Crazy John's Secretive On 'secret' Deal

The Age

Thursday November 9, 2006

By JESSE HOGAN, TELECOMMUNICATIONS REPORTER

MOBILE phone dealer Crazy John's did not even tell its auditors about an alleged secret contract agreement with Telstra because it was convinced the telco would deny the deal existed.

The claim was made by the dealer's chairman, Barry Hamilton, during his second day of questioning by Telstra counsel Allan Myers, QC, in a Federal Court trial in Melbourne involving the companies.

Mr Hamilton was asked why he had a detailed memory of a December 2002 meeting at which Telstra's then consumer and marketing chief Ted Pretty allegedly made the secret agreement not to enforce a contractual limit on Crazy John's remuneration, but had no recollection of another meeting with Telstra nine days earlier.

"Would it be fair to say that the only things that you can remember are those which are favourable to the case that is being advanced by Mobileworld (Crazy John's formal name) in these proceedings?" Mr Myers said. "No," Mr Hamilton said.

Crazy John's claims Telstra unjustly reclaimed a total of $43.4 million in payments that were made after the dealer's remuneration cap was reached.

Mr Hamilton was repeatedly asked why Crazy John's created a separate bank account and provision in its financial reports for "Telstra clawback" if there had been an agreement from Telstra not to enforce the cap.

He said it was necessary for the accounts to be prepared in a "conservative manner" because Crazy John's auditors would need confirmation of the secret agreement, and that Mr Pretty would not confirm the deal if asked.

"Our view is that he (Mr Pretty) would not have said he was doing it, so why send the auditors up?" Mr Hamilton said.

Telstra also disputed the accuracy of the internal financial records provided by Crazy John's under its disclosure obligations.

The dispute involved a 2003 Crazy John's financial report, obtained by subpoena from National Australia Bank, which showed the reference to "Telstra clawback" as a financial liability. But in the copy of the same report provided by Crazy John's, the entry had been changed to "Telstra dispute".

Mr Hamilton said the change was not intentional and occurred because the subsequent change in the name of the entry meant the report supplied to Telstra had been automatically amended to include the new name.

Crazy John's founder John Ilhan may appear as a witness when the trial resumes before Justice Sue Kenny today.

© 2006 The Age

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