Smiles Inclusive locked up personal data amid poll dispute

Smiles Inclusive stymied efforts by shareholders of the embattled dental chain to get to the bottom of alleged irregularities in a boardroom spill, a court heard

Smiles Inclusive raised $35m in its 2018 IPO.

Smiles Inclusive allegedly stymied efforts by shareholders of the dental chain to get to the bottom of alleged voting irregularities in a boardroom spill, a court heard

A public examination into the $91m collapse of the Gold Coast company heard several shareholders contacted Link Market Services after an extraordinary general meeting in May 2019 that removed founding chief executive Mike Timoney and his ally David Herlihy from the board. Link, as well as holding details of the company’s share registry, was responsible for collating votes in the EGM.

The public examination was told that Smiles Inclusive’s company secretary wrote to Link after the EGM withdrawing its authority to provide personal details, including records of voting, to shareholders and instead to instruct them to contact the company directly.

However, Smiles was aware they could not withhold such details if shareholders applied for the information under the Privacy Act.

Earlier, the examination in the Federal Court was told that stockbroking firm Morgans allegedly used shareholders’ proxy votes without their knowledge in the boardroom coup that as well as removing Mr Timoney and Mr Herlihy kept one of its long-standing clients David Usasz as chairman. Morgans had denied any irregularities.

Morgans later provided a $200,000 interest free loan to Smiles Inclusive as it spiralled towards collapse, at one stage having less than $100 in its account.

The examination heard that correspondence was sent to Smiles Inclusive from three separate shareholders who complained that they did not vote in the EGM poll despite their proxies being lodged in favour of Mr Usasz.

Mike Timoney

Link account executive Chris Healey told the examination on Friday that he was aware of controversy surrounding proxy voting at the EGM and had been contacted directly by several shareholders following the meeting. However, Mr Healey said that in relation to those shareholders he did not find any irregularities.

He said he also was aware of controversy in relation to the proxy votes of shareholder Henry Chen and that the company secretary had contacted Link requesting details of his holding registration numbers. The company has denied any irregularities around the voting of Mr Chen’s proxy shares and in an ASX filing rejected assertions his vote was ‘switched’ in the hours before the deadline in favour of Mr Usasz.

Although Smiles Inclusive’s $35m initial public offering in April 2018 was an oversubscribed success story, Smiles swiftly fell victim to board infighting, the departure of key executives, profit downgrades and a crippling debt burden.

Among the company’s many troubles was court action by ASIC, lawsuits, suspension from the ASX and the sudden death of a dentist.

The public examination heard earlier in the week that the company overstated revenue and other financial data to attract investors to its initial public offering. It also had used Bartercard “trade dollars” to help boost revenue projections ahead of the stock market listing. But the agreement with Bartercard to provide up to $3.8m in contractual revenue through its non-cash vouchers failed to materialise with only about $300,000 worth of Bartercard’s non-fiat “dollars” used.

The public examination, which will continue next week, came after ASIC approved an application by two Smiles Inclusive shareholders John Camacho and Arthur Walsh to summons former directors and executives of the company.

The two men were among scores of dentists who sold their practices to Smiles and then reinvested much of the proceeds back into the company. Earlier this year they said their quest to get to the bottom of the company’s decay would “leave no stone unturned”. There are no allegations of wrongdoing by those called to appear in court.

David Asasz