Covid-19 wage subsidy: Failed food outlets Shake Shed & Co, Neo restaurant received $1 million, didn’t pay taxes

Food businesses that received $1 million-plus in Covid wage subsidies have gone under owing Inland Revenue considerable sums – putting taxpayers in the gun twice.

A Shake Shed & Co ice cream retailer and an Auckland restaurant went into liquidation leaving tax and creditors unpaid, despite getting generous government handouts to help them survive the pandemic.

A director of one of the failed Shake businesses is bankrupt and now in Thailand and the liquidators complained she can’t be contacted. Another former director is also bankrupt, they said.

The failures have left some in the corporate insolvency world saying taxpayers are in the gun twice: first for the wage subsidies, then for the unpaid taxes.

Even businesses like the two which were in financial trouble couldn’t be saved by their massive taxpayer bailouts, they noted.

Around $19 billion is estimated to have been paid out by the Government during the pandemic, mostly via the wage subsidies.

KPGM are liquidators for BB Icy, which operated several ice cream dessert businesses in the Shake Shed & Co chain. BB Icy was also for a short period the franchisor for the national Shake chain, they said. Those liquidators were also appointed to an Auckland restaurant, Husman, which traded as Neo.

The liquidators wrote in separate reports that the businesses received big wage subsidies but failed to pay what creditors, including Inland Revenue, were owed.

Because BB Icy and Husman didn’t pay all their taxes, Inland Revenue pursued them, eventually going to the High Court which appointed those liquidators to recover what little they could.

KPMG’s Vivian Fatupaito and Elizabeth Keene are the court-appointed liquidators for both businesses.

The cold dessert business got a warm taxpayer handout.

“Based on information provided by the Ministry of Social Development, the company received $1,002,767.20 of the Covid-19 wage subsidy. The liquidators’ staff are analysing the company’s allocation of the wage subsidy and have already identified that a significant portion of the funds were paid to Parita Phamornpibu,” they said of a BB Icy director.

Phamornpibu is now in Thailand and cannot be reached, the liquidators complained. Chang Xi, a former director, is also currently bankrupt and the liquidators can’t contact anyone to supply information about the business.

A search of the Work and Income Covid wage support scheme says BB Icy got three payments: an initial $740,000 for 123 employees, a $207,000 extension for 52 employees and a further $54,000 as a resurgence wage subsidy payment when it had 54 employees.

BB Icy’s associates are Cone Enterprises (in liquidation and receivership), Chang Feng
(removed), Food Retail Christchurch, BB Health (removed), Shake Shed & Co. Holdings (in receivership), Shake Shed & Co. NZ (in receivership), BB&C and BB Cup (in liquidation).

BB Icy is also a party in various proceedings at the Employment Tribunal, the liquidators noted.

ANZ Bank, Silver Chef Rentals and Bidfood are secured creditors. Inland Revenue is listed as an unsecured creditor but how much it is claiming is not revealed – but certainly enough to go to court over. However, one party familiar with the business said it was a considerable amount.

Auckland Council, Nova Energy, Coco-Cola Amatil and Technology Holdings are also claiming money.

All up, BB Icy creditors are claiming $379,600.

With Auckland restaurant Neo, the same liquidators said Inland Revenue had the court appoint them to that failed business which got $185,000 in Government wage support but still owed Inland Revenue money.

Neo once served diners from level one of the Queens Arcade in Queen St, a prize position with an outdoor terrace that looked out towards the waterfront and the new $1b Commercial Bay.

The restaurant was only founded in 2018 but sole director Jeanette Mariann Karlsson told the liquidators it had failed because it lost revenue when the lockdowns and Covid hit.

But the liquidators noticed the tax discrepancy.

Inland Revenue went to court to get the company put into liquidation last October for failing to pay its GST, employer tax and income tax.

“On application of the Commissioner of Inland Revenue, the company was placed into liquidation on October 20 for failing to meet its obligations to Inland Revenue, ” the liquidators said.

The liquidators said information from the Ministry of Social Development showed the restaurant got $185,083.20 of Covid-19 wage-subsidy relief.

Work and Income’s wage scheme shows Husman got $98,000 as its first wage subsidy grant for 14 employees, a further $71,000 extension for 16 employees, a further $15,000 in the resurgence wage subsidy, $17,000 in March last year for 15 staff and a final $95,000 for 19 staff.

Restaurant reviewers last decade met Marian Karlsson of Neo who was described at the time as the co-owner. The all-day eatery was at 30-34 Queen St and was inside the neo-classical heritage building, hence its name.

Companies Office records show Asma Anwar of Flat Bush owned 23 per cent of Husman with Karlsson owing the rest.

The KMPG liquidators noted Karlsson had been an officer in a previous company failure, Thorn Industries, which also operated a cafe. They were investigating potential claims against her and others.

Of 49 Google reviews, two gave “terrible” rankings for the restaurant, criticised for having dirty menus, offering poor service and food. Other reviews ranked it highly.

BOC and Lion Liquor Retail are secured creditors. How much Inland Revenue is owed by Husman is not stated but it was substantial enough to get the High Court decision.

ACC, ANZ, Queen’s Arcade landlord Davis Properties, Bidfood, Hancocks Wine, Spirit and Beer Merchants, Mt Roskill Cash’n Carry, Silver Chef Rentals and The Product Company are other creditors.

Secured creditor Caffe L’Affare had organised to retrieve its assets.

All up, Husman’s creditors including Inland Revenue are claiming $779,350.

Asked to quantify the amount of tax owed by BB Icy and Husman, an Inland Revenue spokesman said today: “We are prevented from making any comment about specific taxpayer matters by the confidentiality requirements in section 18 of the Tax Administration Act.”

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