How Jamie Pherous grew a journey large, and exited amid an overcharging scandal

Just weeks earlier than the disaster emerged, Corporate Travel Management founder Jamie Pherous was beaming within the Brisbane Lions post-match sheds.

The ever-upbeat chief government, Lions scarf draped round his shoulders, was arm-in-arm on the Melbourne Cricket Ground with younger AFL participant Logan Morris. Then got here a selfie with teammate Jaspa Fletcher.

Pherous’s success equals entry. 

He’s employed singer Jimmy Barnes for his party and brought US heli-skiing journeys, and this evening on the soccer was no totally different; his $2.3 billion Brisbane-based journey firm sponsored the Lions coaching academy.

The smiles that August evening final 12 months have been of smashing victories (Lions 92 Collingwood 65) and distinction with failures since enveloping Corporate Travel.

Weeks after the match, it warned auditors had discovered seemingly benign accounting discrepancies. Then, inside months, the image metastasised: UK clients together with the British authorities had been overcharged as much as £77.6 million ($150 million).

By this week, with the ASX-listed firm’s shares nonetheless suspended, Pherous departed as chief government. Gone was an entrepreneur who grew a enterprise that helped organise journey for large purchasers together with the Australian authorities or Wesfarmers, and lengthy defied critics.

Many questions stay. But the ABC right this moment, by way of critiques of accounts and regulatory paperwork, and discussions with {industry} and sharemarket sources, can reveal extra particulars about travel-industry overbilling allegations and auditor issues with large UK contracts.

Two workers to large income

Brisbane-born Pherous, now 57, credited his entrepreneurialism to listening to his mother and father speak across the dinner desk about their vogue boutique enterprise.

He attended non-public college Brisbane Boys Grammar, changing into a prefect. His small stature helped him as coxswain — the one who barks directions — within the college’s second VIII rowing crew.

His ensuing accounting profession with agency Arthur Andersen went from Papua New Guinea to the Middle East. But discovering himself caught in airports as a result of the agency’s journey company could not prepare flights, he knew enterprise journey could possibly be completed higher.

From 1994, with solely two workers, his Corporate Travel grew by 2010 to publish $3.3 million income and a stockmarket float at $1 a share.

Corporate Travel swelled with acquisitions and by 2015 dealt with $2.7 billion in buyer journeys. That 12 months, the BRW Rich List estimated Pherous’ wealth at $300 million and he wed long-time accomplice Louise on Hayman Island. It was his second marriage and expanded his household to 5 sons.

Corporate Travel shares giddily shot previous $30 every by 2018. But doubters have been gathering.

Jimmy Barnes was belting out Working Class Man at Hamilton Island. It was November 2018 and Pherous was celebrating his fiftieth birthday with associates on the luxurious Qualia resort, hiring the singer for $150,000.

The timing was poor. Days earlier than, short-sellers, who generate income from share costs falling, had portrayed Corporate Travel’s accounting as aggressive.

Margins have been too far above rivals, curiosity earnings was odd, patents didn’t exist and a few international workplaces have been merely phantom shops, they claimed. (They added {photograph} examples, like a supposed Alaskan workplace that was only a kiosk in a baggage assortment space.)

Shares initially dropped 27 per cent. But Corporate Travel refuted the thrust of the allegations, albeit admitting to wrongly describing some know-how as patented and its web site wanted up to date workplace places.

Other governance issues emerged, akin to when reporters found Pherous had in 2018 privately lent $13 million to Brisbane-based firm Shine Lawyers. The subject was Shine chair Tony Bellas was additionally Corporate Travel’s then chair — so Pherous’s boss. (Bellas rejected any battle of curiosity existed and mentioned he didn’t negotiate the mortgage’s arms-length circumstances).

Corporate Travel saved busy, traversing COVID-19’s border shutdowns seemingly much better than struggling rivals. One enhance was a UK deal repatriating 40,000 Britons in 5 weeks throughout the pandemic’s darkest days.

Pherous later mentioned the work had began with calls from an individual “close to” then-UK Prime Minister Boris Johnson.

This was typical Pherous; he didn’t reply ABC News questions this week however over a decade has been incessantly bullish in interviews or investor briefings.

He was an enthusiastic boss too, one who may swap from enterprise go well with to a KISS-style costume at work events. The firm had unbelievable perks. One abroad journey to Spain for high workers, as an illustration, featured hot-air balloons and flamenco dancers.

Yet amid development, European earnings leapt out; in 2022 and 2023 its margins have been double the corporate’s different areas.

“It just didn’t add up,” GCQ’s Doug Tynan, a short-seller, would say later.

Then in March 2023, Corporate Travel gained oversight of a controversial £1.6 billion UK contract to accommodate asylum-seekers. That included housing them on the floating barge Bibby Stockholm, horrifying refugee advocates.

