Mobile payments: AUS mobile payments tech provider turns up its toes

In October 2007, UltraPay proudly unveiled its success in the London, UK, taxi market with its "complete offering for UK taxi and hire car operators. This is done in conjunction with our partner Streamline, a part of The Royal Bank of Scotland Group."

The UltraPay MT3000 is a very sophisticated mobile payments device: it's a dual band mobile phone / SMS device with a mag stripe, chip & pin and fingerprint reader built in and a remote bluetooth printer.With a Linux operating system and FPOS software, the device seems to be a certain winner in a multitude of markets where payments have to be taken "on the hoof."

The demand for the product is clear with somewhat similar concepts being released in the USA for plugging into an iPhone.

But this week, UltraPay went into liquidation. Its website has been taken down suggesting that there is little chance of rescue.

The company had been struggling for some time. Indeed, in August 2007, it voluntarily suspended its listing on ASX. That was 13 years after its debut.

New investors, a major board shake-up and shareholders getting out have been a feature of the past three years. In mid 2008, the company said it was investing in mobile phone entertainment and pay tv.

On 15 November 2010, MSI (Holdings) Pty Ltd, a secured creditor of Ultrapay, appointed Richard Albarran, David Anthony Ross and Blair Alexander Pleash of Hall Chadwick as Joint and Several Administrators of Ultrapay.

On 19 November 2010, Associate Justice John Efthim ordered that the Administration of Ultrapay be terminated and that Mr Jess of Worrells be appointed as provisional liquidator to the company.

On 21 December 2010,The Supreme Court of Victoria ordered that Ultrapay Limited (Ultrapay) be wound up on the grounds that it is insolvent, following an application by the Australian Securities and Investments Commission (ASIC).

MSI had taken a minority stake in UltraPay in May 2008 and increased its shareholding in 2009.

But documents available on the internet purportedly on UltraPay's letterhead give an interesting picture.

First, the automatic presumption for those familiar with technology is that MSI is the Taiwanese manufacturer of computer motherboards and other electronic boards. But that is not so: MSI stands for "Mainstreet International," a private investment company.

In what appears to be an announcement made via ASX but headed "Report from MSI Holdings Pty Ltd to the Board" and produced by Gregory Hannan, a director of Ultrapay and a subsidiary company called Chalmway Pty Ltd, a disturbing picture of the underlying financial position emerged.

First, MSI is "the only secured creditor." Therefore, under the terms of its charge, it has been conducting investigations into the "location and existence of assets owned and recorded by the company in its books of account and any other assets not previously "known."

It turns out, the memorandum says, that the examination of Chalmway as to assets in Sri Lanka "has uncovered further assets that were not part of any information ever provided to Ultrapay, MSI nor recorded in the in the Chalmway and / or Ultrapay Limited comany records by the then incumbent Director and CEO James Scobie who was contracted for... the management of its overseas assets including its 90 ownership of Ruhana Multivision (PVT) limited (the other 10 being owned by the Sri Lankan government authority in the PayTV sector.)

But, the memo says, James Scobie resigned in November 2008 "without providing any style of report or documentation whatsoever of his commercial activities in Sri Lanka as is required of him... under the Australian Corporations law." The memo says that, despite many requests, no information has been provided.

The memo goes on to explain that the assets in Sri Lanka - of which the Australian parent knew nothing - came under attack from third parties; legal proceedings were issued against Ultrapay in November 2007 but the then Ultrapay management made no announcements to shareholders at that time. Worse, it is alleged that action was taken against Chalmway but that its parent, Ultrapay, was not notified of the action. Instead, it is said, James Scobie appointed a legal firm without informing Ultrapay that he was doing so. Those conducting the investigation were unable to find files or contact information, including the name, of the law firm apparently instructed.

In 2008 / 9, MSI "addressed the unannounced legal matter," reported to shareholders and found proper representation. But, as of November 2010, the issues remain unresolved, discussions with a view to disposing of the Chalmway in return for help to recover other assets and apparently missing cash.

But that's not the end of the story for there is an investment company, SmarQ Australia Pty Ltd which has had some investment in Ultrapay.

SmarQ failed but it was taken out of liquidation by a vote of its creditors without a Deed of Company Arrangement, according to MSI, a SmarQ secured creditor. In May 2009, James Scobie was "contracted" to join SmarQ - and also arranged for Scobie to be appointed to the Ultrapay board in November 2009 to fill a "temporary vacancy."At the same time, SmarQ drafted a memo to be issued by Ultrapay, MSI say, appointing one Andrew Lucas. MSI found that Lucas was the brother-in-law of one Rohan Skea.

