Real estate kingpin Mike Pero says he cannot pay $2.3m debt

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Mike Pero, chief executive of Mike Pero Real Estate and Mike Pero Marketing, needs to pay his joint venture partner $2.38m.

Real estate kingpin Mike Pero says he hasn't got the cash to pay back over $2 million he misappropriated from a joint venture company.

His financial plight came to light this year in his court bid to suspend enforcement of the $2.38m debt until other legal action was completed.

He owes the money to the joint venture company which owns the Mike Pero real estate business. His 50 per cent partner in the business is the mortgage company Mike Pero Mortgages Ltd which is fully owned by the Liberty Financial Group, a Melbourne-based financial services company controlled by Las Vegas businessman Sherman Ma. 

Pero told the High Court in Auckland in February his only assets were shares in the real estate business, a national chain of franchised agencies.

He did not dispute his liability or the amount he owes, but said the millions the court found he "misappropriated" were spent on legal fees.

STUFF

Mike and Rachel Pero, left, at The Cancer Society Ball in Christchurch with Amie Palmer (third from left), Paul Bingham as well as Ali and Kiki Maoate.

The High Court granted Pero's application and postponed enforcement of the debt until legal action on a related issue is completed.

Justice Mary Peters said she had been persuaded an "irreversible alteration to the status quo" would occur if the debt was enforced pending the completion of further legal action. Such an alteration would be a "substantial miscarriage of justice".

Pero wants the real estate business, of which he is the chief executive, to declare a dividend of $5m and to take his debt from those proceeds. Liberty opposes that course.

The debt springs from a joint venture Pero entered with Liberty in 2011 to set up a new real estate business using his name.

Liberty had previously bought Pero's mortgage broking business and owns the "Mike Pero" trademark. Liberty provided all the start-up capital for the new real estate company and gave permission for the use of the Mike Pero name.

Ma thought Pero had "a lot of talent" and was a "shrewd marketer", court evidence shows.

During a period in 2013 and 2014, Pero, acting on his own, passed a series of directors' resolutions in breach of the company's rules.

These included providing himself with a car allowance, an increase in his base salary from $200,000 to $340,000, a brand ambassador bonus of $125,000 per year and two other payments of $100,000 each.

Although Liberty disputed the figure, Pero received at least $2.1m he was not entitled to. The $2.38m includes interest.

On discovering the resolutions, Liberty demanded repayment and Pero refused. The High Court, in December 2016, ruled Pero had acted in a "high-handed" and "self interested" way and declared the resolutions were unlawful.  

Pero did not give evidence in the proceedings, but his lawyers argued Liberty was culpable because it had for a period been unable to appoint a director to the joint venture.

Liberty had suffered no real loss and the benefits Pero awarded himself gave him more incentive to ensure the company succeeded, they said.

During the more recent argument over the application to postpone the enforcement of the debt, it was disclosed the Mike Pero real estate business was financially solid. It had retained earnings of $7.4m (March 31, 2017) and earnings before tax were approximately $3m per year.

The court action to find out whether the dividend should be declared has yet to be completed.

Pero told Stuff the real estate chain was trading well and had significant financial resources.

"This is essentially a dispute between shareholders and doesn't affect the day-to-day operation of the business. I am still chief executive and managing director."

He expected the latest court action to be resolved by the end of the year.