The contracting company that has pocketed local families’ money without completing their building work is now confirmed to be insolvent.
CM Contracting Ltd has retained lawyer Tim Arnold and a specialist accountant to find out how much it owes, and what assets it has left to help cover its debts.
This comes after one angry customer filed court action to recover money paid to the company. The matter is due for a first call in court this month.
The company is now contacting creditors to break the bad news.
Arnold said: “It appeared the Company was insolvent and that gives on to the issue of whether it is able to trade its way out of difficulty or should, instead, be liquidated.”
It was too soon to speculate which alternatives would be pursued, he said.
“What is clear, though, is that the position is not good.”
He said the company’s former chief financial officer Sam Capper was no longer in the country. Capper, a New Zealander, founded CM Contracting with his beauty queen partner Teau McKenzie, former Miss Grand Cook Islands.
McKenzie was still in Cook Islands this week, working with her father Ron to resolve the company’s woes.
“The directors of the company are doing the very best they can to establish a firm position so that creditors can be advised,” said Arnold.
Arnold said one road forward for CM Contracting was liquidation, then using the company’s “limited assets” to pay back some of the debt to creditors.
The company had earlier purchased a Mack truck as it tried to diversify into logistics, provoking questions about the business’s rapid growth.
It is not known how much of its debt is owed to secured creditors, who will have first call on any remaining assets – before Mama and Papa creditors see a cent.
Arnold said the other option was to enter into a compromise with creditors, with a plan to trade the company’s way back to liquidity. That would need its own application to the Court, Arnold said, “and more importantly, it would require working capital from some source.”
Arnold said a financial analysis and accounting by an experienced accountant would provide a more detailed breakdown of the company’s financial situation.
He said he had also become aware of other cases of dissatisfied customers, beyond those already reported in Cook Islands News.
One CM Contracting client, Marise Temata, said she was left with “substandard and unfinished work” on their family home, by a building company working in partnership with CM Contracting.
“Although liquidation will shut the company down, it is likely the money left would go to paying back vendors and sub-contractors first, instead of families who might not get anything back,” said Temata.
If the company went into liquidation, she said, they were avoiding their responsibility to local people.
Those also included Emerar Crummer, 93, and her daughter Jacki Brown, who came forward to claim they were owed $162,000 for unfinished work.
“What are Sam Capper and Teau Mckenzie going to do to help these families that will be out of pocket?”
Jacki Brown said she had no way of knowing whether there would be any money that could be returned to them.
“Our family have no more money to try and seek justice over the significant sum of money that the directors of CM Contracting took from us and have not honoured their agreement to build the house that was promised,” said Brown.
It would be a gesture of goodwill to all the clients, she said, if a local law firm would represent them pro bono through the court system.