Australian Electronics giant, Dick Smith, went into receivership back in 2016. Now, the New South Wales Supreme Court is ordering a former executive of the company to pay $43 million.
High profile exec owes $43 million
Former high profile executive, Michael Potts now owes $43 million, plus interest, to the National Australia Bank. Potts was the Chief Financial Officer of the company in 2013 and 2016. Working alongside the Former Chief executive, Nicholas Abboud, both men, breached their duties.
Two banks associated with the company, NAB and HSBC, had become implemented as their lenders. They both began launching a legal suit against both Potts and Abboud, after suspicions of misleading and deceptive information.
The banks say they were falsely led to enter a syndicated loan. A syndicated loan provides a structured arrangement by a group of lenders. However, this syndicated loan, was based on misleading statements on the company’s financial position.
Also, further breaches were made by allowing the company to base its stock purchasing habits to “maximise rebates” from suppliers, rather than consumer demand. With concerns, they also paid more than $28 million in dividends, when the company simply couldn’t afford it.
The technology retailer entered the syndicated agreement with NAB and HSBC. During the agreement NAB agreed to give a working capital of $75 million. HSBC agreed to an overdraft financing facility, of up to $80 million.
In court, Justice Michael Ball says this was all given based off false information.
“Dick Smith Holdings was facing serious problems with its liquidity…. The true position was that it needed additional funds because it was in financial difficulties.” Justice Michael Ball
Dick Smith has since been taken over by Kogan.com and now operates solely in the e-commerce space, with no relation to this legal case.
