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Business News Retail
Deloitte deny former Woolies bosses’ conflict of interest claims
By CMU Editorial | Published on Tuesday 17 November 2009
A spokesman for accountants Deloitte has denied claims made by the former bosses of Woolworths regarding the collapse of the famous music and stuff retailer.
The chairman and CEO of Woolies prior to its demise – Richard North and Steve Johnson respectively – have questioned the fact Deloitte were both the main advisors to the retailer’s bankers and the administrators once the company went under.
They argue that created a conflict of interest, because Deloitte have made about £3.8 million in fees managing the Woolies bankruptcy, and therefore had a lot to gain when they advised the firm’s banks to reject rescue plans proposed by North and Johnson which would have involved the bankers providing further credit.
The Telegraph quote Johnson thus: “I think it is unsatisfactory that advisers to banking groups on their options can then become administrators. The order of magnitude of fees is a factor of many times higher for an administration, compared to giving advice”.
North added: “There is manifestly a conflict of interest. They are not going to look positively on plans to stop a business failing”.
However, Deloitte’s Neville Kahn denied any such conflict of interest existed, partly by noting that it was North and Johnson’s management team who approved the accountant’s appointment as administrators.
Kahn: “The reason that Woolworths failed was because it was making substantial losses. Its working capital was impacted because of the withdrawal of credit insurance and it ran out of money. The directors were the ones who appointed administrators”.
Johnson maintains that, had the banks backed it, his rescue plan would have enabled the famous retail chain to stay in business, albeit in a slimmed down fashion. He argues: “There would have been job losses and it would potentially have been messy. But it was a different outcome that would have been better”.
