RE: THe Times13 Nov 2021 21:33
Moulding, a former lieutenant of Phones4u tycoon John Caudwell, launched THG as a VAT-free CD and DVD retailer in the Channel Islands in 2004. It pivoted towards beauty and nutrition and by 2011, when it bought Myprotein, was turning over ÂŁ142.4 million.
That purchase led to a legal fight with Myprotein founder Oliver Nobahar-Cookson, with each side accusing the other of misrepresenting their finances. The case exposed the discovery of a fraud that derailed plans for a THG float in 2011.
In a special report codenamed Project Hydrogen, auditor PwC found that financial controller James McCarthy had been flattering THG’s profitability on a monthly basis by overstating debtors and stock levels and understating liabilities. A £4.1 million underlying profit for the 2010 financial year had to be revised to a £1.5 million loss.
The court also heard how several people in THG’s finance department carried out what they called the “Saviour Weekend” in July 2011 as they tried to salvage the listing. Nobahar-Cookson alleged that they were fraudulently trying to conceal a deep loss for the first half of 2011, although the judge found that the weekend did not involve fraudulent activities. McCarthy and another member of the finance department were sacked. Three people were given final warnings. Finance director Darren Rajanah was placed on gardening leave for almost two months.
Although the judge did not find that Rajanah committed fraud, he was said to have been copied into an email chain where McCarthy and others discussed whether they could “frig” a sales record and “create an illusion”.
The judge said Rajanah’s behaviour had been “ill advised” and that he must “take some responsibility for an atmosphere within the finance department which allowed fraud to flourish”. Rajanah was also found to have had a £50,000 bonus paid into McCarthy’s bank account to hide it from his wife, who he was divorcing. Rajanah still works at THG, as senior vice-president of Ingenuity.
The Kentucky case again threatens to shine an unfavourable light on THG’s culture. A former employee said the company had entered America “with no real clear path or strategy”. He said it was run like a “boys’ club” or “fraternity”.
“There’s a lot of energy, a lot of bravado. Everybody’s always in the gym — they’re in the gym at 4am and they’re back in the gym at 6pm.”
He described Moulding as a “narcissistic tyrant”. Andy Duckworth, the former chief executive of Myprotein who helped oversee the building of the Kentucky plant, is said to have been forced out after a marketing presentation drawn up by his team attributed some of the credit for THG’s success to him. The former employee said: “He was pushed out, and it was all because of Matt’s ego — nobody was ultimately going to take credit for the business’s growth but Matt Moulding.”
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