It seems like ASIC has gone back to basics in its pursuit of former ABC Learning Centres boss Eddy Groves. Instead of conducting a general civil prosecution (as it unsuccessfully pursued against the directors of James Hardie and One.Tel), ASIC has decided to conduct a very narrow criminal prosecution based on a single transaction between ABC and former executive director Martin Kemp.

Since ABC’s collapse in 2008, Groves has fulfilled the role of the Australian corporate villain No.1 with great aplomb. At one time, the former milkman was the richest Australian under the age of 40. He ran the largest childcare company on earth, and favoured cowboy boots, $675,000 Ferraris and helicopters.

However, Groves’ wealth was based on a mirage. Like many of the classical Ponzi scheme operators of yore, Groves business was not quite as profitable as it seemed. In fact, it was probably not profitable at all, despite what was told to shareholders and bankers, who extended the colourful entrepreneur billions of dollars.

Groves is currently being prosecuted by ASIC for a relatively minor (in dollar terms anyway) transaction that occurred shortly before ABC’s demise. A $3 million purchase of childcare centers from Kemp, Groves’ long-time deputy, and the former boss of ABC’s Australian operations. The purchase was allegedly approved by Groves over email, without reference to ABC’s board. (Groves is denying any responsibility for the transaction, laying the blame at the feet of Kemp).

If found guilty of a breach of his duty to act in good faith and for a proper purposes, Groves faces a potential prison term of up to five years.

It is likely that ASIC is targeting this transaction because of the direct email link from Groves, and the close proximity of the transaction to ABC’s demise. In the scheme of ABC’s collapse, the alleged crime is of virtually no importance. Groves didn’t appear to personally gain from the transaction, unlike many other instances where the former CEO did appear to gain some personal material benefit at the expense of ABC shareholders.

For example, over the past few years of ABC’s life, Groves (and his ex-wife Le Neve) cashed in more than $8 million worth of ABC shares (while ostensibly claim to be net buyers of ABC scrip). Of course, most famously, Groves paid more than $100 million to companies associated with his brother-in-law for untendered maintenance works. Groves has extensive other business interests with the very same brother-in-law.

ASIC appears to have been more keen on targeting the flamboyant Groves than many of the other apparent villains of the GFC, such as David Coe and Phil Green. In July 2008, ASIC successfully obtained a court order that froze Groves’ assets after it appeared that the former milkman had been attempting to transfer property to friends and a trust for the benefit of his new wife.

The matter has been adjourned until late February.