Company shrank from $1.7m to nothing, court told
The former chief operating officer of a company caught up in a legal battle involving a National Party MP has said it was worth $1.7 million just months before it was allegedly asset-stripped, a court has heard.
Anthony Regan, former COO for Digital Partners, is giving evidence in a case in the High Court at Auckland brought by Christchurch Central MP Nicky Wagner.
Wagner has accused Auckland businessman Robert Gill of asset-stripping his companies to avoid repaying her $340,000 she is owed from the sale of 75 per cent of her gardening and fashion websites to him for $700,000 in 2008.
She was paid all but $280,000 before disputes arose which eventually went to arbitration.
In February 2011, arbitrator Barry Paterson QC found in favour of Wagner and awarded her $319,606 plus costs of $21,000.
But Gill and his associated companies refused to pay, Wagner said. Instead he allegedly transferred assets to "fresh" companies creating a shield against creditors including Wagner, leaving liabilities with companies Digital Partners (DPL) and BA Partners (BAP), the court heard.
Gill is alleged to have funnelled substantial assets into associated companies Digital Partners NZ, Brand Advantage Management and Consulting (BAMC), CPG York and Brandadvantage. The old companies were placed into receivership after the arbitration and were then liquidated.
Wagner argued that there were adequate funds moved to Gill's associated companies to satisfy the debt.
Regan said in evidence today that he and Gill had agreed the former companies were valued around $1.7m in January 2010, just two months before the alleged asset stripping began.
At the time the companies were put into receivership, DPL was projected to make a profit of $452,700 in 2010. In the period since the acquisition, her websites produced more than $1.3m in revenue for DPL. BAP was also profitable with revenue from NZ Netball of about $334,000 in 2010, he said.
Between March and December 2010, Gill's asset-stripping scheme saw BAP seek and achieve a compromise with creditors of 55c in the dollar, Regan said. Wagner was not aware of the compromise despite being the largest creditor, he said. In June 2010, the lucrative NZ Netball contract was transferred out of BAP and into BAMC at no cost, Wagner claims.
Wagner, who retained a 25 per cent stake in the business, said no shareholders' meeting was held to approve that transaction.
Regan said the contract between BAP and NZ Netball provided that, where the contract was cancelled, BAP was entitled to continue to be paid out of sponsorships whose terms ran on past the cancellation date.
He said between December 2010 and July 2011, about $344,000 of these "run-off" revenues that should have gone to BAP were transferred to BAMC for no consideration.
The case is expected to run for a week.