Saturday 21 October 2017

Claims that Gleeson let Mercantile group pay for trips and hotel stays

Allegations are flying in the bitter pub dispute over some of Dublin's best-known night spots. Gavin McLoughlin reports on the latest developments in Frank Gleeson's row with fellow shareholders in the Mercantile Group

Cafe en Seine is among the many pubs controlled by the Mercantile Group that Frank Gleeson founded
Cafe en Seine is among the many pubs controlled by the Mercantile Group that Frank Gleeson founded
Gavin McLoughlin

Gavin McLoughlin

As boss and controlling shareholder of the Mercantile group, Frank Gleeson was used to having things his own way. But that all changed when he merged the business with a rival entity, Capital Bars, becoming a minority shareholder in the process. When the deal completed - forming a group encompassing some of Dublin's best-known bars and restaurants - Gleeson spoke of his "ambitious plans to grow the business further both in Dublin and internationally".

Now, due to an almighty falling out with his new partners, allegations about how he ran this business - down to his spending habits - are being picked through in the courts.

Gleeson's adversaries are his fellow shareholders in the new Mercantile group: Danu Partners, an Irish investment firm run by Mark O'Meara and Setanta Sports founders Leonard Ryan and Michael O'Rourke; and JT Magen (Capital Bars) LLC - an offshoot of EMI-MR - a company linked to businessman Maurice Regan and Michael Breslin, a Kerry-born businessman who previously owned a US scaffolding business.

Two cases are before the courts at the moment. One sees EMI-MR trying to recover €4.6m it says it loaned to Gleeson. The other sees Gleeson suing his fellow shareholders, alleging shareholder oppression. When contacted by the Sunday Independent, Gleeson's only response was: "No comment, the matter is before the courts."

An extraordinary list of allegations and counter-allegations have been filed with the court - and fresh claims about Gleeson's expenditure in his role as Mercantile chief executive emerged last week.

In a sworn statement, Danu's O'Meara claims that Gleeson charged the group for 16 nights at Dublin hotels, with frequent trips to the Intercontinental (previously the Four Seasons) despite living in Dublin.

He says the publican spent 66 days abroad at the company's expense over a nine-month period, including trips to New York, London, France and Spain.

One trip, O'Meara says, was to try and secure the Irish franchise to a boulangerie company for himself.

O'Meara says Gleeson "appeared to have been operating an undisclosed practice of taking cash from tills" in three venues, and that in November and December 2016 he had charged €12,000 to the group for food and beverages.

There is also a row over salaries. Gleeson's son Rory was 'welcomed into the business' on the company payroll on an annual salary of €35,000, O'Meara says in his affidavit.

Gleeson claimed that his son went on to be "unfairly and summarily dismissed" - something O'Meara denies. O'Meara also says that a woman called Elizabeth Wichur was put on the payroll with a salary of €25,000. "Mr Gleeson has a close personal and business relationship with Ms Wichur, which was never disclosed to the board and we believe the payment to her is not supported by any responsibilities carried out for the Mercantile Group."

This is the backdrop of acrimony and suspicion that underpins Gleeson being put on gardening leave, pending further investigation from his job at Mercantile.

He has now secured a temporary injunction from the High Court preventing the company from dismissing him, or from disciplining him on foot of findings from the investigation commissioned by the company.

The Sunday Independent understands that investigation has been carried out by Turlough O'Sullivan, the former Ibec director general who is now the managing director of workplace dispute resolution firm Resolve Ireland.

Gleeson's counsel, Rossa Fanning SC, told the court that Gleeson had sought the injunctions because the company was planning to meet to consider the report over the coming days. Fanning told the court the report was "fundamentally and fatally flawed".

As well as his day-to-day expenditure Gleeson's overall financial situation has been cast into the public eye as a result of the dispute.

O'Meara in his affidavit claimed that a major factor in the merger was Gleeson's finances.

"He [Gleeson] was verging on personal and corporate insolvency. He had debts to Bank of Ireland which were close to €24m and he had significant personal guarantees on amounts due to other creditors of his companies," the affidavit reads.

"I also understand that Mr Gleeson had seriously considered examinership and he needed a partner who could rescue him and his business. The transaction... ultimately reduced Mr Gleeson's personal exposure to Bank of Ireland by €14.5m," the affidavit reads.

It states that despite the merger being done, Gleeson "appears to be in serious financial difficulty" and owes €9m to creditors including Revenue and EMI-MR.

The role of accountant Patrick Burke in the merger has also proved a source of acrimony. In a legal letter to his opponents in February, Gleeson's lawyers, LK Shields, wrote that Burke was representing Gleeson "in relation to his financial affairs".

Burke is the chief financial officer of EMI-MR - one of the companies linked to Gleeson's rival shareholders.

He used to be head of Grant Thornton's Irish food and beverage practice.

"For reasons that will become significant in the context of our client's proceedings, it has emerged that Mr Burke had a significant conflict of interest in representing our client arising from his intended commercial involvement with you post merger," the letter stated.

That allegation was furiously denied by Burke in an affidavit brought to light last week. Burke said he was "dismayed" and that Gleeson was "determined to engage in a personal, and, at times, hysterical attack on my integrity and bona fides without any basis".

He said that for Gleeson to label him his "erstwhile financial adviser" was to "greatly exaggerate" the men's relationship prior to the merger.

"While it is nice of Mr Gleeson to give me credit for refinancing his loan from ACC to Bank to Ireland in 2011, Mr Gleeson is gravely mistaken in his recollection," Burke says.

"Mr Gleeson was well known to take advice from numerous advisers and sources and to be a very strong-minded and strong-willed individual."

Burke said he did not represent any particular party during the Mercantile merger negotiations, adding that he "cannot understand" why Gleeson would have made an accusation of unethical and unprofessional behaviour.

"The reasonable inference can be drawn that Mr Gleeson is simply availing of the privilege litigation affords to say what may likely be leaked subsequently to the media."

It's a compelling row for public consumption but the parties involved must surely be wondering if they'd been better off doing a deal before now.

Gleeson says that talks about buying him out of the business took place around November 2016, but these were unsuccessful.

Gleeson said the terms on offer "were not acceptable and were one-sided in the extreme." The talks failed and Gleeson was put on gardening leave shortly thereafter.

With the courts breaking for Easter it will be a couple of weeks before the dispute gets an airing again.

Had a buy-out been agreed, it's likely that much of the detail now emerging would never have come to light.

The 2016 merger

News of the deal bringing Gleeson and his adversaries together was announced on February 4 last year.

The deal would create a business with around 600 employees and annual revenues of €400m.

Gleeson would "oversee the continued development and expansion of the business aided by a management team comprised of highly-experienced individuals from both the Mercantile Group and the Capital Bars Group."

"A significant capital-expenditure programme is planned, ensuring that all venues continue to offer excellent dining and entertainment options to their loyal customers," the statement added.

Gleeson was quoted as saying the deal was transformational - it certainly was that, though not perhaps in the way he had in mind.

Sunday Indo Business

Editor's Choice

Also in Irish News