Teece off to court over firm's failure

22:10, Jun 09 2014

High-profile expatriate investor and rich-lister David Teece is suing a Bahraini bank for US$62 million (NZ$73m) over the 2009 collapse of iconic clothing brand Canterbury.

United States-based Teece, who was Nelson-raised and returns here annually, initially filed the claim in California. In the California proceeding, Teece alleged that Bahrain-based Kuwait Finance House - a private-equity investor in the sports apparel manufacturer - induced him to pour millions into ailing Canterbury in the lead-up to its failure.

Teece also claimed KFH stonewalled a 2008 attempt by him to sell Canterbury to French-Israeli businessman Alexandre Gaydamak.

Gaydamak, best known as the former owner of English Premier League football club Portsmouth, is the son of controversial Israeli politician Arcadi Gaydamak.

According to a recent ruling by California courts awarding KFH costs, Teece discontinued his claim in the US in March before refiling in the New Zealand courts in April. The High Court in Auckland confirmed Teece had filed a claim but no hearing date has been set.

Teece did not respond to Fairfax requests for comment. He was made Companion of the New Zealand Order of Merit in the 2013 New Year's Honours list for services to New Zealand-US relations.


His first involvement with Canterbury came in the late 1990s when he acquired Lane Walker Rudkin from Brierley's. In 2001 he sold LWR, but spun off Canterbury and kept a sizeable stake.

At the time of the 2009 collapse Teece was still a significant minority shareholder in Canterbury, with a 35 per cent stake.

KFH, brought in as a private-equity investor following the spinoff, is recorded as owning 45 per cent of the company's shares. Teece's California claim alleged KFH "was at all times majority shareholder".

Founded in 1904, Canterbury suffered a devastating blow in 1999 when the All Blacks - who had long been garbed in its kit - signed up German giant adidas as uniform supplier. According to receiver KPMG's reports, Canterbury failed due to the poor performance of subsidiaries in Europe and a withdrawal of funding from KFH. Canterbury owed $101m to creditors, including $54.4m to KFH and $3.6m to Teece, at the time of its collapse in August 2009.

According to the final report by receivers, both shareholders lost millions, with KFH receiving $26.2m and Teece just $395,000 from distributions. Unsecured creditors received virtually nothing. Receivers sold the intellectual property and brand of Canterbury to UK sports retailer JD Sports Fashion in 2009. The new business continues to trade and Canterbury shirts are worn by the England national rugby team, as well as National Rugby League teams the Warriors and Bulldogs.

Teece's claim filed in the US District Court, northern district of California, catalogues the dying days of Canterbury, during which he and KFH tried to both offload the company and keep it afloat.

Teece claimed he invested US$1.2m in the company in March 2008 to keep the firm afloat while it was marketed for sale.

He alleged KFH executives threatened in September 2008 that the company was close to insolvency and that unless additional cash was made available, the sales effort would flounder. As a result, Teece claimed he made a direct loan to Canterbury of US$1m. The claim alleges KFH also attempted to hold him responsible for a further US$3m injection into Canterbury it made in October 2008.

The California judgment granting KFH costs noted Teece did not contest a hearing in Bahrain that found he was liable for US$3.4m, including costs, related to the capital injections into Canterbury. Teece said in his Californian claim he became aware of interest in June 2008 from Gaydamak to take over Canterbury for US$75m, and pushed KFH to conclude a sale.

Gaydamak at the time had a high profile after buying the Portsmouth football club in 2006.

Portsmouth won the FA Cup in

May 2008, but ran into serious financial difficulties the following year - including missing staff and player wage payments - shortly before Gaydamak sold out of the club.

Israeli media reports suggested Gaydamak was holding the club on behalf of his father, Arcadi, but this was denied by both father and son. At the time, Gaydamak Sr was wanted by French authorities over allegations he was involved in trafficking arms - including land mines - to Angola during its 1990s civil war.

In October 2009, Gaydamak Sr was convicted in absentia and sentenced to six years in prison. The conviction and sentence was overturned in 2011 when the Paris Court of Appeal ruled he was acting with a mandate from the Angolan government to procure arms.

In February 2012 he reached a plea deal with Israeli prosecutors over a charge of money laundering. The deal involved a $7000 fine and one-year suspended sentence being imposed and no conviction entered.

Teece alleged in his Californian claim that KFH failed to follow through on plans to sell Canterbury to Gaydamak, and blamed the bank for the company's collapse.

"On August 4, 2009, in the midst of a deep worldwide recession, defendant KFH unilaterally decided to stop providing funding to Canterbury, concluding it was insolvent and appointing two KPMG employees as receivers . . . Defendants' actions privileged their own interests and destroyed Canterbury's value to Teece," the claim alleged. Fairfax NZ