Friday, 23 December 2011

Ed Hardy boss's bankruptcy boo boo

Gary Berman with Tara Reid.
Photo: Cameron Laird
BAD fashion transcends borders, which is why SiN can report on the bankrupting of one-time Melbourne clothing entrepreneur Gary Michael Berman.

Berman is the man who brought the Ed Hardy clothing brand to Australia. 

While this was not a crime, Federal Magistrate Daniel O’Dwyer recently pointed out that making an incorrect entry in a debtor's petition potentially is. 

“The details provided in a Debtor’s Petition are required to be accurate,” and “.…. should the requisite declaration that the details are correct made in support of the application prove to be false there is the potential of a criminal sanction of imprisonment for 12 months,” O”Dwyer wrote in his December 15, 2011 judgement.

O'Dwyer was commenting on the response Berman made to question 33 of his debtor's petition, which the former Ernst & Young accountant filed on May 17, 2011, almost 12 months after his stable of Ed Hardy outlets closed its doors. Question 33 requires a debtor to list transfers of assets and gifts made in the preceding five years.

 Berman wrote: “Various pictures/painting given to various friends June 2011.” While there is no suggestion Berman will be charged over the error, it bugged O”Dwyer and gave one of Berman’s most determined creditors another avenue in its efforts to bankrupt him.

“In my view, such Debtors’ Petitions and requisite declarations are generally not to be frivolously or carelessly completed or made”, the Federal Magistrate said.

“This is no less so in this case where the debts were very large, the creditors potentially numerous and the consequence of bankruptcy far reaching in its impact on others.”

O'Dwyer remarks were made during his ruling on an application by the ANZ Bank, which has been seeking a sequestration order against Berman's estate.

When the Ed Hardy businesses defaulted in mid-2010 secured creditor ANZ was left chasing more than $4.3 million in loans secured by among other things, Berman's personal guarantees.

When SiN contacted the bank it refused to quantify how much if any of the debt it has recovered and how much penalty interest has accumulated. Nor were the liquidators – Simon Wallace-Smith and Tim Norman from Deloitte – any more forthcoming. 

What is known is that ANZ appointed the Deloitte pair voluntary administrators of Ed Hardy Operations and Ed Hardy Pty Ltd on August 9, 2010 and that they were subsequently appointed liquidators on September 3. The bank commenced attempts to serve a creditors petition on Berman on November 30, 2010.

It succeeded in serving Berman’s solicitors on March 11, 2011 but has been frustrated in its attempts to cross-examine the entrepreneur, who left Australia with his family in October 2010 to settle in New York.

An order requiring Berman to appear at a hearing in the Federal Magistrates Court in Melbourne on June 29, 2011 was voided when Berman submitted a US medical certificate advising he was too ill to return.

Attempts to cross-examine him via a video link also proved fruitless, forcing the bank to abandon its tactic of trying to show that Berman had committed an act of bankruptcy by leaving the country.

Instead the bank tweaked its application to focus on Berman’s response to Question 33. O'Dwyer's judgement shows the gifts as given to various friends in June, 2010, not June, 2011.

“On the face of it, based upon the then unchallenged evidence under declaration relied on by the Applicant, the gift of the pictures/paintings within the 6 months of the presentation of the Applicant’s petition was an act of bankruptcy,” O'Dwyer declared.

"...that within six months of the presentation of the Applicant’s petition (30 November 2010) the Respondent gifted or transferred assets of $5,000 (June 2010) which would be voidable as against a trustee of the Respondent’s estate should a sequestration order be made."

While $5000 is small change against a $4.3 million debt the bank got its court order and can now move to try and appoint a bankruptcy trustee. And there are the proceeds of the sale of the Berman's Caulfield North home to consider.

The palatial five bedroom residence – which boasts a heated lap pool, four car garage and tennis court - was sold in March 2010 for $4.265 million. According to O’Dwyer’s judgement, settlement did not take place until July, 2010.

Contact SiN

1 comment:

  1. ed hardy shirts are basically a method of showing your edgy side and catching the eyes of all those you encounter.


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