Ex-FCA boss lays out his defence

Lawyers for the man accused of misusing up to $30 million in corporate funds, ex-Fiat Chrysler Automobiles Australia chief Clyde Campbell, said Chrysler LLC "would pull out of the market for right-hand drive vehicles if he didn’t increase sales to 20,000 per year within three years and they didn’t care how he did it".

In the 48-page statement of defence filed on behalf of the former CEO in the Federal Court in Melbourne this week, Campbell contended that as part of his contract he "would have freedom as to how this [sales target] was achieved" during his leadership of FCAA between October 2010 and April 2013.

The document effectively claims the numerous deals listed in FCA Australia’s statement of claim filed in the Federal Court were approved by his superiors at parent company Chrysler LLC, which became Fiat Chrysler LLC in May 2012 following Fiat's takeover of Chrysler.

They say Campbell had the blessings of FCA global CEO Sergio Marchionne and John Elkann (who is part of the Agnelli family that holds a controlling interest in Fiat and Ferrari), to increase sales however he saw fit.

Campbell did just that, more than quadrupling Jeep sales during his tenure, from 5975 in 2010 to 22,110 in 2013. During the period the top-line Grand Cherokee range accounting for more than half of Jeep sales.

Sales performance of FCA's other brands were less stellar during the same period, however, with Fiat increasing from 1363 to 3854 between 2010 and 2013, Chrysler expanding from 1464 to 2676 and Alfa Romeo lifting from 914 to 2373.

The defence document alleges that Marchionne told Campbell during a Chrysler LLC Asia Pacific Group Management meeting in Shanghai around October 11, 2010 “he prepare a new plan not bound by any of the rules of ‘the old Chrysler’ and that he didn’t care how Campbell and his team achieved growth, he just cared what growth they achieved”.

"Marchionne said to plan for what was possible without the constraints imposed by Detroit. Further, at the end of the meeting John Elkann on behalf of Chrysler LLC told Campbell that he been given a big opportunity without the constraints normally imposed and that he should make sure he did not waste the chance."

The defence goes on to outline a culture of verbal approvals, often for multi-million dollar deals, by then-CEO of Chrysler Asia Pacific Operations, John Kett.

Kett was Campbell’s boss until late 2011, when the terms of Campbell’s employment contract were varied, after which he reported to Mike Manley, the then-CEO of Chrysler Asia-Pacific and current global CEO of Jeep.

Kett, who resigned from the company last Thursday, headed FCA in an interim capacity between the departure of former boss Veronica Johns and current chief, American Pat Dougherty.

Dougherty instigated Fiat Chrysler’s initiation of court proceedings against Campbell after he arrived in Australia last December.

Kett employed Campbell. In a written offer of employment dated September 5, 2010 and accepted by Campbell on September 7 that year, Campbell was required to increase sales of FCA vehicles in Australia to 20,000 per year within three years.

Among the many verbal conversations referred to in Campbell's statement of defence, Manley is alleged to have told Campbell during a monthly management meeting in Shanghai in 2012 that FCA needed to match the sales volume of Kia and Volkswagen in Australia.

Campbell claims Manley also told him to increase FCA’s dealer numbers to 100 regardless of means or cost.

Campbell has used the alleged directive and approvals by his superiors within the organisation to justify many of the alleged misuses of company funds including using FCA dollars to fund new dealerships.

Regarding a multimillion-dollar contract awarded to dealer website services company Motortrak, 80 per cent of which is owned by Campbell's friend Gary Pask, the defence document said Kett and Manley verbally approved a number of price increases, as in the Statement of Claim to be from $690 per dealer to an eventual $4100 per dealer.

The defence document claims his managers were also aware that Campbell’s superannuation fund owned a commercial property in Strathfield that was subsequently rented to FCA for its NSW regional office.

In relation to the $1.2 million plus GST per year contract to use the Villa Gusto resort in Victoria as a retreat for VIP customers for 240 nights per year, Campbell's defence document said: “Kett raised no objection or protest during the conversation”, referring to an alleged meeting with Kett and Manley at a 2012 Alfa Romeo media launch.

The defence states: “Further, the authorisation and direction was oral in telephone conferences between FCA’s Board of Management and John Kett in which the proposal to enter the Villa Gusto Contract was discussed and Kett said that he agreed and that other Asian country operations would more likely want to bring their customers to an Australian centre than the China centre that Shanghai HQ were considering establishing”.

As part of FCA's statement of claim alleging the misuse of more than $30 million to fund an extravagant lifestyle for his family and business associates, it's claimed Campbell authorised the purchase of Chrysler vehicles in Britain for the exclusive use of Shane Warne, Elizabeth Hurley and Harry Kewell, who were described as 'brand ambassadors'.

FCA also alleges company money was used to pay for a $400,000 yacht described as a "floating billboard", a private plane, trips to New Orleans and Rio de Janeiro, a golf and spa holiday in New Zealand, luxury villas at Crown Casino, Victorian Racing Club memberships worth $244,800, and more than $380,000 in gift vouchers.

In his defence, Campbell claims he did not breach the company's integrity code, which is described as "vague, uncertain and unenforceable".

Perhaps most significantly, however, in what could open the door to an Australian Tax Office investigation of FCA's local operations, Campbell's defence alleges the company's profits were adjusted for transfer pricing.

The defence document alleges FCA made a $30 million profit in Campbell’s final year in charge, despite generating $1.66 billion in revenue, because the net profit was calculated "after tax and transfer pricing adjustments".

Transfer pricing in the automotive industry can involve a multi-national car-maker moving profits between countries by changing the prices of vehicles and parts, which can potentially breach of strict Australia taxation laws.

Although Fairfax Media says FCA is considered a "low risk" of tax avoidance after it was reviewed as part of an ATO investigation into transfer pricing, Toyota Australia was hit with a $247 million tax bill in 2010 for transfer pricing, plunging it into the red that year.

In what could prove the biggest sting in the tail of Campbell's defence, his lawyers said: "Further particulars of NPATATPA [net profit after tax and transfer pricing adjustments] will be provided after discovery."