Memo to Jamie Pherous: CEOs rarely survive accounting scandals
After the two near fatal episodes at Corporate Travel Management – three if you count Brexit – Pherous believes he is untouchable. After all, he co-founded the $2.4bn travel play and holds an 11 per cent stake.
But dodgy accounts strike at the heart of how a business operates. If the accounts can’t be trusted, nothing about a company can be.
It beggars belief a scandal of this magnitude could happen in isolation, particularly given the high turnover of top finance executives in recent years.
Over decades, Pherous built CTM into a major global player. But now many are starting to ask: built on what? There’s little confidence he’s the right man to fix an accounting mess festering under his watch.
Not only has CTM over-inflated revenue and earnings, the crisis has burnt clients – by up to $162m in overcharged funds going back years.
If government contracts are impacted – which is a large chunk of its UK customers – this could trigger a wider investigation.
Worse for investors: they’re trapped. Shares have been suspended since August after new auditor Deloitte spotted irregularities in how the UK business was booking revenue. Deloitte brought in KPMG, which has analysed thousands of documents and millions of sales and purchase lines. KPMG’s work continues. Deloitte won’t sign off until it gets the full picture – likely well into the new year. Until then, the $148m left on the balance sheet is at serious risk.
No one close to this scandal emerges well. The board, led by former long-term Westpac director and former M&A lawyer Ewen Crouch, is likely to be engulfed.
Former auditor PwC is in the firing line after signing off CTM’s accounts for nearly 15 years, including when the company previously faced accusations from short sellers for overinflating revenue.
Pherous, who tightly runs the show, is squarely in the frame. In recent years, he touted his European business as the star performer in his global empire. Now the same unit is likely at the centre of a shareholder class action.
Behind the scenes, all hasn’t been well. There have been three heads of the troubled UK business between 2023 and 2025, and three chief financial officers. Crouch says the board has confidence in current chief financial officer James Spence. The most recent European boss, Michael Healy, was stood down last week, with the board citing “irregularities”. Further investigations are underway. But in a scandal predating Healy, that can’t be the only accountable action.
Plenty doesn’t add up. The reality: Corporate Travel Management doesn’t know how deep this goes. Big shareholders like AustralianSuper – which has boosted exposure over the past year – will have limited confidence the accounting issues haven’t spread elsewhere. This is always a risk with travel revenue and commission income, typically recognised on the day the customer travels but involving judgment around timing.
An accounting scandal ripped through Downer three years ago, claiming the CEO and several executives. There, the engineering company failed to correctly account for revenue in a major utility contract. A class-action lawsuit is still working through the courts, with a mediation session this month. It took years for Downer to restore its financial reputation. CTM faces the same fate.
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Former career accountant Jamie Pherous may have survived a short-seller attack and the pandemic’s devastation of travel. But no CEO survives an accounting crisis. Pherous should take heed.