Recently discovered financial mismanagement at Metafore Corp. will not change the business direction of equity partner Hartco Corp.
“”Yes, we learned. Will it change what we do?
No,”” said Hartco chief financial officer Marc D’Amour, referring not only to Metafore, but to all of the company’s franchisee arrangements. “”We will not shy away from a good deal.””
In October, Hartco announced it had discovered a misappropriation of assets and financial irregularities at Metafore. Hartco’s third quarter operating results, released in December, included a pre-tax charge of just under $4.8 million relating to the irregularities.
“”Our attitude towards Metafore changed greatly and we got a whole lot closer towards the business,”” D’Amour said. “”We’re much more involved in daily operations.””
Deloitte and Touche LLP are currently engaged in a complete forensic audit of Metafore, which D’Amour said “”will be ongoing for some time.””
D’Amour said Hartco is retaining its one-third equity stake in Metafore despite the hefty writedown.
“”We are still a shareholder in the business,”” said D’Amour. “”The relationship hasn’t changed since the irregularity was discovered.””
Metafore, however, has been subject to significant restructuring. Former chairman Joe Vos was asked to leave the company after the irregularities were discovered. And, on Dec. 20, two of Metafore’s founders, James Alexander and Moishe Lerman, resigned. The new management team includes Ed Vos in the role of executive vice-president and Bryant Jackson as president and chief executive officer. Ed Vos was previously executive vice-president of Metafore’s central region.
Jackson said there will be changes in Metafore’s business operations as well — mainly the shedding of some unprofitable units — but stressed any restructuring will be determined by the market rather than the discovery of irregularities.
Paul Edwards, director of strategic partnering and alliances at IDC Canada, agreed Metafore would be wise to stay its course despite the shakeup.
“”I think the company goes on just doing what they’re doing,”” he said. “”I think what happened is a big shock for a lot of people, but I don’t think it changes their approach to the market.””
Metafore was formed in June 2000, when Toronto’s CTI Solutions Group, MicroAge Southwestern Ontario and MicroAge Calgary announced a merger of the three companies into one e-business solutions provider.
The merger came with large expectations, with Metafore’s promised 360 (full service) by 365 (24×7 availability) model and a highly experienced management team. But of the five founding members, only Jackson and Ed Vos remain with the company.
Edwards dismissed the idea that the misappropriation of funds was in any way the result of a company trying to become too big too fast.
“”I think they did a really good job of bringing these companies together and they were going in a good direction,”” Edwards said. “”Somebody just allegedly did something illegal and wrong, but that’s one individual, not the company.””