On Wednesday, the Lewis Group said that it intended to apply to court for the setting aside of David Woollam’s demand that it start proceedings to have four executives declared “delinquent directors”

Woollam, director of Summit Financial Partners, made the call in a letter to the Lewis board, in which he detailed a number of complaints about Lewis, including “lack of corporate governance, multiple breaches of the National Credit Act and the issuance of consolidated annual financial statements that do not conform with International Financial Reporting Standards”.

Woollam told African News Agency (ANA) that he had written to the board as a Lewis shareholder.

His letter urged the board to take action against chief executive Johan Enslin, chief financial officer Les Davies, independent non-executive chairman, David Nurek, and independent non-executive director, Hilton Saven, over a number of failures which, he said, have “had a damaging effect on the reputation, share price and profits of Lewis”.

Lewis responded with a statement to shareholders, saying: “Having taken advice from Lewis’s legal advisors, it is Lewis’s intention to apply to court for the setting aside of Mr Woollam’s demand in terms of section 165(3) of the Companies Act on the grounds that it is frivolous, vexatious and without merit.”

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Woolam, who has been raising questions about sales and accounting practices at Lewis for the past 18 months, alleges that the practices compromise customers, especially vulnerable low-income consumers.

His 20-page letter to the Lewis board detailed a number of complaints against the business, including the miss-selling of employment insurance to pensioners and self-employed people, charging of compulsory extended warranties and compulsory delivery fees, even in the case of a customer buying an item they were able to carry out of the shop, such as a laptop computer.

He also detailed alleged accounting irregularities such as “entries that appear to overstate revenue from the sale of insurance policies”.

He wrote: “I am convinced that the conduct referred to in this letter is the result of a lack of leadership at Lewis.

He wrote: “I am convinced that the conduct referred to in this letter is the result of a lack of leadership at Lewis. Until such time as Lewis, Enslin, Davies, Nurek and Saven take responsibility therefor, the culture at Lewis will not improve and Lewis will continue to destroy shareholder value.”

This is just another salvo in Summit Partners’ battle to take Lewis to task over questionable sales and accounting practices. Summit has started high court proceedings against Lewis, and the National Consumer Tribunal is due to consider a complaint against the company, but the wheels appear to be turning slowly in both cases.

Woollam said the legal battle was being knocked back and forth between lawyers, with the latest bid to scupper the class action being Lewis’s legal team suggesting that Summit had coerced complainants into taking action and did not have the correct powers of attorney to act on their behalf.

Woollam said Summit would continue its battle until Lewis ended practices that some have argued amount to exploitation of vulnerable members of society.

He told ANA that he took some comfort from the fact that Lewis appeared to have improved some of their policies.

For example, he said, salespeople were now making it clear that buying extended warranties was voluntary.

This change came after an announcement from Lewis on October 27, 2015 saying it was refunding R44.1 million plus R23 million in interest to a group of customers, including pensioners and self-employed people, who were mis-sold loss of employment insurance.

Lewis said an internal investigation into transactions since 2007, undertaken after the National Credit Regulator notified the company of three such cases, had found “a minority of cases where loss of employment insurance policies were erroneously sold to pensioners and self-employed people”.

Loss of employment insurance cover is used to settle customers’ outstanding balances on credit agreements in the event of them losing their jobs and, therefore, was not relevant to people who were not employed.

Lewis blamed this on “human error at store level”

In his letter to the Lewis board, Woollam rejected the “excuse” that the miss-selling was due to human error as “so far-fetched an explanation that, on its own, it constitutes a further reason why the relevant directors should be declared delinquent”.

He added: “At a conservative calculation of R1 000 per customer, it means that 46 000 individual human errors occurred over the past eight years.

The question relating to the multitude of the human errors was asked of the directors but was “ignored.” In an interview in February, Woollam told ANA that this was just the tip of the iceberg. He said: “Lewis’s style all along has been to obfuscate the process and deny everything. On the R67 million they did not have a leg to stand on and came clean.

“They will eventually do the same with all the other charges.”

Author: ANA Newswire