PMP admits misleading clients

Fairfax Media

JUNKED MAIL: PMP has admitted it charged some of its customers for distributing junk mail that never arrived. Instead, it is alleged the mail was pulped instead.

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Print publisher PMP has admitted it deceived some of its customers over its junk mail delivery in the final two years under former chief executive Brian Evans, who left the company in January amid unexplained circumstances.

The company's new boss, Richard Allely, who was the chief financial officer under Mr Evans and took charge after his departure, stresses he was unaware of the irregularities until last year.

These irregularities involved charging customers such as Coles for distributing junk mail which never arrived. It is alleged it was pulped instead, as revealed by the Herald earlier this year.

Mr Allely said he first heard of poor reporting practices in PMP's junk mail distribution in October and immediately began an investigation with forensic accountants, reporting the findings to the competition regulator.

Internal documents obtained by the Herald show that, months earlier, senior management had been made aware that customers were not getting the delivery level they had been promised.

Responding to this yesterday, Mr Allely said senior management and the board had been assuming since April there were operational problems, but the false reporting had not come to light until later.

The Australian Competition and Consumer Commission announced yesterday the printer had admitted misleading some of its customers over how many pamphlets had been distributed to households through its network of neighbourhood walkers.

During 2007 and 2008, PMP's distribution arm had "provided some of its customers with reports that included incorrect pamphlet delivery statistics - claiming deliveries had taken place in certain areas where they had not," the ACCC chairman, Graeme Samuel, said.

The former chief executive, Mr Evans, who has sued PMP seeking termination benefits, declined to comment on the events yesterday, pointing to Mr Allely. "Richard has been the CFO, now CEO, for a long time and Richard was fully abreast of everything," he said.

PMP has made court-enforceable undertakings to improve its business processes, provide the watchdog with an independent auditor's report over its reporting to distribution customers and establish a trade practices law compliance program.

"The reality is that the ACCC is simply putting closure under the matter," Mr Allely said, stressing that each of the undertakings had already been implemented.

He said he had spoken to each of the affected clients over the past months to put the issue behind the company.

But clients and corporate lawyers said yesterday the admission of "misleading delivery claims" was a significant development that could open the door for claims from clients wanting damages over breach of contract and their estimated revenue losses, and from shareholders seeking compensation for the stock's 60 per cent price decline over the past year.

PMP told the market in December there had been "poor reporting practices" in its distribution, stopping short of admitting misleading conduct. It has yet to explain Mr Evans's exit.

The Herald revealed in March that senior management had been warned by the company's lawyers in June last year that irregularities in its junk mail distribution could expose the printer to criminal charges from customers such as Coles.

The printer has been facing allegations that under Mr Evans's tenure, it billed key clients such as Coles for the printing and distribution of catalogues, some of which it failed to deliver to households. Sources also claimed the board was told that the distribution unit had booked delivery fees for areas it did not service in order to prop up earnings.

Ben Slade, a managing principal at Maurice Blackburn, said yesterday the law firm was looking into the possibility of a shareholder claim against the company. Jim Cooper, a spokesman for Coles, declined to comment on the retailer's intentions.

The ACCC bombshell came as Mr Allely was briefing major investors about his plans to transform the company and rebuild customer relations.

Having lost market share in its distribution business and suffering lower demand in the economic downturn, the company also warned its full-year profit would come in about 19 per cent lower than forecast, with second-half operating earnings expected to fall by almost half to $20.5 million.

PMP has laid off 360 people, or about 11 per cent of its workforce, since the start of the year. Mr Allely flagged there would be further job losses.

Seeking to turn around the company's fortunes, the new chief executive pledged to turn PMP into a low-cost printer to restore profitability and dividends, which are expected to remain suspended for at least the rest of the year.

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