George Calombaris restaurant pay scandal tests relations with business partner

Cameron Houston & Mark Hawthorne
APRIL 4, 2017
The Age

The underpayment of $2.6 million in wages by celebrity chef George Calombaris’ company has caused major ructions with his new business partner, Radek Sali , who could be forced to bail out the embattled hospitality empire.

Mr Sali, the former chief executive of Swisse vitamins, took a 33 per cent stake in Calombaris’ company Made Establishment last year, valuing the restaurant group at $20 million. 

Mr Sali and his co-investors said they were “prepared for a few potholes in the books” when they invested, but they were not made aware that up to 200 staff had been underpaid for up to six years.

It is also understood that financial information provided to Mr Sali’s advisers last year, when they undertook due diligence on Calombaris’ businesses, may have overstated the performance of the Jimmy Grants chain.

Calombaris’ restaurants underpaid staff $2.6m

“This was a business that had its issues when we bought in, but that is what we look for as an investment,” Mr Sali said. 

Mr Sali admitted that events of the past few days would test his relationship with his business partners, including the MasterChef host.

“I have spoken to George three times today,” Mr Sali said.

“Look, my business partners, including George [Calombaris], have been saying how great it is we have gone into business together. I have reminded them all along that in business life can get challenging, and that will be the test of our relationship. Well, life very quickly became challenging.” 

With an estimated personal fortune of $400 million, Mr Sali had forecast the rapid expansion of Jimmy Grants when he became chairman of Made Establishment last year.

He conceded that the underpayment of staff would have a major financial impact on the company.

“This will be paid for out of cashflow,” he said. 

That process could take 12 months, and according to Mr Sali, “I would suggest we won’t be paying any dividends in that time.”

About 50 former staff from Calombaris’ stable of restaurants, which includes The Press Club, Gazi and Hellenic Republic, are understood to have made contact on Tuesday following widespread media coverage.

The MasterChef judge said he was “devastated” by the blunder, which will see affected employees back-paid an average of just over $16,000 each.

“I am so sorry we have messed up and let you down on a fundamental, which is to ensure our people are paid what they are entitled to,” Calombaris said in an email to staff on April 3.

A number of Calombaris’ former business partners refused to comment when contacted by Fairfax Media.

However, one individual, who has knowledge of the Made Establishment accounts, said he believed the cost of the underpayment of staff would exceed $2.6 million.

“The truth is, it will cost a lot more,” Fairfax Media was told.

“You have superannuation, payroll tax, BAS, the cost of hiring KPMG to do the review, and the cost of spin doctors. All up, that’s $4 million before you have to pay a fine to Fair Work.”

A spokeswoman for the Fair Work Ombudsman refused to answer questions about the size of fines that could potentially be imposed on Calombaris, or why it had not launched an investigation when concerns were first raised 18 months ago.

“The Fair Work Ombudsman is currently working through the issues we first identified and raised with the business in 2015 to ensure compliance has been achieved,” a spokeswoman said.

“As this remains an ongoing operational matter we cannot make further comment at this stage.”

In 2014, Fairfax Media revealed Calombaris’ empire faced a major financial overhaul amid mounting debts and the closure of a string of high-profile restaurants.

In a bid to raise cash, Calombaris and his partners in Made Establishment sold off the buildings that housed some of their signature restaurants, including the premises of East Brunswick institution Hellenic Republic.

At the time, Calombaris denied the company was in trouble, saying the group was revamping its business plan in a bid to go back to its roots.

“There’s not one hospitality operator out there doing cartwheels right now,” he said. “We’ve made a few mistakes but we’ve have some real successes too.”