We have had some misgivings about the use of a “technology” company in a credit union, see our blog of Sept. 1, 2015, one that was missed by the defamation suit that was launched at about that time against me. The suit, by the way, is perhaps still operational despite the fact that the instigators have not lived up to their commitments.
In that blog I estimated that Zenbanx would loose another $5 mln. by year-end 2015. I was again too optimistic as the actual loss turned out to be $6.6 mln. for the last 6 months of 2015. See below;
The total since inception mid 2014 is now $16.617 mln. but that does not include certain managerial and professional expenses that were born by the parent and conservatively are in the order of another 1.5 mln. or so. What little revenue there was comes from, of all things, foreign exchange translations and rentals. Payroll, occupancy and governance are now well over 3 mln. a year. Little wonder then that the credit union is looking to “renegotiate” the deal with ZBH. Unfortunately that will not be as easy as it was in the past as the two Senechals have been reduced to one, no doubt after a “golden handshake”.
A particular paragraph, under “related party transactions” on page 36 caught our attention;
First of all, we the members, did not even know that there were board directors at ZBC. It was mentioned in passing at the last AUM but you would have had to listen very carefully. The board members, at least those that were named are Ralph Kikkert, Marijke Kanters, Jennifer Visser and Angela Pollard. The person the statement refers to is of course now ex-Vice-chair Angela Pollard or, more precisely, Pollard and Associates which company was petitioned at the court by the credit union in stead of Collins Barrow, well before she herself stepped down. Not only did that result into “billings” of a few hundred thousand dollars but now there is an additional $96,000 to share between the four of them. The concept of appointed directors is alive and well despite the regulators earlier strong objections and clear prohibitions against professional people holding office within a certain time period in the Credit Union Act.
Before this whole affair is over and done with we would estimate that the financial damage of this predictable unwise experiment will be around $25 mln. Even at 60% that is twice the self proclaimed catastrophic event that was mentioned in the offering memo for the B share issue and this one is, for the most part, not tax-deductible. No statement of material change was ever issued even though these developments were blatantly obvious starting from mid-year 2015. More on that some other time.