The Rise and Fallout of Red Ant

Unexplained loans

Within a month of the company going into receivership, White had started up another company – a licensing consultancy agency by the name of Tuff Kat, and brought former Red Ant client, 505 Games, and former Red Ant staffer, Tim Emmerick, over with him. His actions led some his former employees to wonder how he managed to start another business and support another employee when he claimed to have lost everything just weeks earlier.

When the company’s Report As To Affairs was released late in October of 2009, it revealed that Red Ant had loaned more than AUS $2 million (£1.2m / $1.8m) to numerous other companies and trust funds – all owned by Julian White. Question marks still hang over when and why these loans were made, as well as where the money is now, especially given that there are creditors and former employees who are waiting to be paid over a year later.

The report stated that White had loaned almost AUS $700,000 to himself, with Red Ant’s holding company (also owned by White), borrowing AUS $1,100,496. Almost AUS $400,000 went to companies registered under the names Mad4Games Australia, Green Monkey, and White Commerce Trust – all companies of which Julian White was a director. All his other registered companies were still in operation at the time of writing, although his wife, Anne White, had assumed the role of both director and secretary of most of those companies before stepping down from all of those posts in late 2009.

White explained that all the aforementioned companies that were loaned money were set up over the years in association with Red Ant and that all the loans were made for business purposes only, and all the money was put back into the business through those companies, although he did not say how. When asked about his other companies, White said: "The bank has a fixed and floating charge over all those companies you’re referring to," which would mean that all his other companies are in debt to the bank, which raises questions as to whether those companies have the capacity to repay the loans they borrowed from Red Ant.

When asked why he had made a loan to himself, White responded with: "If you go back through the history of personal loans, they were paid off by dividends." However, loans cannot be repaid through dividends – they can only be paid off through loan repayments and interest. Furthermore, if those loans were paid off, they would not have appeared on the Report as still being outstanding.

Associate professor of business law and taxation at the University of NSW, Frank Zumbo, who couldn’t comment specifically on the Red Ant case, said that while inter-business transactions aren’t uncommon, it raises serious questions about the business practices of an individual if they are lending money to themselves. More importantly, it raises serious legal concerns if the money was loaned when the company was insolvent, which then raises the question of whether or not the Corporations Act was breached.

The report revealed that while more than AUS $2 million had been moved to other companies owned by White, Red Ant had accrued almost AUS $10 million (£6m / $9.1m) in debt to its creditors and owed its former employees approximately AUS $250,000. The list of hundreds of creditors showed that the company owed amounts of money ranging from hundreds of dollars into the millions. Publisher of Fallout 3, Bethesda, were owed AUS $2,860,046 (£1.72m / $2.63m) – it declined to comment on the loss.

Bethesda wasn’t the only game publisher to lose money in the fall of Red Ant. Other big players within in the industry also appeared in the list of Red Ant’s unsecured creditors, included:

• Midway – AUS $1,923,687 (£1.16m / $1.76m)
• Capcom – AUS $1,128,591(£682,000 / $1.03m)
• 505 Games – AUS $220,049 (£133,000 / $202,000)
• Black Bean Games – AUS $151,616 (£91,000 / $139,000)

Further to the list of creditors, the receiver’s report also listed two addresses as being the place of residence of Julian White – one being a large two-storey, newly built house in the affluent Sydney suburb of Turramurra, and the other, which was also listed as being the operating address of White’s other companies, a mansion in Sydney’s northern suburb of Dural. The house in Dural was listed as recently as November of this year in the Report as to Affairs and Anne White’s resignation document from her directorships as the residence of both Julian and Anne White. White said that his property in Dural had been auctioned off in June and that he no longer lived there, although he would not reveal where he now lived. The property was indeed sold to a couple for the sum of AUS $2,430,000, but despite his assertion that the property in Dural was no longer his place of residence, the Report as to Affairs initialled and signed by him and his wife as recent as October of 2009 still list it as his home address. In the Report As To Affairs, White signed off on every page to confirm that the details were accurate and correct, including the pages stating that he lived in the property in Dural.

A director’s search on Julian White showed that his companies Green Monkey, Julianne Industries, Mad4Games Australia Pty Ltd, Tuff Kat, Red Ant Holdings, White Super Pty Ltd, and TK Ownership Pty Ltd all operated out of this premise, which covered hectares of land, came with a large swimming pool, manicured lawn, a water fountain that greeted guests who drove up the long driveway, and security cameras at the entrance.

ASIC searches on all these companies revealed little information – there was no explanation anywhere as to what these companies did – the only information that was available on the public record was that they had been loaned a significant sum of money by Red Ant.

In mid-November 2009, documents were also lodged to ASIC across all companies signifying the resignation of Anne White as director and secretary from the majority of the aforementioned companies – all on the same day. Her resignation came just two days before the Report As To Affairs – which detailed the debt that her companies were in to Red Ant – was lodged with ASIC. This raises questions as to when and why these companies were put in Anne White’s name, and what caused her to step down from all these roles at the same time. Julian White declined to comment on this and Anne White could not be contacted.

A lot is still unknown about the inner-workings of the company and where a lot of its money has ended up. When contacted in October, the liquidators PPB Pty Ltd said they were not ready to make a comment on whether they would chase up loans that Red Ant made to other companies. In December, they did not respond to further phone calls and it is still not clear whether the liquidator will recoup much of Red Ant’s outstanding debts.

Standing outside Red Ant’s office in Baulkham Hills, the signage was still there, albeit with a missing letter ‘A’. All lights were switched off; calls to the office’s phone number and intercom yielded no results, and it was fairly apparent that no one had worked here in a long time – the office’s only inhabitant was a life-size statue of a character from the company’s massive hit and Game of the Year, Fallout 3. With Red Ant’s symbol of success standing in an empty office of a company that was once thought to be unsinkable, one could only imagine what it was like to have been there when the company rode its high, took its fall, and lost it all.