Dick Smith receiver Ferrier Hodgson will publicly question former directors of the iconic electronics chain after uncovering what are understood to be "serious issues" during its investigation into the lead up to its collapse in January.
The Australian Securities and Investments Commission has already granted Ferrier Hodgson permission to examine individuals linked to the failed business and it’s believed this will include its former board.
Ferrier Hodgson will not comment on the examination process or how many individuals it has reached out to but a source close to the receiver said it would be surprising if the examination did not include the directors.
“There’s no way someone would fund an examination and not question those individuals,” he said.
The source denied the examinations amounted to a fishing expedition, for no other reason than they were “costly and time-consuming to prepare for and run.”
“It’s a very serious power that the liquidator or receiver uses very carefully,” he said.
“There is an awful lot of preparation that goes into an examination, you conduct examinations to put submissions to people.”
Ferrier Hodgson will report back to ASIC on the examinations and the corporate watchdog has the power to take action based on the result of these interrogations, which are conducted in public and the subjects answer questions under oath.
At the time of its collapse Dick Smith’s directors included chair Robert Murray, managing director and chief executive Nick Abboud, independent non-executive director Jamie Tomlinson, independent non-executive director Lorna Raine, independent non-executive director Robert Ishak and chief financial officer Michael Potts.
Mr Abboud has not made any public comment since he resigned from the company one week after Ferrier Hodgson took control of the business at the behest of its creditors, including its banks National Australia Bank and HSBC.
Dick Smith collapsed in January under the weight of more than $400 million in debts, including about $140 million it owed to its banks.
Ferrier Hodgson’s bid to sell the business failed to attract a buyer at the right price and the shutters came down on the last Dick Smith store in early May, putting close to 3000 employees out of work.
The last remaining vestige of this once ground-breaking business is the online operation, which is still trading under the Dick Smith brand after online entrepreneur Ruslan Kogan acquired it.
Senior sources from within Dick Smith have always blamed the banks for moving too quickly on the chain and signing its death warrant over what was only a short term "cash- flow pinch."
Insiders have gone as far as claiming the administrators’ investigation will show the business could have survived with the support of its banks but it appears a communication breakdown between Dick Smith and its bankers soured the relationship.
The administrators McGrath Nicol is expected to publish its report in early July and the examinations are likely to take place later this year.
This story first appeared in SMH’s Business Day. Read it here .
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