Action offers window into world of Dunnes Stores

 

BACKGROUND:The case brought against the company by Dunnes Stores’s head of finance, which returns to court today, underlines the tough way it does business

Every so often, usually as the result of a legal action, we are allowed peek over the wall into the secretive world of family-owned Irish retailer Dunnes Stores.

In the 1990s, it was the highly publicised sacking of its then chief executive Ben Dunne following his liaisons with cocaine and prostitutes in the United States.

There have also been spats with suppliers, notably in 2006/07 when a row with Whelan Frozen Foods, a supplier to Dunnes for 26 years, hit the headlines. Whelan accused Dunnes of trying to put it out of business by squeezing its profit margins to unsustainable levels.

The case highlighted the hard-nosed tactics employed with Dunnes when its does business, even with long-time suppliers such as Whelan. The case was eventually settled out of court.

Last year there was a high-profile spat in the Commercial Court with businessman Harry Crosbie. This followed a decision by Dunnes to pull the plug on an anchor store at Crosbie’s €850 million Point Village development in the Dublin Docklands.

Dunnes was to have paid €46 million plus VAT for the store and other works but sought to pull out of the scheme when Crosbie scrapped plans to build a 102-metre high Watchtower building and a U2 Experience as part of the development. The case was eventually settled on the steps of the court, with Dunnes agreeing to build a smaller store.

Dunnes’s latest public outing came last week when Larry Howard, its head of finance, began an action in the High Court. Howard claims to have been excluded from his duties for the past three months and is seeking the protection of the High Court from being dismissed from his job or for his continued “exclusion” from his duties.

Howard’s case has given an intriguing insight into the way in which Dunnes Stores operates internally at executive level and the unique management style of chief executive Margaret Heffernan and her family.

Howard joined Dunnes in April 2007, taking up his current role that June. He reported to Andrew Street, the then Dunnes Stores chief operating officer who left to join Superquinn in December 2009.

Following Street’s departure, Howard reported jointly to Noel Fox, a long-time adviser to the Dunnes family, and to Anne Heffernan, Margaret’s daughter.

Howard claims he was “very successful” at Dunnes during Street’s time. But he claims that matters changed significantly following Street’s departure for Superquinn.

“I was treated differently and was excluded from many functions for reasons which I can only assume were based on some ill-conceived and unjustified presumption that I was going to leave and join Mr Street in Superquinn,” Howard states in his affidavit.

Last June, Howard claims he attended a meeting with Margaret Heffernan, her daughter Anne, her niece Sharon McMahon and Fox. He states Margaret Heffernan “challenged” him about a piece of work he was doing. Howard explained that the issues involved related to a newly introduced Oracle software package in the food division, which was “erroneous”.

Howard proposed to allocate an accountant to deal with the issue. Margaret Heffernan objected, saying: “I’m telling you now, if you don’t get yourself up to speed on Oracle you’re wasting your time here.”

He also claims that Heffernan said on two separate occasions during the meeting: “He’s not effective.”

According to Howard’s affidavit, Fox replied: “He is effective – he’s still holding money .” That statement in itself tells you something about the management style at Dunnes.

At the meeting, Howard was asked what else he was doing. He advised that he was working on the group budget, an analysis of individual store performance and the monthly management accounts.

Heffernan referred to these tasks as “bullshit”, adding that “we have accountants coming out of our ears”. Heffernan referred to him as a “floater” and said she was paying him too much money “to float”.

He claims Heffernan referred to him and another senior executive at Dunnes in a “very demeaning manner” by saying she “either wanted fucking men or mice”.

Over subsequent months, Howard claims he was then removed from responsibility for certain functions.

On September 13th, 2010, he was instructed to cease carrying out work for the corporate services department and claims he was told by Margaret Heffernan that she planned to remove the preparation of the monthly management accounts from his remit.

“What will you do then,” Heffernan is alleged to have said to Howard.

Howard took this as a veiled threat that he might be dismissed.

