Is Gerry Harvey Set To Retire As More Questions Raised About Questionable Investments?
Days out from Harvey Normans latest financial results serious questions are still being asked about the Companies structure and related entities than the day to day retail operation, and when the 80-year-old Gerry Harvey will retire from the business.
ChannelNews understands that Chairman Gerry Harvey has sold his Byron Bay resort for $41.76 million, but questions still remain about his future investment strategies as some of his past ones have turned into ‘dopey cash drains” according to the Australian Financial Review.
There was the terrific idea to build accommodation in mining towns that lost $45 million, with $33.7 million still owing. Then there was the KEH Partnership, which sells school uniforms and other supplies ($15.6 million lost, $30 million outstanding).
This was a direct attempt to take on JB Hi Fi’s Corporate business that is on track to turn over $500M this year.
Another disaster was Gerry Harvey’s investment in dairy farming via Coomboona Holdings, an operation Harvey Norman initially shelled out $34 million in cash in 2016 to buy into.
The Company became a massive cash drain on Harvey Norman and was eventually placed into administration after Ernst & Young partner James Karekinian, noted a deficiency of net current assets.
The AFR Claims that Karekinian signed off on the accounts as a going concern because “a shareholder has provided the company with a letter offering financial support to the company and its controlled entities.
It turned out that the “financial support” offered in October 2017 was provided by Harvey Norman which put it on the hook to cover debts up until October 2018.
Five months later Harvey Norman put Coomboona into administration after NAB appointed a receiver to protect its secured debt, Harvey Norman (showing its unexplored philanthropic side) paid NAB $36.1 million to take over the debt in full.
Taking out NAB took Harvey Norman’s total exposure to $109 million.
After the operations were sold Harvey Norman shelled out another $5 million for unsecured creditors, walking away with a $76 million loss.
Creditors only got 81 cents in the dollar.
Lawyer Chris Brown who was revealed as a key player in the Harvey Norman group, giving him absolute control over a 16.5 per cent share block that the AFR claimed cements Gerry Harvey’s power and will determine who will succeed him as head of the giant retailing business.
After years watching Gerry Harvey’s back as outside legal counsel and director of Harvey Norman, it’s been revealed reveal that under the terms of the late Ian Norman’s will, Brown controls the estate’s 183.2 million shares – $747 million at current prices – until 2094.
That’s the “Norman” in Harvey Norman.
Ian Norman was Gerry Harvey’s partner in the Norman Ross group, then a silent partner in Harvey Norman since it was listed in 1987.
Harvey, who holds 30.7 per cent of Harvey Norman with his wife Katie Page’s 1.5 per cent, knows his position is unassailable because with the shares Brown controls Harvey can count on the support of 48.4 per cent of the register.
Some insiders including directors at the Company believe that Gerry Harvey should quit “sooner than later”.
Harvey Norman share price dropped 32 per cent from October to June, at one point wiping $570 million from Gerry Harvey’s shares and $310 million from the value of the Norman estate. Currently the shares are trading at $4.49 up from $4.02 in July with the lift credited to the announcement last Monday that JB Hi Fi net profit rose 7.1 per cent to $249.8 million and that sales rose 4.1 per cent to $4.73 billion.
Currently the Australian Securities and Investments Commission is reviewing the Harvey Norman books and is close to taking action according to the AFR.
Brown, who is the senior partner of Brown Wright Stein Lawyers, referred questions from the about the estate and the ASIC investigation to Leon Zwier and Jeremy Leibler, of Arnold Bloch Leibler.
Zwier has been dubbed the “ASIC Whisperer” for his success in handling awkward regulatory hiccups.