Best Buy director goes to ground as receivers come in

Best Buy director Mark Mahony and his managers seem to have gone to ground - evading all attempts by Computerworld to contact them and, instead, issuing a press statement which has been hotly disputed by the failed company's chief supplier. The computer retailer closed its doors on June 26, only to briefly re-open them briefly the following day. Yesterday's press statement says the company is now in receivership.

Best Buy director Mark Mahony and his managers seem to have gone to ground - evading all attempts by Computerworld to contact them and, instead, issuing a press statement which has been hotly disputed by the failed company's chief supplier.

The computer retailer closed its doors on June 26, only to briefly re-open them briefly the following day. Yesterday's press statement confirms that the company is now in receivership.

The closure has left dozens of customers out of pocket, many of them having paid in advance or made 10% deposits for machines that never arrived. Their best hope may be one bid to buy the company as a going concern.

Computerworld spoke to at least eight disgruntled customers at the company’s warehouse in South Auckland. All had paid either in full or part for computers, while two had machines inside the warehouse awaiting repairs.

One customer had waited 12 weeks for a new computer, while another had paid his 10% deposit and had heard nothing since.

Suppliers and business associates seemed as bewildered about the situation as customers. Only one had received word from Mahony, who was previously involved with Cost Club, which went into voluntary liquidation last year with debts of more than $2.6 million dollars.

The only supplier that professed to receiving any information, Hamilton-based Pegasus Electronics, was unwilling to comment in detail but issued a statement saying it intends to maintain its warranty commitments on computers purchased from Best Buy. Managing director Colin Brown was reported to have received a fax from Best Buy saying that the company had stopped trading and was restructuring.

Pegasus refuted suggestions - which it says came from Best Buy -that it had been facing problems in supplying computers to customers. These allegations were reiterated in the statement released on behalf of Best Buy.

The release quotes Mahoney as saying that "The combination of … two factors - the PC Direct Campaign and the inability of Pegasus to supply as undertaken - put unsustainable pressure on our operating capital and cash flow."

Best Buy was recently involved in an dispute with PC Direct over a series of advertisements. Best Buy issued a writ against PC Direct claiming $250,000 in damages and applied for an injunction to stop the advertisement from appearing.

Best Buy purchased Cost Club last year after two vendors took legal action against the company. As part of the deal Mahony became sole director of Best Buy.

Fujitsu had filed proceedings to have Cost Club wound up, but this action was rendered void by its sale and liquidation.

Mahony also faced action as a result of an agreement made when Cost Club was first incorporated with $300,000 capital. Mahony exchanged his “intellectual property” for $300,000 instead of paying cash for shares. That intellectual property was then sold on to Best Buy for $1000.

A third action was lodged against Advertising Works by Cost Club’s liquidator, who claimed the company had received a preferential of $40,000 two days before the company went into liquidation.

On this occasion the receiver was bought in by the National Bank. The company has total debts of $700,000, the most substantial being $370,000 to Pegasus Electronics and $220,000 to 220 customers who have paid moneys in advance. The assets of the company are estimated at $550,000.The National Bank is the only secured creditor.

Furniture chain For Homes is negotiating with the Receiver, Coopers And Lybrand, to purchase Best Buy as a going concern. A contingent asset is the defamation case against PC Direct.

Says Mahony, ‘It is unfortunate that the effect of liquidation will be to halt our $250,000 claim for damages against PC Direct who have directly contributed to Best Buy being unable to meet its commitments to those who have paid in advance.’

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