ONTHEHOUSE FOUNDER IN THE CLEAR, BUT ON HIS OWN
Written on the 2 October 2014 by Laura Daquino
A WHIRLWIND few weeks have come to a bittersweet head for Onthehouse (ASX: OTH) founder Michael Fredericks.
His name has been cleared of any serious misconduct for a dispute that arose from a private trust, but the court proceedings have culminated in his permanent departure from the company he founded.
Fredericks resigned from CEO and managing director of OTH on Monday 22 September, handing over to interim CEO Gail Pemberton, despite allegations having no bearing on his conduct at the publicly listed company.
Fredericks says he is disappointed with the way the case has been handled by the board.
“Notwithstanding the resolution of this private dispute in relation to my role as trustee of my personal trust, and the correction of any suggestion of serious misconduct in this role, I have taken the step of resigning from my positions with Onthehouse, while I consider my options.
“I am dissatisfied with the manner in which the board of Onthehouse has handled recent events.”
Frederick’s former business partner and Brisbane lawyer, Phil Heraghty, alleged that Fredericks used a $50,000 seed capital investment for personal expenses including credit card payments.
Through The Fredericks Onthehouse Trust, a personal investment entity, Heraghty’s funds were intended to make their way to OTH in its start-up days.
The Supreme Court of Queensland heard that Fredericks had not delivered a single financial statement to Heraghty in seven years of business despite being pursued since June 2011.
Justice Alan Wilson referred to Frederick’s paucity of record keeping as “atrocious” particularly due to his training as a solicitor.
After three weeks, the issue was resolved in court yesterday, and Fredericks has since been reinstated as a trustee.
Separate statements from Fredericks himself and Russells, whose managing partner Stephen Russell was representing Heraghty, revealed that the court determined Fredericks’ breaches to be of an administrative nature.
Both statements noted that Fredericks isn’t guilty of any impropriety, dishonesty or misappropriation.
Fredericks says he understands Heraghty’s frustration in the documentation delay, a ramification of narrowing his focus to his business performance.
“My focus has been squarely on the performance of the Onthehouse company, at the expense of my personal affairs, including my trust holding documents,” says Fredericks.
“It was never intended that this trust would be used for anything other than for personal reasons and it was always intended that Mr Heraghty units in the trust would be redeemed for shares in the company.
“We are now rectifying that situation.”
OTH’s share price has dropped since the beginning of court proceedings, picking up 1 per cent today to 50 cents per share upon the announcement of Fredericks’ resignation.
The board conceded to the implications of the court case in a statement released earlier today.
“The matter has caused unnecessary distraction and publicity in relation to the company,” the statement reads.
Interim CEO Gail Pemberton says distractions haven’t deterred the OTH team, who “remain incredibly focused”.
“The team are working hard at building deeper relationships with our banking clients, increasing the yield from our real estate agency customers and delivering on our key strategic initiatives, namely the new consumer portal and the build out of our Data Platform, which are professing well and according to expectations,” says Pemberton.
She also credits Fredericks for building up the company since its listing three years ago.
“The board wishes to thank Michael for his dedication and leadership in building the company since its listing in 2011.
“The founder of the consumer online business, Michael drove the strategy and vision that saw the acquisition of the real estate software businesses, Console and Portplus, the property data and AVM business, Residex, as well as the Real Estate Advertising Network (REAN).”
Pemberton, who serves on a number of boards, will oversee the company until Monday 13 October when Anthony Scotton will then step into the role of interim CEO.
The board has begun searching for a new CEO to take Fredericks’ place.