Heated debate but no resolution over Lewis's disputed business practices
Lewis Group's much-anticipated annual general meeting lived up to the expectation that it would be a humdinger, despite several attempts by chairman David Nurek to stop shareholders from asking questions about the group's controversial selling and accounting policies. His increasingly irascible efforts to stymie discussion were ignored by two determined shareholders.But despite two hours of heated exchanges between the board, auditors PwC and a number of shareholders, the meeting closed without any clarity on critical issues.Typical of the deterioration in the fractious debate was the discussion, 90 minutes into the meeting, about whether "ancillary products" - including extended warranty insurance, which earned Lewis a staggering R804-million in 2015 - were voluntary.story_article_left1When Nurek stated no customer was obliged to buy these products, shareholder Dave Woollam, who has done several "mystery shopping" exercises at Lewis, responded: "That's categorically wrong," to which Nurek replied: "No, you're wrong."Woollam, of Summit Financial Partners, who has spent several months investigating Lewis, provided the National Credit Regulator with results of his investigation, which indicated Lewis had contravened several sections of the National Credit Act. It was these results that formed the basis of the NCR's charges against Lewis.Nurek kicked off the meeting with a lengthy defence of the policies that have been challenged by the regulator. He also used his position as chairman to attack Woollam.In an attempt to undermine his standing, Nurek made frequent references to Woollam's position as a former African Bank executive and current director of unsecured lender Bayport. Nurek told the meeting: "Woollam's interest in this matter is not entirely altruistic."He said some of the claims made by Woollam and his colleague, Clark Gardner, CEO of Summit Financial Partners, were "patently false and defamatory of the company and its management and we will be taking legal advice ..."Gardner told the meeting it was unfortunate that Nurek had chosen to attack them for pointing out contraventions instead of thanking them.After the meeting, an evidently disappointed Woollam said: "We'll proceed with the planned court action against Lewis in a bid to force the company to change policies that are ripping off customers."Woollam is hoping to secure the sort of high-profile success achieved in the recent case in the high court launched by Stellenbosch University's legal advice centre against garnishee orders.story_article_right2If Lewis acted quickly, said Woollam, it could reverse the damage its policies had caused and "lay the foundation for a sustainable, profitable and client-centric financial services industry that will foster financial inclusion".The guts of the allegations against Lewis are that it levies unnecessary charges on its customers, that it does not undertake adequate affordability checks on potential customers, that it does not provide adequately for bad debts and that its accounting for insurance income is inappropriate. If true, these allegations either indicate contraventions of the National Credit Act or required accounting standards.Lewis has said it is opposing the NCR's charges and at Friday's meeting Nurek said repeatedly that the company's accounting standards were in line with the appropriate accounting standards. He said a number of issues raised by Woollam had even been referred to PWC's technical team to ensure they were in line with acceptable reporting standards.A representative of PwC who attended the meeting confirmed that Lewis's accounting policies were in line with international standards.When pushed to comment on whether the debtors' book was overstated, the PwC representative said he was not prepared to answer as the AGM was not the appropriate forum.A second Lewis shareholder challenged the board to look for a second opinion from an independent auditing firm.The Lewis share price closed down 1.2% to reach R62.80 on Friday.