Surfstitch accuses former CEO of revenue inflation, sells Surf Hardware International
Surfstitch has accused former chief executive Justin Cameron and industry confrere Kim Sundell of conspiring to inflate revenues and profits in the first half of 2016.
The recovering surf and apparel e-tailer told local media on Friday it had filed claims and counterclaims in the District Court of Queensland alleging that Sundell's firms, Coastalcoms and Three Crowns Investments, "were knowingly involved in, and knowingly assisted, certain alleged breaches of statutory and fiduciary duties by Mr Justin Cameron, the former CEO of the SurfStitch Group," a statement obtained by Australian Financial Review, said.
"Mr Cameron caused the company and SurfStitch Holdings Pty Ltd to enter into a contractual scheme with Coastalcoms and TCI, allegedly for the purpose of inflating the revenue and profit of SurfStitch for the first half of the 2016 financial year in a manner that contravened the provisions of the Corporations Act 2001," SurfStitch said.
"Mr Cameron did not inform the board of the full nature of the contractual scheme nor that the arrangements were contrived to boost revenue for the first half of 2016," the company said.
As a result of this scheme, $20.3 million included as revenue in the first half of 2016 had to be reversed in the full-year accounts, contributing to SurfStitch's $155 million bottom-line loss.
Surfstitch believes Coastalcoms, Three Crowns and their directors, Kim Sundell and David Wooldridge, are liable for compensation for the loss or damage suffered as a result of the alleged breaches of statutory and fiduciary duties.
Meanwhile, Sundell is suing SurfStitch in the Queensland District Court for $15 million over a failed content deal negotiated by former-CEO Cameron, as well as proposing to take the company over and break it up.
It is understood SurfStitch is not taking legal action against Cameron, reported AFR.
However, the Australian Securities and Investments Commission is investigating SurfStitch's original disclosures of the Coastalcoms transaction and could take action against Mr Cameron if it finds evidence of wrongdoing.
In other news, SurfStitch said it sold surfboard accessories maker Surf Hardware International for $17 million to Gowings Bros Ltd, which it acquired from Crescent Capital and Macquarie Capital for $24.3 million 12 months ago.
It was part of Cameron's failed ambitions to turn SurfStitch into the Amazon Prime of the outdoor sports sector.
Cameron took a shock exit from the company earlier in the year on a series of profit slumps.
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