By Kymberly Martin
Questions begin about the company’s collapse
Former Dick Smith Holdings directors and executives are facing their first day in the New South Wales Supreme Court over the downfall of the electronics retailer that collapsed in January owing $400 million to creditors. Receivers Ferrier Hodgson will be attempting to determine if the executives were aware of the company’s position and whether there is a case for criminal charges.
Those to appear include former Myer and Woolworths chairman, Bill Wavish, company secretary David Cook and non-executive director, Jamie Tomlinson. Former CEO, Nick Abboud is expected to appear in early October.
According to the Australian Financial Review letters sent in July to 10 former directors and executives by Ferrier Hodgson’s lawyers outlines a litany of alleged “wrongful acts” that contributed to the retailers’ demise and foreshadowed claims of misleading and deceptive conduct. The letters alleged that directors and officers breached their duties by failing to have proper reporting systems in place, inflating earnings to meet market expectations by deliberately buying too much stock, booking rebates from suppliers as profits and disguising weak retail sales with low margin commercial sales. The receivers also alleged that the National Australia Bank and HSBC were misled into providing loans to Dick Smith.
According to the letters, from at least July 2014, Dick Smith management allegedly undertook a program of maximising rebates by suppliers – buying excess and unsaleable stock and booking certain types of rebates as an increase in profits or a reduction in marketing expertise, rather than spending the rebates on marketing and customer discounts. Also, that the executive and non-executive directors did not have systems in place to ensure adequate reporting or management of stock purchases.