A Newcastle building company which won the NSW Excellence in Small Business award 14 months ago has collapsed owing subcontractors, clients, investors and finance companies millions.
Sehez Group, owned by Newcastle men Matthew Galvin and Callan Smith, is facing a wind-up motion by finance firm Fundit in the Victorian Supreme Court next week.
The company has racked up a mountain of debt since collecting the NSW Business Chamber award in November 2018 at Luna Park, and Mr Galvin said there was little hope most of Sehez's creditors would get their money back.
"With what's happened since Christmas, I don't think so," Mr Galvin told the Newcastle Herald. "We're going down owing people a s---load of money."
He admitted Sehez had lied to "certainly some" of its subcontractors as he and Mr Smith tried to keep the company afloat during a series of setbacks last year.
The long list of companies owed money includes major suppliers such as Reece and Saddingtons, tradesmen, investors, concreting and scaffolding firms, the tax office, a radio network and the short-term financiers the two men reached out to when their troubles mounted.
Mr Galvin said the debts included a "couple of mill to unsecured creditors, which is potentially worse than that" because clients had stopped paying bills.
He said the debt to Saddingtons could be as high as $500,000, and Fundit was owed $240,000, half of a $400,000 loan which had accrued $80,000 interest. The company owed $106,000 to the tax office in late November, but its current liability was unknown.
Sehez owed superannuation, but not wages, to staff, all of whom had been laid off.
Mr Galvin sold his recently renovated inner-city house on Saturday for $2 million, but 10 separate parties hold caveats over the property.
Mr Smith sold his Adamstown Heights house in August for $890,000. He also owns an investment property at Georgetown which he said he had refinanced to prop up Sehez and would "probably go back to the bank".
"That's the last of the houses, and the reality is I think I'll be moving back in with my parents," Mr Galvin said.
"If Sehez goes down, Cal and I will be bankrupt personally due to all the personal guarantees we've signed."
A Newcastle businessman who said he had lost $120,000 described the Sehez owners as "cowboys" who had "hurt a lot of people".
"I don't feel sorry for them at all. They've lied to so many people," he said on condition of anonymity.
"They should have just owned up to their mistakes 12 months ago and went under then. They were rooted 12 months ago."
Several clients have told the Newcastle Herald that they felt pressured into making forward payments to Sehez so work would continue on their jobs.
The Newcastle Herald spoke to 11 subcontractors owed money, including plasterer Barry Huang, who said he had lost about $150,000, irate concreter Vince Di Prinzio, who had spent months chasing Sehez for almost $60,000, and a tiler who said he was in financial trouble after losing $120,000.
A shell-shocked Mr Huang said his losses had taken a toll on his family as he faced at least two years of "living hard" to pay his own subcontractors and bills for materials he had already bought.
"I've got three boys, seven years old, five and two. My wife can't even sleep any more. This has really affected me a lot," he said.
Other victims of the company's collapse include Novocastrian Scaffolding ($120,000), Mansman Fabrications ($100,000), another plumber ($30,000), another concreting firm ($193,000), cleaners, electricians, glass suppliers, plasterers, builders, carpenters, fencing contractors and pool companies.
Another finance firm, Fifo Capital, appointed a receiver in late January, and Sehez was listed by ASIC as being in "external administration", triggering a domino effect as creditors scrambled to get paid.
Mr Galvin told the Newcastle Herald that Sehez had not been placed into administration and pointed to a letter from receiver David Ross to creditors on February 4 stating the two directors were still responsible for the ongoing trading of the business.
In the letter, Mr Ross wrote that the powers of the directors in relation to "cash at bank and real property" had been suspended.
"We're certainly not in a good place, and that receiver being appointed has made things even more challenging," Mr Galvin said.
"As that's listed publicly, then clients stop paying their bills, subbies stop turning up to site, and that's basically been 2020 for us.
"There's very little we can't sort in terms of one thing; it's just the fact there's a whole heap of them."
He said the more pressing matter was the Supreme Court wind-up motion which would likely liquidate the company.
"Where we are is we're still trading; just not well. Not doing much more than kicking stones until we go through this court case next week.
"There's no cash in the bank account and the clients have stopped paying us until we tell them otherwise.
"We had a whole heap of defaults listed leading up to Christmas, which then got Fifo uncomfortable, and they were the ones who appointed the receiver, which then got the NAB interested and Fundit interested, so Fundit have listed the wind-up and now the NAB's sniffing around."
