‘Why is he racing sports cars?’ Collapsed fashion empire lent money to director’s racing team

Luxury fashion retailer Harrolds may have been insolvent for more than a year before it collapsed in October with debts of almost $17 million, while the liquidator has demanded its high-flying director repay massive loans made to associated companies, including a racing team.

A statutory report by liquidator SMB Advisory revealed that Harrolds Logistics transferred $13.3 million in “related party loans” to six other corporate entities also controlled by director Ross Poulakis or members of his family.

Ross Poulakis with a luxury car in 2022.Credit: Simon Schluter

Poulakis is the director and a co-driver at Harrolds Racing Team, which borrowed almost $100,000 from Harrolds Logistics, before its collapse, according to the SMB Advisory report from January 3.

The 36-year-old has driven a Mercedes-AMG GT3 for Harrolds Racing Team but announced in August he would also compete in an Aston Martin Vantage GT3 for the Sydney-based Volante Rosso motorsport team.

The internal loans have incensed several creditors, which include international fashion houses and renowned designers, along with smaller local businesses that provided information technology, cleaning and logistics services.

“Please tell me why he is racing sports cars all over the country when his business is about to fall over? And now we find out the company behind the racing team received $100,000 when we’ll be lucky to get a fraction of what’s owed to us,” said one Melbourne-based creditor, who asked not to be identified over concerns it could jeopardise his company’s debt recovery.

“It’s beyond a joke and someone needs to be accountable.”

SMB Advisory managing principal Andrew MacNeill said he demanded the related-party loans be repaid but informed creditors he could not estimate how much would be recovered at this stage.

He said he was waiting for a formal response to his demands from Harrolds and its director.

“Creditors should note that if a debtor subsequently claims not to have the financial capacity to repay their loan in full, I will review the relevant party’s financial position and may be required to settle the matter on a commercial basis,” MacNeill said in the report.

Harrolds Racing Team founder Ross Poulakis (left) with champion GT racer Peter Hackett, Mercedes-AMG’s chief driving instructor.

He also raised the prospect that Harrolds Logistics had traded while insolvent.

“My preliminary investigations indicate that the company may have been insolvent from at least 1 July 2023. Notwithstanding, further investigations are desired,” according to the report filed with the corporate regulator.

SMB Advisory was appointed as liquidator on October 3 but met with Harrolds management in May when it determined that a “liquidation scenario was the likely path forward”.

More than 90 creditors – including luxury fashion labels Versace, Victoria Beckham, Balmain Paris, Tom Ford and Stella McCartney – are owed more than $16.6 million, while staff are owed more than $200,000 in entitlements.

Harrolds founder John Poulakis and son Ross Poulakis, the company’s director, in London in 2014.Credit: Getty Images

Ross Poulakis did not respond to requests for comment.

His father, John, who founded the first Harrolds store in Melbourne 39 years ago, also did not respond to requests for comment.

At the time of the collapse, Ross Poulakis blamed the business’ demise on the post-COVID retail landscape.

“Despite our best efforts to adapt to the evolving economic environment, a combination of reduced luxury spending, decreased foot traffic, unprecedentedly high levels of CBD office vacancies and extremely unfavourable government policies has significantly impacted our ability to sustain operations,” he said in a statement in October.

Ross Poulakis was just 26 years old when he replaced his father as director of Harrolds Logistics in 2014. His appointment was made about six months before John Poulakis pleaded guilty in 2015 to understating the value of imported European clothing by $1.47 million to reduce the customs duty payable on the goods.

County Court Judge Carolyn Douglas sentenced the now 66-year-old to a five-year prison sentence but ordered that he be released on a five-year, $40,000 good behaviour bond.

In 2018, John Poulakis also pleaded guilty to assaulting his elderly parents and damaging their home, but escaped a conviction and was handed a community correction order in Heidelberg Magistrates’ Court.

Poulakis’ lawyer told the court he was deeply remorseful and embarrassed by his conduct in January 2018, when he smothered his then 81-year-old mother’s face with a pillow and bashed his 89-year-old father before smashing windows, a coffee table and an entertainment unit.

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