|
The former Bank of Valletta and Malta Tourism Authority chairman John C. Grech had insisted with the directors of Priceclub to “build a solid structure before expanding” according to the evidence Grech gave in the court case brought by liquidator Andrew Borg Cardona against the directors of Priceclub, Victor Zammit, Wallace Fino and Chris Gauci.
Malta’s largest supermarket chain crashed spectacularly in 2001 leaving debts of about Lm8 to Lm12 million mostly to its supermarket suppliers.
Grech explained that he was asked to help Priceclub because of his involvement in a number of organisations and his experience as chairman of Bank of Valletta. He told the court that while he did not have direct experience in retailing he had a business in the same line and was experienced in financing.
“My position with the directors was always that the company should always be managed so that it can sustain itself and that we should not bite more than we can chew,” Grech told the court.
Grech was chairman of the Priceclub in 1998, its first year of operation and was only chairman for a few months resigning in October after taking up the position in April or May, but he already seemed to have an inkling of what was to happen.
“I was under the impression that the company was small and grew too quickly. The rate at which it was growing was too fast and I was worried. I used to insist with the directors to build the structure before growing and efforts were made in that sense. For example the directors went to the US on courses to specialise in purchasing and the structuring of a company – but at the same time the fast rate of growth of the company was worrying me,” he told Judge Tonio Mallia.
Grech explained why he had resigned as chairman: “We were expanding too fast and I was not comfortable with the growth rate before giving it a proper structure. I told the directors of my worries several times when I was chairman. We used to meet regularly – about once a week – and the executive directors used to attend and tell us of developments.”
Grech told the court he did not mention his worries in his letter of resignation and said these were not minuted in the minutes of the meetings.
“The executive directors were Wallace Fino and Chris Gauci up until the time when the Fino and Gauci families were involved. When the Fino family pulled out there remained only Wallace Fino and Victor Zammit joined. Victor Zammit started involving himself in the management and my mind was put to rest about certain concerns that I had since I know that he has experience in business and could balance the enthusiasm and fast pace the other directors maybe had.”
During the cross-examination in court Grech was asked by Dr John Cremona as to whether he was paid by Priceclub. “I confirm that I used to receive a salary during the months I was chairman of Priceclub.”
Speaking further about his worries Grech told the court he was worried because when the business was first purchased it was always advisable to “digest the purchase,” but obviously there was an effort to redecorate or rebuild the outlets.
Grech said that while he admired the vision and attempt to achieve standards of the directors, he feared they did not have the financial clout to achieve their aims.
The former chairman of BOV said that while he was involved in what direction the company should take regarding financing he was not involved in negotiations with the banks. “I was generally satisfied with the direction taken as regards financing and I know that an attempt was made to approach several bank and get the best terms.”
John C. Grech also told the court that a company he created in 1983, Economic Management Consulting Services, was commissioned to study the development of the company as it was planned at the very start and its potential in Malta.
“It was also asked to establish a policy between the original shareholders of the company and if I remember correctly a private agreement was signed between the first shareholders. These were members of the Gauci and Fino families and I mean Giosue Gauci and Lawrence Fino. Then to all intents and purposes Victor Zammit substituted the Fino family except for Wallace who remained involved.”
According to Grech, even after Zammit joined Priceclub, the company continued to expand quickly in the hands of Wallace Fino and Chris Gauci and he (Grech) began “to feel left out.”
Grech said he was then asked to work full-time but could not because of his commitments, and he told Wallace Fino and Chris Gauci that if they insisted he work full-time he would have to resign. “In all honesty from their body language during the meeting my feeling was that they wanted me to leave, that I had fulfilled my role with the company.”
Grech said the directors, who were also investing their money in the company, wanted more control.
Turning the subject to cash management, John C. Grech told the court that expanding was not a bad idea because it increased the purchasing power of the company.
“The more products one has, the more cash flow, but one has to be careful as the cash being generated was not cash of the company but of the suppliers because with that money one has to pay one’s suppliers, especially if all the purchasing is on credit.”
“As new outlets increased the cash flow also increased and one could use some of the cash on short term financing, but if the cash is used on larger long term financing there is a mismatch in the sense that the money is being used for development and not paying attention to creditors.”
|