The parties who hold caveats over Mr Galvin's King Street house are demolition company boss Warren Watson, Trend Windows, Southern Cross Austereo, Fletcher Insulation, Reece Australia, Saddington and Sons, BJB Industries, Northumberland Handyman Supplies, Fundit and Mr Galvin's parents, Enfys and Michael Galvin.
Mr Galvin painted a picture of a successful company which had "grown too fast" then made "dumb" decisions when trouble struck.
He said the ASIC "external administration" listing had been a "real disappointment over the past two weeks because we had some really good money that would be flowing in that now hasn't, and that goes straight to subbies and suppliers".
Mr Di Prinzio, Mr Huang and other contractors said Sehez had convinced them to keep working last year with promises of impending payment.
Mr Galvin said there had "really only been one that has been specifically told, 'Do this job and we'll pay you on this date,' and that's Di Prinzio.
"I feel bad for the bloke, but in the space of time between when that statement was made when he poured the slab and when we got paid there was four or five legal matters pop up that if we didn't address the whole show was going to be over anyway."
Commenting on whether Sehez had deceived subcontractors, Mr Smith said: "Any time there was a commitment or a promise given, the intent was that it would be upheld."
One asset associated with Mr Galvin and Mr Smith is Sehez Group's headquarters in Gavey Street, Mayfield, which a company called Modella Developments bought from the University of Newcastle for $1.7 million on November 30, 2018.
ASIC records show Modella Developments had been created seven weeks earlier with Mr Galvin's wife, Tamar Carpenter, and Mr Smith's wife, Kate Freeman, as sole directors.
Modella's shareholders are listed as Candoit Investments, WW Gavey Pty Ltd, Hunt and Fame Pty Ltd and Klacek Enterprises.
Mr Galvin and Mr Smith joined their wives as Modella directors on the day of the Gavey Street property sale but were replaced on May 29, 2019, by Warren Watson and Kurt Smith, Mr Smith's brother.
Mr Galvin said Modella could not secure finance to buy the property before it settled in May 2019 while he and Mr Smith were directors.
"Whether we're directors or not doesn't protect that asset [from creditors] one bit. It's who owns it," he said.
He said Modella was partly owned by a family trust, Hunt and Fame, of which he was a beneficiary, and he expected creditors to scrutinise the family's assets.
Mr Galvin insisted he and Mr Smith had used the last of their money trying to keep Sehez afloat.
"It's been months and months and months since Cal and I have been paid. We've sold houses, businesses, borrowed off family and friends and jammed every last cent into Sehez Group to keep trying to help people and have continued to come to work," he said.
"We've kept trying to keep the business going to get that windfall ... while there's a lot of disappointing things that have happened, Cal and I are disappointed in ourselves."
The two men said they had sold a $400,000 share in a company called Vista Property Management to real estate firm PRD last year to help support Sehez.
Mr Galvin said Sehez had "lost control" of a $3 million job to build a large waterfront house for Glencore mining boss Ian Cribb at Toronto.
He said the house was nearly finished and Sehez was owed $300,000.
Mr Cribb would not comment, but the Newcastle Herald understands he is working to pay subcontractors directly rather than through Sehez.
Mr Galvin agreed $300,000 would not fix the company's problems given its long list of creditors. He said he had apologised to "most" of his subcontractors.
"I'm not leaving Newcastle, and neither's Cal. If this thing falls over, which there's every indication it's going to over the next couple of weeks, I'm still going to be working from my office in Mayfield and they can come and line up. I'm certainly not going to hide from any of them. It's been our mistakes."
He said the company's troubles had started when it had sunk $1.25 million into a property development at Valentine and lost $700,000 on a construction job at Wickham in early 2019.
"We lost two mil in a month in January last year. That's what sent us into our tailspin. If we had quit then, we would have gone down owing people more than what we owe them now.
"By the end of January  we thought, 'F---, we're short two mil cash.' So, then, what do you do from there? We could have cut and run. Cal and I would have been a whole lot richer, but we would have left everyone absolutely in the lurch."
The January "tailspin" came two months before Mr Galvin wrote an email to Sehez suppliers and contractors in which he assured them the company was not "in distress or going into liquidation".
"I just want to send this quick email to assure everyone that this is not the case and although we have had a challenging start to the year our future is secure and we will continue to trade through this challenge with the ongoing support of our staff, subcontractors, suppliers, and just as importantly our clients," he wrote on March 8 in an email titled "Assurance to Rumours".
"We are nowhere near insolvent due to the significant equity that we have in three houses that we built in Valentine (if anyone wants to buy a house in Valentine sing out as we have a few) and the profitability of our current jobs.
