterf---,” he said, Justice McDougall clarifying the expression ‘clusterf---’ was used “to denote a perilous state of affairs”.

“I have been more than fair to this business over 14 years and have invested large amounts of money and reputation. Nobody has been as integral or committed to this business as I over an extended period.”

‘Potentially ruinous litigation’

Play LA was seeking damages of $US10,798,500 from SecureOne and its 11 major shareholders for an alleged breached share purchase agreement, a lawsuit which Adcock said would be “catastrophic for SecureOne if successful”.

Strapped for cash and with its product still in development, SecureOne would be unlikely to bring its “billion dollar” idea to market.

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“Mr Porges could not have failed to understand that if the Play Proceedings succeeded, SecureOne would be wiped out,” Justice McDougall said.

“In my view, Mr Porges’ conduct in making the profit representations but in failing to disclose the matters ... above was misleading or deceptive, or at the very least likely to mislead or deceive.

“Because it withheld from the recipient ... information that any purchaser considering an investment in SecureOne shares would have thought material to its decision whether to proceed.

“There is no need for expert evidence on that point; the bright light of common sense illuminates a sure path to the conclusion.”

Mr Porges previously held senior leadership positions at HSBC Bank and SAI Global. He now serves as chief executive at Australian Alliance for Data Leadership, and previously advised real estate group LJ Hooker.

David Estcourt works for The Age and The Sydney Morning Herald.

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