On the same date, Howard was called to a meeting in Heffernan’s office. When he entered the room, he claims that Heffernan said there was no need to “look so worried” and she was eating her lunch and wouldn’t “sack” me “. . . yet”.

A similar exchange is said to have taken place on November 22nd, when Howard claims he was described as an “Andrew man”. He was also quizzed about whether he had been approached by Andrew Street to join him at Superquinn.

“I say that during the course of that exchange, I took the opportunity to confirm to Mrs Heffernan my commitment to Dunnes Stores lest there be any doubt,” Howard says in his affidavit.

Howard says matters came to a head on December 2nd, 2010, when he received a phone call from Margaret Heffernan to discuss an error in relation to a tax matter that he had uncovered relating to the retailer’s VAT return for September/October of last year.

Howard said that he brought the matter to the attention of Fox and financial accountant Rena O’Sullivan. Margaret Heffernan is alleged to have asked Howard what this matter had to do with him.

“I advised her that Mr Fox asked me to have a look at it and she then went on to ask why should Dunnes Stores repay the VAT if it had always been done in that particular way,” Howard claims.

“I immediately replied that the repayment should occur because it was the right thing to do.”

Howard says Heffernan became “very animated” and said: “That is exactly why you have no future in Dunnes Stores.”

She is then alleged to have instructed Howard to write down on a piece of paper the functions he was responsible for and to send it to her so she could “discuss it with Frank Dunne .”

She then hung up the phone.

Howard sought legal advice from Mason Hayes & Curran and the law firm wrote to Heffernan on December 20th last year on his behalf. The following day Howard was asked to attend a meeting with Anne Heffernan and Sharon McMahon. He says the meeting was “amicable” but he was asked to go home while the matters outlined in his letter were investigated.

Several letters passed between Howard’s solicitors and Anne Heffernan before he returned to work on January 25th.

That day, he was approached by Anne Heffernan and asked to meet her in a meeting room. “During the course of that meeting she told me that it was not realistic for me to return to work and when I was asked whether I agreed with that I responded by saying that the situation was difficult but, in my view, not irretrievable.”

Heffernan is then said to have told Howard that she would have a conversation with the shareholders to see if the matter could be resolved so that they could all “move on with our lives”.

Howard says he met Anne Heffernan on February 1st and discussed the terms of a termination package. This was discussed again on February 7th, during a telephone conversation between the pair.

Howard and Heffernan then met on February 14th at the Westbury Hotel in Dublin, after which he had no communication from the company.

Howard attended work on March 7th. He was met by Anne Heffernan, who directed that he should not sit at his desk. Heffernan is alleged to have told Howard that he was not being dismissed but that he should go home and that his salary would be paid.

According to Howard, his continued exclusion from his duties at Dunnes has become well known in business circles. “I say and I believe my suspension would not be viewed by anybody as being for some innocent or innocuous reason,” Howard adds in his affidavit.

He told the court that unless Dunnes was restrained, he would continue to be excluded from performing his duties “thereby causing me irreparable loss and damage” and said his business reputation would be “destroyed”.

So far, we have only heard Howard’s side of the story. The case is due to return to court today. It remains to be seen if Heffernan and Dunnes Stores will seek to counter his claims or whether an out-of-court settlement will be agreed.

The case once again highlights the tough, no-nonsense manner in which Dunnes conducts its business affairs. This, perhaps, should not come as a surprise. After all, Margaret Heffernan and Frank Dunne acted decisively to remove their brother Ben as head of the business two decades ago.

We have suspected for some time that Margaret Heffernan was a tough cookie, who gave no quarter in her business life. Howard’s case hints that the next generation of the Dunnes family are cut from the same cloth.

Whatever the merits of Howard’s claims, many in the retail sector wonder why Dunnes, which is regarded as a slick operator by its rivals, didn’t simply sort the matter out privately and without any media fuss.

It remains to be seen how much more media oxygen Dunnes Stores is prepared to give this matter.