Creditors Hear How Cash-strapped Computer Firm Lent Boss $1.6m

Sydney Morning Herald

Monday July 3, 1995

By JULIE ROBOTHAM and SUE LOWE

Unsecured loans of more than $1.6 million to Mr John Linton, the managing director of Osborne Computers, were among a catalogue of "bad management" by the company, the company's voluntary administrator told a packed meeting of creditors yesterday.

Osborne Computers went into receivership last week leaving the delivery of more than $4 million-worth of pre-paid personal computers in doubt.

Mr John Star, the voluntary administrator appointed by Osborne, told the meeting in Sydney that the company's problems were "largely selfinflicted".

His office later told the Herald that the loans were made to Mr Linton in the 1993-94 financial year.

The meeting was told by Osborne's receiver, Mr Tom Riddell, that customers who paid in advance would be last on the list to receive computers.

Mr Star is attempting to form a Deed of Company Arrangement which would allow Osborne to trade out of difficulty, saying that in the event of liquidation, pre-paid customers would get no refund.

"All you creditors have got the chance of zilch, in a meltdown, a liquidation scenario. In my view, the problems of the company have been largely self-inflicted by the management," Mr Star said.

But Mr Riddell, who was appointed by the Commonwealth Bank and whose decisions take precedence over Mr Star's, has vetoed the resumption of manufacturing at Osborne's North Ryde factory.

Mr Riddell told the meeting that he could not approve the plan because the company's true financial position had not yet been revealed. "I refuse to be bullied into doing something now that will make a worse situation for creditors later," Mr Riddell said. He said if profitable trading resumed, Osborne would have to boost cash flow by filling new orders before it could begin supplying the backlog of consumers who had already paid for goods they had not received.

"I believe we do have a problem recommencing (production) when we're saying, 'Sorry, it's not for you'," he said.

The NSW Department of Consumer Affairs said yesterday that it began an inquiry into Osborne last week after receiving about 60 complaints over two weeks in mid-June.

"We are looking in particular at the extensive advertising in May and whether it was known at that time the company was insolvent," said a spokesman.

Mr Star is providing State consumer affairs departments with a list of pre-paid customers.

Mr Linton did not appear at yesterday's meeting, but Mr Stanley Falinski and his wife, Jill, who own Osborne with Mr Linton, were present.

Mr Star said the Falinskis "are looking at a situation in a worst-case point of view where they'll lose everything". The couple's home is mortgaged to the Commonwealth Bank, which is owed approximately $7 million by Osborne. Mr Falinski said he was willing to consider the prompt sale of his home.

Mr Star said he was attempting to secure a mortgage over Mr Linton's wife's property - believed to be an unencumbered $2 million Mosman house.

PAGE 35: Rise and fall of a technology star.