Contract losses killed Canberra cloud firm 4D

Canberra government IT supplier Digital Digest Data Design (4D) battled the loss of key government contracts and a high staff turnover in the years leading up to its liquidation.

According to a report to creditors, produced by then-administrators Frank Lo Pilato and Peter William Marsden on 19 May and recently leaked to CRN, the 21-year-old-company's demise followed years of turmoil.

4D, which entered liquidation on 20 May after first going into administration on 23 April, saw revenue plummet in its last few years and was dealt a significant blow when contracts were not renewed by the Department of Defence, which accounted for a significant proportion of the company’s revenue.

As the work dried up, 4D lost staff. The company had 16 different financial managers in the past three years, as well as a high turnover of technical and administration staff.

4D faced mounting tax and superannuation liabilities as well as falling revenue. The company's revenue dive bombed from around $9 million in mid-2012 to $2.1 million in April 2014. Outstanding tax liabilities in May 2012 were in excess of $700,000, while $175,000 was owed at the time for superannuation. The company suffered another setback when it failed to secure financing.

The report includes claims of alleged fraud by unnamed staff in finance, human resources and payroll. Administrators had not done a detailed review of the fraud claim at the time, but were advised payroll records had been falsified to improve entitlements, leave balances and salaries. The director had spent a large amount of time trying to investigate and correct the problem after identifying the alleged fraud.

4D's liabilities now stand at $4.4 million, according to a preliminary report filed by the liquidator this month.

Existing customer contracts and work in progress, the company’s telephone, fax number, internet account and website, furniture and IT equipment were sold by administrators to 4Data Hall 1, a related entity of the company operated and controlled by Andrew Caudle, for $35,000 plus GST.

The liquidator, who declined to comment when contacted by CRN, will deliver a report at the next meeting of creditors on 26 August.