Liam Walsh, Courier Mail, Australia

A TOP executive at childcare giant ABC Learning Centres established a private staff-recruitment business that later won exclusive contracts with the stockmarket-listed company.

The executive was listed as the business’s sole director when the contracts are understood to have been won, although documents filed later said another businessman had actually been in charge.

Brisbane-based ABC maintains the organisation is separate but it marks the latest case involving outside companies that do not appear on ABC’s accounts….

ABC Acquisitions’ sole director is Donald Jones, who like ABC Learning, has said the outfit is an independent operation. Mr Jones is also executive director of 123 Busy Beavers, which recently started trading in Canada.

Company documents show 123 Careers, which Mr Jones now solely owns, was created in April 2005 – the director was listed as Jillian Reynolds, ABC’s chief operating officer.

On March 23, 2006, Ms Reynolds was recorded as signing company documents again naming herself as director.

But in mid-2006, Mr Jones signed documents saying he had actually been the sole director since April 2005 and shareholder since December 2005.

The timing is important because it is believed that in February 2006 ABC sent a memo to casual centre staff saying 123 Careers (under its previous name Childcare Services Recruitment) had won a contract beginning in April that year.

Staff who wanted “to continue working” as a relief worker had to transfer employment to 123 Careers.

ABC chief executive officer Eddy Groves confirmed an exclusive arrangement, could not verify the contract’s exact months, but said 123 Careers was not a related party….

He said Ms Reynolds – who has not responded to interview requests – had been “proactive” in setting up the company, only later seeking ABC approval.

“We said that wouldn’t work because she would be a related party transaction, so she let that go and transferred it to Don (Jones),” Mr Groves said.

ABC also said it did not want to run a recruitment business because it was focused on childcare, he said.

Asked about the directorship and shareholding changes recorded in mid-2006, he said: “They were slack on the paperwork.”…

Mr Groves said Mr Jones was running the operation “from the get-go”.

Mr Jones, meanwhile, would not be interviewed, but wrote that 123 companies were private businesses.

Professor Natalie Gallery of Queensland University of Technology’s School of Accountancy said, generally speaking, any transactions with key executives in 2006 should appear as a related-party transaction.

The 123 Careers 2006 return shows a $1.3 million loss in fiscal 2006 off revenues of $25.5 million.

Including a $27.3 million intangible “right of children supply” asset, it had a shortfall in net assets of $1.3 million.

The auditor signed off the accounts stating: “The entity’s ability to continue operations and meet its debts as and when they fall due is dependent on financial support pledged by the sole director Donald Vivian Jones”.