This couple has lost their successful small business after its tax payments were taken by an accountant the ATO was warned about three years ago.
Police are expected to charge Coffs Harbour’s Stephen Raymond Douglass as soon as this week over his pilfering of at least $500,000 and possibly $1 million from Warren and Sheenah Whitten’s Woolgoolga-based steel fabrication company, Arc Attack Engineering — money they thought he had remitted to the ATO.
In a confession he emailed to the Whittens a month ago, Douglass attempted to elicit sympathy by blaming his actions on a gambling addiction.
However, there was no mention of a gambling addiction in 2014 when another Woolgoolga client, Eadie Cabinet Making, discovered a decade’s worth of GST had not been paid to the tax office.
John Rolfe The Daily Telegraph
On that occasion Douglass said the money had been taken by an employee that Craig and Michelle Eadie doubt actually existed.
The Eadies alerted the ATO about Douglass. But it never even contacted them. It is unclear why. Its media unit said it could not comment.
“The system is a joke,” Mr Eadie said. “The ATO didn’t care. There was never any follow-up. The thing that really pisses me off is that I should’ve been able to warn the other local businesses (who were clients of his). Warren would never have been ripped off. But I was put under a gag order.”
In 2015, seemingly by coincidence, the ATO audited Arc Attack. But it did not speak to the Whittens. When News Corp Australia asked why, the ATO said “taxpayers may wish to have another person act on their behalf. The ATO will contact the nominated person to discuss related matters, for example during an audit.” After the audit, the ATO fined the Whittens $60,000.
In June, the ATO began winding up proceedings against Arc Attack in the Federal Court. The company, which employs seven people, went into voluntary administration in August.
Only then was the fact of the missing money identified — by Mrs Whitten.
Arc Attack is now in liquidation. The Whittens face having to remortgage their home if they are to be any chance of buying back the business. They’ve already had to sell their investment properties and shares.
“I think the ATO has something to answer for,” Mr Whitten said.
Liquidator Steve Nicols of Nicols & Brien said were it not for the misappropriation by Douglass “this company would not be in liquidation”.
Mr Nicols said he would sell “the assets to the highest bidder, which could be Warren. (But) they may not get the business back.”
The main creditor is the ATO. It is not yet known what dividend will be paid.
The Whittens said if it is less than 100 cents in the dollar they will pay the difference out of their own pockets.
“I want to walk around with my head up,” Mr Whitten said.
The couple had not wanted to go into administration. But Douglass encouraged them to do so, rather than hire business advisers the SR Group.
Its managing director Susie Bennell said it would have negotiated with the ATO to keep Arc Attack trading and in the Whittens’ hands.
When News Corp Australia approached Douglass for comment he said: “I do not give you permission to write anything. My solicitor says she will sue for all the world if anything is written against me.”
In our Newsroom, we share advice, the latest news, financial tips and our case studies. Please enter your email address to receive our monthly news update.