A True and Factual Account of Fraud and Corruption
This section describes some of the ways in which CEO Pocock and his ‘team’ removed any potential opposition to the actions they were taking and their intended restructuring plan, and how the Deloitte administrators were complicit in preventing any further enquiries being made.
At the EGM of 4 December 2013, Phil Bowers (one of the three Deloitte administrators to hibu plc) was asked what it would cost for shareholders to buy hibu plc out of administration. He was unable to give a precise figure but agreed to find out.
On 7 February 2014, Deloitte confirmed that the total amount for all creditors (excluding shareholders) liable to the plc was £440,000.
hSG then formed a consortium to raise the required funds, contacted the Administrators and had a subsequent meeting to discuss the matter.
Within a week, Deloitte informed hSG that they had just learned of a £4.5 million pension deficit for which the plc was liable (Bowers: “I can confirm that the pension claim has been particularised and is estimated at £4.5m.”), on top of the £440,000 previously mentioned. hSG would therefore need to find about £5 million to be able to buy the plc out of administration.
· Financial Statement of 21 July 2011 states, “Pension assets"
"Yell values the portfolio of assets held by the UK defined benefit pension scheme at market value when calculating the net pension asset or deficit. Values will increase and decrease as markets rise and fall. The trustees and management have an agreed strategy to mitigate the risk of having insufficient funds, if markets fall. The trustees annually match the low-risk asset portfolio against the cash outflows for the following 12 years. Against longer-term cash payouts they match a combination of investments in index-linked gilts to mitigate inflation risk, and higher risk assets to get higher rates of growth. The trustees also work with management to ensure sufficient assets will be available to settle obligations extending beyond 12 years.”
This clearly states that enough funds would have been set aside to meet pension commitments for the forthcoming 12 years. Yet, only 2 years later, in 2013, it seemed the funds had disappeared OR that obstacles were being placed in front of hSG by the Administrators to prevent the PLC being repurchased by its original shareholders.
hSG believes that the intention of this action was to make the cost so prohibitive that it would prevent shareholders from being able to find out the value attributed to the hibu brand, investigate the true financial position of the Plc, or have any possibility of calling in debts or loans owed to the plc by other subsidiaries in the group.
Resignations of Remuneration Committee Chairmen
15 February 2011 -Tim Bunting (Non-Executive Director and Chairman of the remuneration committee) resigned. His departure from Yell was announced by RNS but no reason was given.
February 2011 - Joe Eberhardt (Non-Executive Director and former Chairman of the remuneration committee) also resigned, but his departure was not announced by RNS.
Both Director resignations took place within only a few weeks of Pocock taking office and came at around the same time as the excessive pay awards referred to elsewhere in this document. Bob Wigley then joined the remuneration committee and sanctioned the Executive remuneration packages.
Board’s removal of high-ranking Yellowbook Executives
The removal of Walsh, McCusker and Cairns eliminated 3 very senior dissenting voices from the upper echelons of hibu. Yell/hibu did not however choose to inform its shareholders by RNS of the departures or the reasons behind them.
· Joe Walsh
Walsh had been a very senior figure as CEO and President of Yellowbook for 18 years from July 1993 to November 2011, when he unexpectedly resigned.
At the time of Walsh’s departure, it was explained to the press as being due to his desire “to pursue other interests”. The lawsuit launched by hibu against him in April 2013 states that, in reality, it was the result of “a failed bid to acquire the directories service”.
The case was settled out of court, but the order stated that Joe Walsh could “respond in an appropriate manner to any legal process or give appropriate and truthful testimony in a legal or regulatory proceeding” (https://www.pacermonitor.com/case/16..._et_al_v_Walsh).
The case filing states that Yell / hibu terminated Joe Walsh’s appointment in October 2011 “because he was unwilling to support a new strategic direction for hibu’s worldwide business.” This clearly evidences how Pocock dealt with internal disagreements.
· Jim McCusker and Mark Cairns
On 6 March 2013, Mike Pocock sent an email to “Everyone in hibu US and Senior Management Staff (SMT)” stating that Jim McCusker, US president, and Mark Cairns, chief publishing officer, “have been dismissed today following a thorough investigation into conduct by them that the company considered to be disloyal and against the interests of its employees and other stakeholders".
This was a very serious allegation, made even more puzzling on account of the fact that McCusker had been appointed President of Yellowbook USA to great acclaim on 19 April 2012 (less than one year earlier) after about 23 years of experience with Yellowbook (which he joined in 1989) and had held “a wide range of increasingly senior sales roles”.
Deloitte declines to recognise Shareholder-appointed Directors
· 5 December 2013 – letter from Phil Bowers of Deloitte to hSG
“Although the members voted in favour of the resolutions for the appointment of the relevant persons set out in the notice of the general meeting as Directors of the Company, due to the administration of the Company and in accordance with paragraph 64 of Schedule B1 to the Insolvency Act 1986, the appointment of a Director can only be made with the consent of the Administrators. As I made clear at the meeting, the Administrators do not consent to such appointment and accordingly the Directors cannot be (and were not) effectively appointed.”
Phil Bowers of Deloitte had stated at the EGM that control now resided with him, as the company was in administration, and not with the former Directors.
He was however still entitled under the law (paragraph 61 of Schedule B1 to the Insolvency Act 1986, “61 The administrator of a company - (a) may remove a Director of the company, and (b) may appoint a Director of the company (whether or not to fill a vacancy).”) to allow the ten hSG members who had been legally elected to the hibu plc Board to hold the Director title and any residual decision making powers
Instead, Bowers resolutely refused the elected Directors their positions to avoid a change of direction at the company and quashed the possibility of any challenge to the placement of the company into administration the previous week by the incumbent Directors.
Deloitte rejects request to add an independent administrator
· 4 December 2013 – at the EGM
Shareholders expressed concern about the extent to which Deloitte had been involved with giving ‘restructuring advice’ to hibu plc, and the creation of a potential conflict of interest when they were also chosen by the Board to act as Administrators.
They then asked if Phil Bowers, representing the Deloitte team would agree for a truly ‘independent’ administrator to be allowed to work alongside Deloitte, to ensure shareholder fears about a lack of impartiality could be allayed.
However, Phil Bowers and Richard Hodgson from Linklaters refused the request.
Directors refusal to accept their Auditor’s (PwC) asset valuations
· 15 January 2014 - Joint Administrators’ Statement of Proposals.
Deloitte reported that “draft accounts were produced to 31 March 2013”, but “following consultation with the Company’s auditors”, the Directors believed the “values attributed to assets of the Company… to be overstated…”
The Directors chose to reject their auditor PWC’s valuation of hibu PLC’s assets, we contend, because lower or negative valuations would ensure the demise of hibu plc.
While the following information pertains to the holding Companies, not hibu plc, it shows that the Directors were intent on ‘adjusting’ the books to fit the picture that they wanted to paint.
· 14 March 2014 - Joint Administrators’ Statement of Proposals
Item 5.2 Notes to the Directors’ Statement of Affairs states, “The net book values have been taken from the Company’s management accounts prepared to 27 November 2013.”
Further, in the same document, 2.1 Overview of Financial Information, Deloitte states that the figures would be better without management’s adjustments:
“In the latest Management accounts dated 31 December 2013, significant provisions against intercompany receivables have been included as the receivables were deemed by Management not to be collectible.
In part this has caused the balance sheets of the Companies to be in a significant net liability position. Absent these provisions, certain of the Companies (namely Finance BV and UK Finco) would be in a net asset position as at 31 December 2013.”