ICT 123 has officially gone under, with around $2 million of debts and almost 100 smaller dealers facing haircuts due to unpaid rebates on hardware and phone plan commissions.
The Telstra distributor appointed liquidator Loebenstein Insolvency Services on 30 April, a week after telling customers it was ceasing trading due to the fraud of one Queensland reseller.
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In the summary of affairs lodged with corporate regulator ASIC, ICT 123's total creditors are listed as $2 million, $1.75 million of which are unsecured.
CRN has counted more than 90 resellers exposed by the collapse, with debts ranging from $30 to more than $20,000.
The true exposure could be higher; some of the dealers CRN spoke to said they are owed substantially more than the sums listed in the summary of affairs.
Under supply arrangements, it is understood that dealers paid ICT 123 upfront for hardware and would later be rebated by Telstra, which owns the billing relationships with customers.
This approach has left up to 100 dealers holding the bag for unpaid rebates and commissions for phones and plans.
Melbourne-based CommSolve Solutions is listed as being owed $28,337, however, director Jane McGrath said the real figure was over $40,000.
"It is a bit of a shock. We are owed a bit more than what the paper says. It is all related to rebates and commissions."
While Loebenstein Insolvency did not respond to CRN's request for comment, McGrath said: "The administrators told us we will get nothing."
Jason Jarrett, director of Brisbane-based Trusted Business Solutions, said it was "unexpected".
The company is listed as being owed $20,775 for rebates and commissions, said Jarrett.
"Because [ICT 123] are a Telstra distributor, and not just an ordinary customer we might deal with, we didn't have them on the radar as a risk."
Jarrett said he had suspected something was wrong in the weeks before the collapse and even quizzed ICT 123's directors about overdue commissions, but was told he had nothing to worry about and it was "business as usual".
Less than a week later, ICT 123 closed its doors, but not before Trusted Business Solutions had placed a new order for Samsung Galaxy S5s worth around $10,000 – a debt now caught up in the liquidation, said Jarrett.
Fraudulent actions
ICT 123 director Ben O'Leary confirmed that many of the debts were for rebates and commissions. "Telecommunication dealers often derive their revenue from commissions, with hardware merely being an associated part of the sale."
He blamed the collapse, which has hit ICT 123's 15 staff, on the "fraudulent actions by one Queensland-based dealer".
O'Leary told CRN: "The fraudulent activity and investigation occurred over a period of approximately six months with its magnitude and the associated ramifications only becoming clear over the last few weeks.
"The financial impact of the fraud was significant, the dealer is no longer trading and as best we can ascertain, no longer in Australia.
"As all business owners and operators know all too well, business challenges come in all shapes and sizes – from competitors, customers, suppliers and the like. However after almost eight years in this business and 12 going it alone, I am personally devastated that it has ended in this way," added O'Leary.
It is unclear exactly how the fraud occured, but a well-placed ICT 123 reseller, who asked not to be named, said he had noticed a "superstar" dealer arrive around three months ago and start placing huge orders for top-spec hardware and unlimited plans.
"He was a superstar. He was making big orders and he would get priority over anyone else."
He said that this kind of scam could involve ordering handsets and signing up plans for phantom customers who would never pay.
The scammer would be able to resell the phones on the blackmarket, as well as making off with commissions for the phone plans.
"He put large volumes through and was hitting targets. We're not talking about chump change. He did all this in three months. The guy came on the market in three months and disappeared. He is nowhere to be found," the anonymous source told CRN.
It is unclear exactly how a rogue dealer could have procured handsets without paying when resellers had to pay upfront for hardware.
The two largest debts on the report are Telstra's hardware supply arm, Telstra CLOC, and for ICT 123 Holdings.
The debts are similar: $419,858 owed to Telstra CLOC and $410,256 owed to ICT 123.
Keith Masterton, director of Telstra Business Enterprise Specialist Partners, told CRN that the telco's current focus was on working through the liquidation "and not on money we might be owed".
"We can’t ignore the fact that this is a company that has gone out of business and I’m saddened by that as it affects a lot of people. We’ve already started the process of sharing CVs of affected employees to try and keep these people employed in the industry and minimise the impact on that front.
"Since the announcement was made, we have made contact with the larger distribution partners through personal calls and correspondence and offered them the chance to reapply to an alternate Tier 2 Telstra distributor partner. For smaller partners we have provided them an avenue to finalise sales or business opportunities with a referral partner.
"Monies owed will be dealt with through the standard liquidation and administration process. At the moment our focus is on working through this and not on money we might be owed," said Masterton.
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