Watchdog 'swoops' on One.Tel HQ

Troubled: Keeling with Murdoch, Packer and Rich

Investigators from Australia's corporate watchdog have reportedly swooped on the headquarters of the telecom company One.Tel following its collapse.

The company was placed into administration on Wednesday after its major shareholders, Kerry Packer's Publishing & Broadcasting Ltd (PBL) and Rupert Murdoch's News Corp, declared it insolvent.

Investigators from the Australian Securities and Investments Commission (ASIC) are examining documents and computer records at its Sydney headquarters, according to the Sydney newspaper group.

ASIC is looking into potential breaches of the corporation law

Kate Harvey
ASIC

They have also reportedly questioned the Australian media magnates son's, Lachlan Murdoch and James Packer, who headed the companies' $520m investment in One.Tel.

ASIC spokeswoman Kate Harvey said they were looking into potential breaches of corporation law.

"All I can tell you is that warrants were executed on a number of premises yesterday but we are not giving any further details," she said.

"ASIC is looking into potential breaches of the corporation law including possible insolvent trading, possible insider trading and market disclosure issues."

News Corp owns 23% of One.Tel, while the Packers have 11% through ConsPress and 17% through PBL.

'Profoundly misled'

ASIC has reportedly questioned Lachlan Murdoch and James Packer over their joint statement issued on Wednesday that said they were not properly informed about the company's problems.

It said: "We have been profoundly misled as to the true financial position of the company. We intend to explore all remedies available to us."

One.Tel's founder, Jodee Rich, has also been questioned by ASIC, according to Sydney's Daily Telegraph newspaper.

The company provides mobile, fixed-line, broadband and internet services to 1.8 million customers in Australia, Hong Kong, the UK, France, Switzerland, Germany and The Netherlands.

The joint investment by the Packer and Murdoch families in One.Tel was seen as an important deal in Australia, where it signified the mending of fences between the two media empires.

Resignation

Relations had become soured following a damaging row over the rights to rugby league in Australia.

The collapse is all the more embarrassing for James Packer and Lachlan Murdoch because they were believed to have pressed for the investment despite a lack of enthusiasm from their fathers.

The problems surfaced earlier this month when Mr Rich and his co-founder, Brad Keeling, were forced to resign after One.Tel revealed its cash position was worse than forecast.

An auditor's report subsequently discovered that a $68m rights issue would not keep the company afloat.

PBL and News Corporation decided to place the company into administration.