California Fitness, Hong Kong 3

 For the record, FuelMix is not, and never was, a member of California Fitness gyms.

1.   The Director's Unconvincing Press Conference

1.   On 13 July 2016 the former sole Director of JV Fitness, the holding company of the various California Fitness gyms around town (as well as the sister gym, "Leap" and the MYoga studios) gave a press conference in Hong Kong.  We'll call him Mr W1.

2.   The gist of it all..?  Mr W1 claimed he too was a "victim" and in December 2015 was duped into buying the gym chain for HK$50 Million by Mr C and Mr G. In particular, he alleged he had not been shown an audit report that highlighted the chain's lousy finances at the time he bought it.  Apparently JV Fitness' net liabilities in 2014 was HK$335 Million.

3.    Mr W1 claimed that it was only months later did he find out what the finances were and had personally injected HK$20 Million to keep the chain running, but ended up losing a total of HK$70 Million.

4.  He claimed the problems were compounded by the gym chain's notorious hard sell practices which he did not know about and that Mr C and the personal trainers were deliberately obstructing his attempts to end them.  Those hard sell practices got Mr W1 and his wife arrested for misleading sales practices.

5.   In June 2016, Mr W1 sold his shares in JV Fitness to his brother Mr W2.


2.   FuelMix says:

1.  Total bullshit.

2.  Mr W1 is himself a businessperson, being a director of BeSpark Technologies - the company that filed the Winding-Up Petition against California Fitness' Whampoa Branch, which blew the lid off this whole saga.

3.  It's hard to believe he was duped and that the Audit Report was withheld.  It looks like a failure to properly conduct due diligence fueled by greed.

4.  It's hard to accept that he was totally in the dark about California Fitness' sales tactics. He claimed to be one of its earliest Life Members. Did he never keep his eyes and ears open in the gym..?  And even more recently,  his company BeSpark Technologies was doing renovation work in the Whampoa Branch.

5.  If as he claims, some personal trainers were earning over HK$100,000 a month due to the hard sales tactics, why didn't he fire them in the interests of ethics..?
(b)  Instead Mr W1 claims Mr C raised their commissions.
(c)  What agreement was there between Mr W1 and Mr C..?? and between the trainers about the daily management and sales quotas of the gyms..?  Is it to be assumed that Mr W1 had absolutely no contact with the trainers and never held a management meeting in any of the branches..?
(d)  Is that why the trainers are now covering their faces when they appear in public?

6.   It looks like Mr W1 first divested himself of his shares in JV Fitness in order to launch the Winding-Up Petition, so as to avoid any allegations of conflict of interest.

7.   But here's something curious:  A few days ago, the SCMP reported that some staff and trainers claimed the various branches were actually solvent and that they had seen the accounts.  That raises the question who skimmed off the money? when....? and where did it go..?  After all, as pointed out above, Mr W1 himself said that JV Fitness' net liabilities as at 2014 were HK$335 Million.

8.   Putting it another way, whilst the customers were stripping in the Locker Room, somebody was stripping the gym.

9.  If JV Fitness' finances were such a mess, what incentive was there for Mr W1's brother to buy his shares..?

10.  If as Mr W1 claims, JV Fitness' Net Liabilities as at 2014 were HK$335 Million, why was the Court told on 13 July 2016 that the company had lost HK$117 Million over the last 30 months..? Are these additional losses or were Net Liabilities reduced in some fashion..? If so, how and by whom..?

11.  Given that several gym branches were in debt, it looks like the Winding-Up Petition was a tactical move to force the creditors to the table.  Several writs were issued after the Winding-Up Petition. That means those writs cannot proceed in court unless the Provisional Liquidator allows them to go ahead.

12.  In the meantime 64,000 gym members (initially estimated in the media at 100,000) and 700 employees (initially estimated in the media at 500) are in limbo.


As one of our readers wrote to us yesterday:

Dear FM

I am so amused by the California fitness saga. The "victim" director simply made himself look like a total idiot in public.

One could not make this stuff up.

Sincerely,
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