Country Road boss admits mishandling funds and steps aside

Q: What responses and next steps have Country Road and Woolworths announced publicly?

Country Road has said it will vigorously defend Mr Cheston's allegations and is expected to file a defence in the coming weeks. Woolworths announced the management change replacing Susman with Ian Moir and reported the matter to the Johannesburg Stock Exchange. Investors should watch formal company announcements for further updates.

THE head of Country Road's South African parent company has stepped aside after admitting to repatriating company money to Australia for his personal benefit.

By InvestSMART · 20 Nov 2010

By InvestSMART ·
20 Nov 2010

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THE head of Country Road's South African parent company has stepped aside after admitting to repatriating company money to Australia for his personal benefit.

Simon Susman's resignation as chief executive of the South African retailer Woolworths comes amid a legal stoush over the removal of the Country Road CEO, John Cheston.

Yesterday Mr Susman took up a role as deputy chairman of Woolworths, which is not related to the Australian supermarket chain of the same name.

In Federal Court proceedings, Mr Cheston alleges Mr Susman directed Country Road's chief financial officer, David Thomas, to "repatriate amounts of cash from South Africa to Australia for Susman's benefit".

In a personal statement Mr Susman, who is also Country Road's chairman, said "a small portion" of his travel allowance was taken to Australia ahead of his arrival.

"I am advised that this may not have been the correct procedure and will take the necessary steps to regularise the situation," he said.

South African law permits residents to take up to 1 million rand (about $145,000) offshore as travel allowance every year, provided the transaction is reported to the Reserve Bank.

In a statement to the Johannesburg Stock Exchange, Woolworths said Mr Susman had been replaced by Ian Moir, the former Country Road CEO who has been managing the Australian business by video link from South Africa since September.

Mr Cheston, who lasted just nine weeks as CEO after being hired in July, launched legal action last month against Country Road and Mr Moir, alleging the company misled him about its financial position and did not do business in accordance with corporate law.

He is claiming the $6.5 million he alleges he would have received if he had continued as CEO of the Singaporean chain Robinsons rather than taking the Country Road job.

He also said Mr Moir interfered with his management.

"As to the business conduct representation, Moir knew when he made it, and it was the case, that Country Road did not conduct the business of the Country Road group in accordance with the Corporation Act, the ASX listing rules, or its own policies," Mr Cheston said.

While Country Road is listed on the ASX, the tightly held stock seldom changes hands.

Country Road, which is expected to file a defence in the next few weeks, has said Mr Cheston's allegations will be "vigorously defended".

A directions hearing has been set down for November 30.

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Frequently Asked Questions about this Article…

What led Simon Susman to step aside from his role related to Country Road and Woolworths?

Simon Susman stepped aside after admitting he repatriated company money from South Africa to Australia for his personal benefit. He said a "small portion" of his travel allowance was taken to Australia ahead of his arrival and that he would take steps to regularise the situation. The matter has also triggered legal scrutiny and management changes at the related companies.

What are the Federal Court allegations made by Country Road CEO John Cheston?

John Cheston has launched Federal Court proceedings alleging that Simon Susman directed Country Road's CFO, David Thomas, to repatriate cash from South Africa to Australia for Susman's benefit. Cheston also alleges Country Road misled him about its financial position and did not conduct business in accordance with corporate law, and claims interference with his management.

What did Simon Susman say about the money he moved to Australia and South African travel allowance rules?

In a personal statement Susman said a small portion of his travel allowance was taken to Australia ahead of his arrival and that this may not have been the correct procedure and would be regularised. Under South African law residents may take up to 1 million rand (about $145,000) offshore as a travel allowance each year, provided the transaction is reported to the Reserve Bank.

Who is Ian Moir and what change did he make to the Country Road/Woolworths leadership?

Ian Moir is the former Country Road CEO who had been managing the Australian business by video link from South Africa. Woolworths told the Johannesburg Stock Exchange that Moir replaced Simon Susman in the South African business role following Susman's stepping aside.

What compensation is John Cheston seeking in his legal action against Country Road?

John Cheston is seeking compensation totalling about $6.5 million, which he says he would have received if he had remained CEO of the Singaporean chain Robinsons rather than taking the Country Road job. He is also pursuing claims that relate to alleged misleading conduct and breaches of corporate rules.

Is Country Road listed on the ASX and how actively does its stock trade?

Yes, Country Road is listed on the Australian Securities Exchange (ASX). The article notes the stock is tightly held and seldom changes hands, which can mean lower daily trading volumes compared with more widely held companies.

What responses and next steps have Country Road and Woolworths announced publicly?

Country Road has said it will "vigorously defend" Mr Cheston's allegations and is expected to file a defence in the coming weeks. Woolworths announced the management change replacing Susman with Ian Moir and reported the matter to the Johannesburg Stock Exchange. Investors should watch formal company announcements for further updates.

When will the court address the dispute and what should investors watch for next?

A directions hearing in the Federal Court has been set down for November 30. Investors should monitor the outcome of that hearing, any filed defences or court documents, and company announcements to the ASX or Johannesburg Stock Exchange for material updates that could affect the businesses involved.