"We understand that the Newcastle construction industry has seen six of our peers go into liquidation over the past 12 months and that a lot of people have lost significant money because of this and we fully understand the concern that people have for their livelihoods.
"As soon as we started to stretch out our payment terms, we knew that there would be pain and we take responsibility for this and are committed to working through it for you.
"What I can clearly say is that we are in a better position this week than we were last and that last week was a better position than the week before. We are trading profitably and will continue to catch up over the coming weeks."
But the catch-up never happened.
Mr Galvin said this week that when he wrote the March email the company was selling the share in Vista and had plenty of work in the pipeline.
He insisted Sehez was "100 per cent in a better position today than what we were in January " and that the company's fortunes had improved in the first six months of 2019 before a series of setbacks from July, including losing eligibility for government home warranty insurance for 13 weeks.
"The likes of Vince have well and truly been stitched up, and that's hard for us to wear. We've let him down. We understand that, but as an overall we owe less now than what we did then."
He conceded Sehez had been in danger of trading while insolvent, but he and Mr Smith had consulted administrators, solicitors and accountants about whether they were "doing the right thing".
Mr Galvin said Sehez had also had its computer system hacked last year.
Mr Smith wrote about this "hacking" incident in an email to Mr Di Prinzio on October 15, part of a long exchange between the pair as Mr Di Prinzio chased outstanding payments.
Mr Smith also referred to problems with home warranty insurance, "Banks & Construction Certificate issues" and an "admin error" relating to a "Mines Subsidence Board" payment, all of which had delayed jobs and interrupted the company's cash flow.
Asked whether he and Mr Smith had been making excuses for not paying bills, Mr Galvin said the business had endured a "ridiculous run" of bad luck.
"The IT hack, we literally had identity theft. That's a police case. It shut down our IT ... and turned our office phone off for a fortnight.
"We were going through a rocky financial patch, and the second your phone gets turned off it just sends shockwaves."
It was not the last time technology issues would blight the company.
Mr Smith wrote in a directors' report sent to the Australian Securities and Investments Commission by the receiver, Mr Ross, on Tuesday that Sehez had lost access to its records.
"We have had our IT support shut off and as such are unable to access any financial, email, or general business information to provide as support," Mr Smith wrote.
"The only way to access this info is to pay an outstanding invoice, but our bank accounts have been frozen."
Mr Ross told ASIC the lack of information meant he could not comment on the company's financial position, but he would continue to investigate its affairs.
Mr Galvin said he and Mr Smith would have been "relatively wealthy" had they wound up the business last year.
I don't feel sorry for them at all. They should have just owned up to their mistakes 12 months ago and went under then. They were rooted 12 months ago.Newcastle businessman who lost $120,000
"We now don't have a cent to our name because we have launched everything into that business physically possible to get everyone paid," he said.
"That's not about me and Cal; that's about our subbies and suppliers and the fact we're Newcastle people and haven't wanted to cut and run."
He said Sehez had started paying "ridiculous amounts of interest just to keep our heads above water", a decision he conceded was "dumb".
One of the short-term loans was with Archery Capital, an eight-week arrangement in early 2019 which had "flushed 144 grand down on interest".
"Money just hasn't stopped disappearing since. I'm giving you excuses, but it was our fault.
"I love every aspect of business. I've got an MBA. I've never encountered what the spiral effect is and what happens when you start chasing your tail with interest."
ASIC documents show Mr Galvin and Mr Smith are also directors of a slew of other companies, including Vista Property Services, MG Property Consultants, MG Business Consultants, GPS One Developments and Brunker Road Developments.
Mr Smith is also a director of Medoit Pty Ltd, Youdoit Pty Ltd, Carpe Global and Sehez Maintenance.
Mr Galvin is a director of Galvin Carpenter Pty Ltd, Galvin Carpenter Property Pty Ltd and GPST Holdings.
The Newcastle Herald visited the Gavey Street address, formerly the university's Newbolds Building, on Friday, where a Sehez Maintenance van stood on the kerb with its "SEHEZ" decal stickers removed.
Mr Galvin said the Sehez office was still open and he was not hiding from his creditors.
"Everyone knows where I live. I have subbies round here every day, and nine out of ten of them are still amicable, and, while they're hurting, they know I'm hurting more.
"There's certainly some more hostile ones. I got blasted by three separate guys this morning. I just cop my medicine because, at the end of the day, we're the ones that have lost the money."
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