Skea is a former lawyer and a convicted fraudster. In 2004, he was convicted on 37 counts of fraudulently obtaining more than AUD13 million from finance companies. He ran a motor racing team, built a vineyard, led a lavish lifestyle - and then got sent to jail. HIs bankruptcy had an estimated AUD20 million shortfall despite vast assets being identified. His Linked-In profile (http://au.linkedin.com/in/rohanskea) is a masterpiece of positive presentation but makes no mention of his four years in jail. He does, however, drop the names of the very reputable law firms he has worked with - and some rather good clients. The West Australian newspaper, which maintains an almost constant vigil on Skea, presents a somewhat less flattering picture: "Mr Skea, 56, was forced into bankruptcy in WA and his 19 luxury cars, two boats and multi-million-dollar properties were sold. At the time, his bankruptcy trustee told the Supreme Court he believed Mr Skea was hiding other assets," it wrote in March this year.

But SmarQ is a vehicle: it has no funds of its own. The Australian Tax Office launched an investigation into the company in 2009. The West Australian alleges that it holds hundreds of documents which prove that Skea is in control, under a power of attorney, of the SmarQ group including. Skea denies the allegations and, through an intermediary, told the newspaper "he did not manage and was not a director, officer or employee of SmarQ, nor any Australian company. He said he was not authorised to say where SmarQ's money came from, nor if it had any income." But he's been booted out of his Sydney Harbour apartment because SmarQ didn't pay the rent of more than AUD17,000 a month.

Skea's position (detailed at http://au.news.yahoo.com/thewest/business/a/-/national/6992240/crooked-lawyers-sydney-return/) is even more interesting; "documents show that Mr Skea spent tens of thousands of dollars of SmarQ's money on legal and technical advice about how to hide his convictions from any future business partner who might search online for details about his past," it said. A google search for him now produces a raft of positive stories at the top of the search pages.

SmarQ's own publicity says "

• SmarQ provides leading edge, secure and market proven transaction processing, and Value Added Service payment solutions, to merchants and financial institutions throughout the global marketplace
• SmarQ has a global presence with processing headquarters in Dubai, UAE, and representative offices in Sweden, Singapore, Hong Kong, USA and Australia"

Certainly, there was a time that the company was well thought of: it has received a business expansion grant of AUD78,398 "to engage an overseas representative to market product / service." Unfortunately, the date is not available to us.

In the aftermath of the West Australian story, ASIC set about investigating Skea and those around him including his sister, Patricia Coghlan, owner of another company which it was alleged was under the control of Skea under a power of attorney.

The relationship between SmarQ and Ultrapay became snarly when SmarQ made a bid to take over the company, using Coghlans's company Herishef Pty Ltd as the proposed buyer. MSI worked out that there was a network of companies

Skea was banned from running any company until at least 2013 but ASIC is at least persuaded that there is some prospect that he is running multiple companies while third parties are promoted as the true directors.

The West Australian claims that as a result of its disclosures as to who was actually controlling SmarQ, Motorola and MasterCard both cancelled "lucrative contracts" with the company.

MSI's 31 August memorandum says that the SmarQ appointees refuse to leave the Ultrapay board despite the termination of any and all arrangements with SmarQ. MSI called a shareholders' meeting to restructure the board. But things started to move swiftly and soon afterwards, MSI sought to enforce its position and called in administrators which, ultimately, brought in ASIC and its liquidators.

Incredibly, the story becomes even more fascinating.

The MSI memo is written by Gregory Hannan. He, along with David Jaffe resigned as directors in October this year.

Ultrapay had made several positive announcements about its products.

For example, in May that it had received an order from the Australian Tax Drivers' Association for "up to 20,000" units over a two year period. In September, it was announced that "the company has suspended discussions" with the Association.

But more interesting is that, in November 2008, UltraPay filed a notice with ASX saying that it had a confirmed written order from MainStreet International Group Limited for 10,000 MT3000 terminals to be delivered over five years. Two months earlier, Ultrapay had said that it needed to sell non-core assets to raise the money to "re-commence production."

Then, in December 2009, there was an announcement that the MainStreet order had been "revised." A commentator pointed out that the telephone number and address for Mainstreet was the same as for Ultrapay (P.O. Box 10070 Adelaide Street, Brisbane QLD 4000) - but that there was no announcement that this was not an arm's length transaction.

MainStreet International's website is at www.mainstreetworld.com.au.

Guess what it says are its products?

"Over the last decade, MainStreet has developed under license a dynamic and growing international business. Known as a leader in commercialising and supporting strategic technology for the financial services sector; MainStreet is a global eCommerce and mCommerce solution provider with a focus on providing point of sale and online payment technology to merchants, online traders and direct selling companies, and includes online Malls, and the MainStreetMoney (MSM) product, which provides a mobile phone integrated payment service through SMS. MainStreet with its partners have issued over 200,000 stored value, debit and virtual cash rewards cards. MainStreet and its offshore partners process substantial financial payments, bill payments, e-Cash transfers, SMS payments, pre-paid recharges and cash based loyalty payments."

And remember that the company's shares were suspended in June 2007?

In June 2008, Fulcrum Equity announced that it had sold 29 million shares in Ultrapay.That company, which has featured on bulletin boards asking for information about investments made in it, has been listed and de-listed on multiple occasions, the most recent being in August this year due to its failure to pay its listing fees. It appears that its annual report for 2009 remains outstanding.