The Rise and Fallout of Red Ant

Kept in the dark

Former finance manager at Red Ant, Carol Philpott, said that while the issues surrounding exchange rates were evident back in September of 2008, it didn’t necessarily spell the end of the company. She believed that Red Ant could trade out of the problem it had found itself in – had the bank allowed it to.

"It was the bank that foreclosed," she said.

"Basically we were talking to our creditors and going through some scenarios to arrange some payment plans which they accepted. We had the bulk for our creditors on board, and they were happy with the payment plans, but the bank said no. We didn’t have a loan as such, but basically the bank didn’t want to take the risk.

"The bank sent in the auditors and the auditors become the receivers so I think it was unfortunate because Red Ant could have gotten out of it."

Amidst auditors making visits to the company, staff members were still assured that things were fine.

Redundancies were being made in November and by this stage, many employees of the company had started to sense that the company’s problems were greater than first thought. Product managers and those in the marketing department found that budgets and expenses weren’t being signed off and marketing campaigns were being knocked back for no apparent reason. Retailer deadlines weren’t being met because of the hold-up in product orders, and the company started receiving calls from suppliers who hadn’t been paid for work that they’d done for Red Ant. And as these calls became more frequent, people in the office started to talk.

Raj Wakeling, who worked as a product sales representative at Red Ant and also provided administrative support to the sales executive said that there were gossip and rumours in the office that something was going to happen, but no one knew how drastic it would be.

"I would say that it wasn’t something that everybody knew. It was talked about in whispers, very quietly – 'Oh I heard this is happening, I heard that is happening' – it was still very hush-hush, until the official announcement was made."

That official announcement came in early December.

Those who were let go in and before December were paid off, while those who stayed on until January (when the company went into receivership) missed out.

It was only in the space of a few weeks that most Red Ant employees got the sense that the company was in trouble to the time when the first large round of redundancies was made. And within weeks of the redundancies, the company was handed over to the receivers.

"It happened in a blink of an eye," said Red Ant’s managing director, Julian White.

"I was devastated. I wouldn’t wish it on my worst enemy and it essentially came out of left field so we did everything we could. We actually contacted the bank before they even knew there was a problem and they were surprised and appreciative that we came forward; they looked at providing additional funding but unfortunately it was probably the worst time, the financial system was very nervous and cautious and as consequence they were unable to cover the hole that was created.

"We sold all the assets, the buildings, all my private assets were sold right away. Me and my wife and my family walked out with the clothes on our backs and that was it."

Those who were let go in December were then faced with entering the holiday season without a job and having to wait for months before positions would open up in the new year. The worsening financial climate also meant that jobs were scarce. Roy Stanton had to sell his house to support himself, while other former employees found themselves going through a long period of unemployment, relying heavily on what savings they had.

The employees who stayed on until January found out the day before pay day that they were not being paid for the previous month’s work. Julian White had told his staff that there simply was no money left in the company – no enough to pay staff wages, superannuation, sick-leave and holiday pay. Some employees were owed up to AUS $27,000 in unpaid wages and holiday leave.

The high-profile titles and software that Red Ant had secured reverted back to their publishers and suppliers and staff were told no money would be seen unless the company was sold, and even then, there was no guarantee.

"In fairness, Julian White was noticeably distressed – he was not his usual self, he seemed to be really upset and apologised and expressed his grief at the situation," Wakeling said.

"I couldn’t have faulted him – I don’t think he was uncaring about the situation, obviously it was his business and he didn’t want to see it fail – I guess it’s got to hurt your pride a bit, and I think he realised how we all felt about it and how it would affect us, so I don’t think he was uncaring. But I don’t think he felt any responsibility to assist anyone beyond apologising."

Despite finding themselves in a situation where a company that they’d worked incredibly hard for had fallen apart, many former employees held no animosity towards the director or management – after all, he had been quite open with them about his own losses, too.

"It was Julian’s company – he founded the company and built it up and he as quite emotional when he was telling everyone," Philpott said.

There were accounts of White crying when he broke the news to his staff, informing them that he’d had to sell his house and withdraw his children from private schools and put them into public schools because he could not afford any of it. It was believed that it was everyone’s loss – the employees may have lost their wages and creditors may have lost some money, but it appeared that Julian White had lost everything he’d spent the past eight years working for.

But amidst all of this, something wasn’t quite right, and some former employees sensed this not long after the company collapsed.