Dick Smith, Inflated Invoices Millions In O&A Payments NSW Court Hears, See Video Here
The Dick Smith shareholder action court case underway in the NSW Supreme Court has heard explosive evidence that the failed retailer was deliberately inflating invoices from suppliers by as much as 60% while also allegedly manipulating million of dollars in over and above payments by suppliers.
The former head of merchandising at Dick Smith Carl Bonham was grilled this afternoon about several Belkin emails which revealed the payment of $287K in marketing support dollars for the month of June 2014.
He was also shown an excel spreadsheet of payments made by the likes of Canon, Samsung, Microsoft, Go Pro, Hewlett Packard and Sony, these payments alone totalled over $4M.
In cross examination an email from Michael Sullivan to Carl Bonham and Greg Hirsch a former Merchandising Manager at Dick Smith who later worked for the failed Masters, was presented in court that indicated that Dick Smith management wanted to avoid a situation where their auditors Deloitte question the accounting treatment of O&A (Over and Above) payments.
Among the people Cc: on the email was Rodney Orrick now CEO of Best & Less, and Michael Potts who is now a Director at Mrs Potts Chocolate House Limited in the UK.
Sullivan instructed Hirsch and Bonham to instruct their teams to have appropriate documentation that showed the O&A funds being received from brands were not bookkept as being purchase related.
The court was also shown spreadsheets of artificially inflated prices of goods on an with obsolete stock register totalling $186 Million.
See video here for part of today’s cross examination.
One item a 1.5M HDMI cable was purchased for $5.45 from a Chinese manufacturing who after being asked to inflate the original purchase price by 60% delivered questionable documentation that is now being probed by barristers in the NSW Court.
Bonham admitted that low quality items such as the HDMI cables were ordered with the 60% mark up so that Dick Smith could claim the O&A rebates.
He told the Court that the normal mark up on a Dick Smith product was 65% and that the Company was buying “low quality stock” which was being bookkept in the Obsolescence accounts.
A document listing of more than 25 brand who had paid money totalling $4.5 Million was shown to Bonham.
On the top of the Excel spreadsheet was a note from the accounts department indicating that the wording on emails must not relate to an order, instead Dick Smith buyers had to use the words ‘Promotional Activity’ as this wording covered ‘both scans. Support, marketing spends etc’.
Claims have been made in statements obtained by ChannelNews that Dick Smith Holdings (DHS) asked suppliers to change invoices to reflect “higher prices” than what the goods were actually worth.
Swept up in the collapse is Deloitte the auditors to the failed retailer who now stand accused of making “false statements” and failing to reveal accurate information regarding the operations of Dick Smith in the Companies accounts.
Dick Smith executives are blaming Deloitte while Deloitte is blaming Dick Smith executives.