By 2024, the group’s income have been an “underlying” $113.3 million. Accounts for 2025 haven’t been launched and shares stay suspended at $16.07 amid revelations refunds stretch again to 2021 work.

Corporate Travel is tight-lipped on what’s gone flawed, solely saying new auditors Deloitte found preliminary discrepancies. So why did Deloitte discover what predecessor auditors PwC missed?

One risk is that the brand new UK Labour authorities has been blasting earlier asylum-seeker contracts. Just final May, firms Clearsprings and Mears introduced repayments of £46 million, after incomes above contracted margins from authorities hotel-accommodation offers.

Still, sources near Corporate Travel downplay ideas authorities probes triggered the auditors to research nearer.

Another principle whispered in enterprise circles entails Deloitte itself; regulators have questioned Deloitte’s UK auditors about two earlier consumer firms with authorities contracts.

Tagging of criminals

One Deloitte consumer was Serco, which had a contract for digital tagging of criminals within the 2010s, and submitted large false bills to the federal government to cover fats margins. The UK’s Financial Reporting Council fined Deloitte £4.2 million in 2019 for “failing to react to clear indicators of the risk of potential fraud on a UK government department”.

A second consumer was Go Ahead Group, whose majority-owned entity ran a railway in a authorities deal. That entity hid for nearly six years £27 million in transport division overpayments. UK regulators since 2022 have probed Deloitte’s audit work there.

The principle now goes Deloitte UK auditors have been subsequently hyper-vigilant to authorities contracts as they probed Corporate Travel accounts final 12 months. Deloitte declined to remark.

Corporate Travel will not element the way it overcharged authorities or different purchasers within the UK.

But freedom of knowledge requests by the ABC with Australian governments additionally uncovered issues about potential rip-offs by different firms within the sector. The tips? Hidden airfare mark-ups, or journey brokers wrongly pocketing commissions from suppliers akin to lodge chains, auditors warned Queensland’s authorities in a single 2022 evaluation.

Another 2021 audit, the ABC can reveal, raised questions on Brisbane-based Flight Centre’s large NSW authorities journey contract. The audit is generally redacted however one part about Flight Centre and “commissions retention” mentioned a “precedent of successful action”.

Overcharging allegations

The auditors continued: “in 2017 and 2018, National Australia Bank discovered [Flight Centre] had allegedly been overcharging it for several years by applying hidden mark-ups to airfares … The nature of the alleged wrongdoing was different, being mark-ups versus commission non-payment”.

NAB and the NSW authorities declined to element what occurred. Flight Centre instructed the ABC it had settled a “contractual dispute” with the financial institution amicably and confidentially, whereas downplaying the NSW authorities audit and rejecting any wrongdoing.

An auditor had made some “incorrect” feedback, Flight Centre mentioned. The journey firm mentioned it had responded to subsequent NSW authorities questions, “there were no outstanding issues and the contract was renewed”.

Corporate Travel’s UK woes, in the meantime, are so critical the Home Office has confirmed investigating an “appalling overspend”.

Morningstar analyst Brian Han mentioned Pherous’ imaginative and prescient had single-handedly constructed Corporate Travel however “the growth was not accompanied by robust systems.”

Accountability issues would doubtless declare extra scalps, particularly among the many board, he added. Still, Han believed a viable enterprise existed.

‘Governance shortfalls’

Mark Wade, one of many few sharemarket analysts who early on printed sceptical studies about Corporate Travel, mentioned the corporate had ominously not up to date its enterprise’s efficiency. Unanswered questions embody how “broader governance shortfalls were allowed to manifest”, he added.

Tony O’Connor is a veteran guide for the journey {industry} and sees key dangers looming for Corporate Travel together with shareholder litigation, dropping purchasers, refunds and drying up of credit score. “That’s a lot of horsemen to fend off at once,” he mentioned. The wildcard stays the main points of the UK occasion.

There’s no suggestion of wrongdoing by Pherous – he has left the corporate on good phrases, retaining a six-month consultancy paying nearly $337,000 and the corporate praising his “pivotal” position in its success.

He has, in keeping with a number of sources, just lately mentioned snowboarding in Colorado (Even his Instagram profile is of him clad in winter gear, arms outstretched, amid snowy mountains.)

His remaining 16.6 million shares have been final value $267 million however that worth is now cloudy. Still, he had crystalised nearly $125 million in internet share gross sales, owns an $11.3 million Brisbane house with cliffside pool, and an $8 million beachside Noosa condominium.

At least one market watcher thought one thing appeared odd on final November’s investor name in regards to the large refund drawback.

Pherous was on the cellphone. Yet others did a lot of the speaking. The normally evangelical entrepreneur’s spirit had seemingly already departed.