This week’s public examination into the collapse of Allco Finance Group reads like a who’s who of the corporate world and highlights the conundrums created when public companies are run like private firms.

Former Allco chairman and former Optus boss, Bob Mansfield, will take the stand, as will Allco founders, David Coe and Gordon Fell, and the Government’s infrastructure adviser, Sir Rod Eddington.

Up first in the Federal Court in Sydney was former chief executive David Clarke.

He wore a grey suit and patterned grey tie, and sipped water before the cross examination by John Sheahan SC began.

Mr Sheahan is working for the receivers, Ferrier Hodgson, who are being paid by the banking syndicate to find out why the company failed in November 2008, owing more than $1 billion.

Allco’s market value was almost wiped out in 2008 as share markets plummeted amid the global financial crisis.

That from a company which had a market value of $5 billion at its peak.

The cross examination revealed the complexities of Allco’s structure. More than 50 related companies are in liquidation following the collapse.

Mr Clarke admitted that the company was too complex and said that negative perceptions of highly structured finance houses like Allco and Macquarie Bank affected the share price, which fell by nearly half in late 2007.

Under heavy questioning, he conceded that a $50 million loan to a subsidiary, Allco Principals Trust, was partly made to stop margin calls from affecting the Allco share price.

“One of the purposes of the loan was to allow APT to meets obligations… one of set of obligations was the margin loans,” he told the inquiry.

The main shareholders in APT were senior Allco executives and its main asset was Allco shares.

The loan and other transactions with Allco companies are among issues being investigated by Ferrier Hodgson.

Another transaction being investgated is Allco’s decision to takeover property group Rubicon, which was controlled by Gordon Fell.

Mr Clarke conceded “we knew there was a poor response from shareholders,” but Allco went ahead regardless.

Mr Fell, Mr Coe and another top executive got paid $63 million and more than $130 million in shares.

Related party transactions were all the go at Allco, despite dissent from independent directors and big and small investors.

Mr Clarke said the company hoped to stop using such methods as the business model “matured”.

The admissions kept coming.

Mr Clarke said the sale of assets was sped up in 2007 so the company’s financial accounts would look better to the market and to head off another fall in the share price under a “failure is not an option” strategy.

That included $68 million in asset sales to the Singapore Investment Fund, a fund set up by Allco to expand its business.

Mr Clarke said “I felt there was a good reason to be optimistic.”

“We, of course, did not know we were about to enter the global financial crisis.”

The public examinations represent a rare insight into the inner workings of the company.

The former executives have rarely commented on the high profile collapse of a local victim of the global financial crisis.

Essentially, Allco borrowed too much to fund its expansion, which included assets like trains, planes and property.

And the collapse of Allco has already hit reputations.

Mr Clarke, a former Westpac executive, did not stand for re-election to the board of wealth manager AMP last year.

Sir Eddington decided not to take up the role of chairman of ANZ after the collapse.

He was criticised by shareholders for his seat on the Allco board at last year’s Rio Tinto annual general meeting. Sir Eddington is also a non-executive director of the big miner.

The banks are expected to get a substantial proportion of their cash back. Ferrier Hodgson has already managed to sell assets such as the leasing business and shipping business.

There’s little joy for ordinary investors though. They could wait years to see any of their money.

Investors are waiting on the sidelines to launch a class action if this inquiry reveals the company has available assets.

Also waiting on the sidelines is the Australian Securities and Investments Commission.

They are probing whether Allco executives broke the law by doing deals in house.

As for Allco’s grand plans to takeover Qantas as part of a failed private equity bid, we are lucky that never happened.

The move was championed by Bob Mansfield, but it may have led to disaster for Qantas as the global financial meltdown hit.