Eddy Groves to Sue Stockbroker

Founder and director of collapsed childcare group ABC Learning Centres is seeking to sue ASX listed stockbroker, Austock Group (ASX:ACK). The legal redress being sought by Mr Groves is over a share order which was not executed. Austock received a letter of demand from the lawyers acting for Mr Groves. He alleges that the stockbroker's failure to execute a sell order on a stake he held on Austock resulted in $10 million of losses.

Austock announced on the ASX that: "The letter alleges that on February 27, 2008, Mr Groves gave an order to sell approximately 5 million shares in ACK (Austock) at market price, that the order was not executed by Austock and that Mr Groves suffered loss as a result. The losses claimed by Mr Groves (including consequential losses of $5.5 million on the subsequent sale of his private helicopter and luxury yacht in September 2009) amount to $10 million."

Eddy Groves and Austock has a history. Bill Bessemer, a former Austock chairman also sat on the board at ABC learning. Austock helped the defunct childcare group with its capital raisings and deal making activity. The broker had helped ABS float in 2001 and was a key corporate adviser.

The parcel of 5 million Austock shares were allegedly offered by Mr Groves as security for a $8 million loan from Frank Zullo, his former brother in law, who also was the exclusive provider of maintenance to the ABC childcare system. Mr Groves had attempted to sell the Austock shares in February 2008 to repay the loan, but the shares sell order was not executed. Mr Zullo eventually had the shares transferred in August 2009, however the value of the stock had fallen to $1.5 million.

ASIC, the corporate watchdog has seized his passport, but he has not been charged for the failure of ABC Learning.