The public unravelling of a playboy pub owner

analysis How Jon Adgemis became Australia's biggest bankrupt Sometimes, it can be hard giving up life's little luxuries. This time last year, even as he was trying to stave off bankruptcy, failed hotel owner Jon Adgemis was still living the high life. Holed up in luxurious digs in Bondi in Sydney's east, Adgemis was forking out more than $60,000 a month in rent while he tooled around town in a Mercedes G63, the tank-like turbo off-roader that's a steal at just $430,000. Back then, with debts of more than $1.8 billion, the former KPMG high-flyer had declared himself insolvent. But he had a plan, one final shot at avoiding total collapse. He was about to offer his creditors 0.15 cents in the dollar for them to call it quits and just go away. That's not 15c in the dollar. Or one and a half cents. We're talking a tiny fraction of one cent. He was trying to buy his way out of a $1.8 billion bankruptcy with just $2.3 million. Somehow, he had convinced his two insolvency trustees, Ben Ho and Scott Pascoe of WLP Restructuring to recommend this puny amount to his legion of creditors, including some of the most business savvy operators in the land. Many, however, were retirees who had inadvertently lent vast sums to Adgemis's fledgling Public Hospitality Group via what's known as private credit syndicates — non-bank lenders — with little idea of the parlous nature of the company's finances. But before he'd even had a chance to put the proposal to them, the Australian Tax Office jumped in and sent him to the wall. Since then, he's tried to play it low key. No public appearances, no glamorous models on his arm and, definitely, no Maseratis. Until Friday last week. Flanked by a legal team that includes some of Sydney's most expensive counsel, Adgemis fronted the Federal Court in an effort to stymie a public examination of his finances or, at the very least, to keep his evidence secret. Impeccably dressed in a light blue, possibly Italian, suit, crisp white shirt and spotted blue tie, his eyes shaded by dark glasses, the former playboy pub owner maintained a serious but surly expression as his counsel argued the public hearing would give the ATO an unfair advantage in its investigations. But his appearance raised an obvious question. How could a man who now ranks equal first with Alan Bond as the country's biggest ever bankrupt afford a legal team that costs upwards of $20,000 a day? It's a mystery that is part of a much bigger riddle. Given Adgemis's hotel empire cost just $380 million to assemble, how on earth did he end up with a debt almost five times that amount? And where did all the money go? Spilling the beans There's little love lost between Adgemis and his one-time chief financial officer. For while the court agreed to consider the arguments mounted by Adgemis's legal team, it decided the hearings — which are being funded by the ATO — into the failed organisation's finances should continue. On Wednesday this week, Alex Andruska, who spent 14 years as an employee of Adgemis, delivered damning allegations of the way the operation was run, outlining a chaotic environment where money flowed freely between companies and colleagues, often in secrecy. "It was intertwined, as in Jon would use funds from one [entity] and use it for another and money would flow all over the place," he told the hearing. Loading...The would-be hotel mogul, Andruska told the court, used the money to fund his high-octane lifestyle. "He had an exorbitant financial lifestyle that he always had to maintain," he told the court. There was little, if any, documentation about where the money came for or what it was used for and records were often fabricated after the event. And, in an explosive revelation, he told the court that Adgemis claimed GST refunds from the ATO to which he was not entitled. "He was aware they were dodgy claims," he said. Andruska outlined schemes where, in one instance, Adgemis allegedly claimed GST refunds on a $595,000 import of COVID-19 test kits that were never shipped or paid for. Andruska, once a Woollahra councillor, until recently was working in shadow housing minister Andrew Bragg's office. According to Andruska, he urged Adgemis and one of the pub mogul's close advisors — former fellow KPMG partner David Drummond — that they should go to the ATO and "tell everything". But he claimed under oath that the pair ruled out that course of action and when asked why, responded that they were aware they'd "get in a lot of trouble". The ATO has had its eye on Adgemis for years and raided his offices in 2024 and has offices monitoring proceedings in the court. It previously has alleged that other companies in the Adgemis orbit created sham transactions totalling more than $1 billion that resulted in more than $80 million in GST refunds. Pay you back next week Described as the penultimate networker, Adgemis is little known outside the world of high finance, preferring to spend his time in the company of billionaires. During his time at KPMG, he forged business relationships that blurred the lines between the professional and personal. But many of those relationships have since unravelled, and mostly over money. Jan Cameron, the founding force behind Kathmandu, was a big supporter. So was WIN TV owner Bruce Gordon. Both backed Adgemis on property developments and both lost out with Gordon eventually launching legal action against him to retrieve $10 million. In Cameron's case, the relationship soured to the point that Adgemis turned star witness for the corporate regulator, the Australian Securities and Investment Commission, in its case against her over undisclosed shareholdings in dairy group Bellamy's. Richard Gazal, the Monaco based son of Joe Gazal, also backed him but after years of broken promises and debts that blew out to $26 million last year decided to tip him into bankruptcy. It was Gazal's petition to bankrupt Adgemis that the ATO finally took over. It since has installed BRI Ferrier as liquidator, the firm now conducting the court hearings into Public Hospitality Group's demise. At that stage, the ATO was seeking $162 million it claimed it was owed, most of which comprised director penalties. But it has since ramped up its investigations, particularly around what it alleges are sham transactions, and this week's evidence from his former lieutenant will bolster its arsenal. Adgemis has denied any wrongdoing and charges have not been filed against him. LoadingFinancial alchemy At its peak, Public Hospitality assembled a portfolio of 22 hotels, mostly in inner city suburban Sydney with a handful in Melbourne. The spending spree began in 2015 with the purchase of the Darlinghurst Exchange Hotel on Sydney city's eastern edge for a little over $4 million. And then came the financial alchemy. Even though the pub needed a huge amount of renovation, it was quickly revalued, up to $26 million, as though the work had already been done. That delivered Adgemis the collateral to buy more. By 2017, he owned four Sydney pubs. All had been revalued and all required extensive work. In some cases, the renovations were started but not completed, leaving the hotels idle and burning through cash. Then came the pandemic and the lockdowns. Loading...Rather than attempting to consolidate his position, Adgemis instead embarked upon a buying spree in 2021 and 2022, massively revaluing each property shortly after its purchase to bolster the firm's financial position. As building costs soared in the post pandemic era, Adgemis increasingly found himself short of cash and was forced into loans at ever higher interest rates, just to keep the wheels turning. According to Alex Andruska, none of the pubs turned a profit. "All the companies were losing money," he told the liquidator's hearing this week. "All of them." By this stage, word was out that Adgemis was over-indebted and in trouble and he formulated plans for a stock market listing, which never got off the ground. Even he was forced to concede problems. "People just look at us as an overleveraged pub player [and ask] 'how does he get out?'" Adgemis told the Australian Financial Review's Rear Window column in 2023. "First and foremost, we're a property private equity group. We might do hospitality … but our main focus is extracting full value from the property." Except, he'd already extracted all the value early on, and up-front, leaving the cupboard not just bare, but full of IOUs.