Collection House AGM: Debt chasers reject queries from Lev Mizikovsky over profits and executive share sales

SOME of Qld’s veteran corporate warriors are going toe-to-toe over claims about profits and executive share sales at debt chasing agency.

Lev Mizikovsky has raised serious claims against Collection House, which have been denied.

QUEENSLAND debt chasing outfit Collection House has denied allegations of company executives and insiders dumping stock while profits were allegedly artificially inflated.

The allegations were raised by former Collection House director Lev Mizikovsky, a motorbike-riding veteran of Queensland’s business scene and founder of home-building outfit Tamawood.

Mr Mizikovsky has further claimed in a notice to shareholders that Collection House director Phil Hennessy, another corporate patriarch with spots on boards including the Mater Foundation and Blue Sky Alternative Investments, ran interference when he tried to probe costs associated with a software project at the company.

All the allegations have been rejected by Brisbane-based Collection House. The company, an 800-staff operation chaired by banking old-hand and occasional boxer Kerry Daly, disputed Mr Mizikovsky’s description of events and train of logic.

Kerry Daly trains.

Collection House mainly makes money through chasing money for clients, such as energy companies, or buying debt ledgers from banks at cheap rates and reaping it themselves.

Mr Mizikovsky owns 12 per cent of Collection House and has asked fellow shareholders to dump Mr Hennessy from the board and reject the company’s remuneration report, at this month’s annual general meeting.

FOCUS ON SOFTWARE SPENDING

In the notice, Mr Mizikovsky raised concerns about more than $14 million spent on a software project. Companies can assign the costs of some projects, such as information-technology, as an asset on the balance sheet instead of as an immediate expense against profits.

But Mr Mizikovsky asked in his notice: “How much development work of justifiable merit was actually done?”

He alleged during his time as a director last year he tried to investigate and received “limited co-operation”. “When I approached the manager in charge of development for answers I was met with a brick wall and the manager went on personal leave and filed a complaint against the company as a result of my questions,” he said.

“When I asked the auditor, KPMG, how they concluded the expenditure was correctly capitalised, I was effectively told I was not privy to this information. Given I was a director at the time, it (is) most disconcerting that this response was supported by director Philip Hennessey.”

Collection House rejected the notion Mr Hennessey had tried to deny his fellow director information as “untrue”. In their version, KPMG had declined to release their audit working papers to Mr Mizikovsky and Mr Hennessey said “it was his experience that auditors do not release their audit working papers”.

Lev Mizikovsky.

Mr Mizikovsky said he was focusing software because if “capitalised expenditure was not properly incurred then it should have been expensed in the company’s accounts”. “Because of the large sums involved, this would have significantly reduced the profitability of the company, and, arguably, had a negative impact on the share price during those years,” he said.

“This was at a time when the share price was high and company executives and insiders profited from the sale of large parcels of shares, in most cases their entire holdings. The coincidence of the two is curious if not troubling.”

Mr Mizikovsky told The Courier-Mail he thought shareholders who bought when stock was trading at a higher level had been hurt. “I’m not happy and I think people did suffer,” he said. Shares were at $2.49 in 2015 and closed at $1.41.

“Everybody’s like, ‘Oh, but accountants are happy. At the end of the day, if you look at (the) annual report, what accountants say (is) ‘hey we’ve got no idea if anything’s there but directors (are) saying it is,” he said.

COLLECTION HOUSE: LOGIC IS FLAWED

Collection House countered that Mr Mizikovsky’s logic was flawed, saying auditors, an external accounting specialist and the board had determined the software costs had been noted properly. That meant allegations of inflated profitability and questionable share sales “cannot be sustained”, Collection House said.

The situation was “three audit firms, the board versus Lev who believes that the software has negligible or no value”, Mr Daly told The Courier-Mail.

Collection House has given the outside expert’s report to the Australian Securities and Investments Commission. “We’ve heard nothing from ASIC nor do we anticipate to be corresponding with ASIC on the matter,” Mr Daly said.

Mr Mizikovsky also has argued Mr Hennessey has a “very real” potential conflict of interest because he was chairman of KPMG’s Queensland arm for 12 years and now Collection House uses KPMG as an auditor.

Phil Hennessy in his KPMG days.

“It is not appropriate for Philip Hennessy to remain in the office of director, let alone chair of (Collection Houses’s) audit committee,” Mr Mizikovsky said.

Collection House countered that the allegations were “without any proper foundation” as Mr Hennessy had retired from KPMG in 2013, had ceased consulting for them in 2015.

KPMG was hired as auditors based on five directors’ recommendations, the company said. Collection House had also hired an independent expert who said there was no “reasonable basis” for asserting Mr Hennessy had a real conflict of interest.

Mr Hennessy declined to comment, referring back to the chairman and company’s statements.