The director of New South Wales beauty chain Ella Rouge Beauty, Ali Hammoud, has pleaded guilty to two charges in the Downing Centre Local Court in Sydney, following allegations he misappropriated more than $2.6 million from a company that has subsequently collapsed.
The Australian Securities and Investments Commission accused Hammoud of misappropriating $2,609,831.91 from a company called ERB International, of which he was a director.
ASIC also alleges that between August 8, 2003, and June 26, 2007, Hammoud made false statements in workers’ compensation insurance forms. By understating the company’s wages on the forms, it is alleged the company gained a financial advantage of $338,709.25.
In a case being prosecuted by the Commonwealth Director of Public Prosecutions, Hammoud pleaded guilty to both charges, which were committed to the Sydney District Court with a hearing on December 5.
Before its liquidation, ERB operated the Ella Rouge Beauty salon chain, which operates 25 company-owned stores and franchises throughout NSW.
The company, founded by Hammoud and his partner Manel Issa, opened its first outlet at Westfield Shoppingtown in Hurstville in 1997.
The case followed an earlier case before the Companies Auditors and Liquidators Disciplinary Board (CALDB), which saw William James Hamilton suspended for six months, for his conduct as joint liquidator of ERB International. Hamilton was a partner at Hamiltons Chartered Accountants at the time.
The CALDB found Hamilton had entered into a deed of settlement with the directors of ERB to accept an amount without investigating what its true level of debt was. It also found he failed to seek the approval of the court or a resolution of creditors and failed to seek legal advice before entering into the deed of settlement.
A second liquidation notice for ERB International was published on the ASIC website on November 7, overseen by Simon John Cathro from EY. Creditors with claims that have not already been admitted were given until November 24 to establish their claim.
Ella Rouge Beauty refused to comment about the matter when contacted by SmartCompany this morning.
However, on its official website, the company is advertising for franchisees and states it is hoping to expand into Queensland and Victoria in the near future.
“We are seeking prospective franchisees to join the team and realise their own potential to contribute to the beauty industry… We are dedicated to brining [SIC] the best technology and results to our clients and that is why we use the world’s most state of the art advanced treatment for effective results,” the company states.
ASIC said in a statement Hammoud faces up to five years in prison for each offence.
“A breach of directors' duties carries a penalty of five years imprisonment and/or a fine of $220,000. Making a false statement to obtain a financial advantage carries a penalty of five years imprisonment and/or a fine of $22,000,” ASIC said.
In 2013, a five year penalty was handed to real estate agent Michael Wilkes for misappropriating $412,796.40 from trust accounts while operating inner-city Brisbane real estate agencies.