Samsonite chief quits after accusation of resume fraud

Suitcases and bags on display at an investor presentation in Hong Kong. The firm's CEO Ramesh Tainwala has stepped down after being accused by a short-selling investor of falsely claiming to have a doctoral degree.
Suitcases and bags on display at an investor presentation in Hong Kong. The firm's CEO Ramesh Tainwala has stepped down after being accused by a short-selling investor of falsely claiming to have a doctoral degree.PHOTO: BLOOMBERG

It sounds obvious, but Samsonite has a lot of baggage.

The 108-year-old maker of suitcases and bags was once the pre-eminent US name when it came to life on the go. Then, after financial disappointments and decades of shifting ownership, Samsonite took its shares public in Hong Kong, seeking to capitalise on Asia's growing legions of well-heeled travelers.

Its troubles are not over. The company's top executive has stepped down after being accused by a short-selling investor of falsely claiming to have a doctoral degree.

Samsonite said last Friday it had accurately represented the academic credentials of the executive, Mr Ramesh Tainwala, ever since going public in Hong Kong in 2011. Still, the company said that it took the allegations "seriously" and that Mr Tainwala would be replaced immediately by its finance chief Kyle Gendreau.

In a report published on May 24, an activist investment firm called Blue Orca Capital accused Samsonite of using questionable accounting practices to inflate its earnings and profits. The report said entities controlled by Mr Tainwala and his family did business with Samsonite in ways that it said raised eyebrows.

Blue Orca also wrote that Mr Tainwala was referred to as "Dr Ramesh Tainwala" in a few United States and Indian regulatory documents. But when Blue Orca contacted the institution from which Mr Tainwala, according to some biographical sources, received a doctorate, the institution said he had not obtained a degree.

Samsonite responded by calling the report "one-sided and misleading". It requested that trading in its shares be halted for most of the past week.

Last Friday, it published a rebuttal defending its accounting practices and transactions with related parties.

The moves cap a troubled week for a storied name. The company started out in Denver in 1910 as a maker of wooden trunks for Americans travelling out West. The Samsonite brand - which honours Samson, the biblical strongman - was first used in 1941. It stuck, and the company's name was changed to Samsonite in 1965.

By then, travel was becoming an affordable mass pursuit, and Samsonite's products evolved with the times. It introduced sleeker suitcases, then ones made from modern materials, then ones with wheels.

But in 1973, after the death of its founder, the company was bought by a conglomerate, Beatrice Foods. Crushed by debt, Beatrice was later sold off in a huge leveraged buyout.

Samsonite was listed on the Nasdaq between 1994 and 2002, when it was dropped for having a market value below the minimum requirement. It tried to shed its dowdy, midmarket image and transform itself into a luxury brand. A few more changes of ownership later, it floated shares in Hong Kong in 2011, around the same time as Prada.

Blue Orca, which does not hide the fact that it stands to profit if Samsonite's stock price falls, says in its report that investors trade Samsonite shares at a high premium relative to its earnings, as if it were a luxury name comparable to Burberry. This is "ridiculous", the firm's report argued.

"Tumi is Samsonite's high-end brand. Yet it is popular not with the jet-set crowd, but overzealous business school students and bleary-eyed McKinsey consultants," the report said.

In a news release responding to the report, Samsonite said it had a strong record of organic growth and free cash flow.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on June 04, 2018, with the headline 'Samsonite chief quits after accusation of resume fraud'. Print Edition | Subscribe