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California Fitness

I’m a victim too, says ex-owner of California Fitness

Wong Ping-kuen claims he was lured into buying the embattled firm, without seeing all the facts

PUBLISHED : Wednesday, 13 July, 2016, 11:16pm
UPDATED : Wednesday, 13 July, 2016, 11:16pm

Underlying and pre-existing problems plagued the finances and sales tactics of ailing gym chain California Fitness months before its closure, a former owner said on Wednesday, claiming that he was the “ultimate victim”.

Speaking publicly for the first time since the gym chain’s ailing state came to light, former owner Wong Ping-kuen hit back at accusations and said he was duped into buying JV Fitness in December last year at a price of HK$50 million without seeing a key auditing document.

Only months after he bought JV Fitness – which also runs mYoga and Leap – did he find out about papers advising that the company was no longer fit to run, he said. Since the purchase, he has also pumped an extra HK$20 million into its 12 now-closed outlets across the city.

He said the situation was exacerbated by the chain’s notorious hard sell practices, inherited from past owners, so deep-rooted that he found them impossible to change.

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They eventually got him and his wife arrested by customs officers in April.

“My wife could not sleep ... and we lost HK$70 million,” said Wong, who eventually decided to let go upon family’s advice. “I am indeed a victim.”

He said he sold the business to his brother Wong Lun, who is now in talks with mainland buyers, because he did not want the business to fold.

Recounting his fall from grace, the former director said he was lured into buying the company by then shareholder Wu Ge via another former director, Cheng Kar-tat in December.

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He claimed Cheng said: “He told me that it’d be a bargain to buy that many outlets at a price of HK$50 million, Mr Wong.”

Cheng allegedly went on: “I’ll help the company make loads of money.”

Wong said that, despite Cheng claiming the company had been vetted, JV Fitness turned out to be in serious debt. The audit pointed to HK$335 million in net liabilities for 2014.

And, according to Australian media, Gu pleaded guilty in court there to manipulating the share price of another company just months before he sealed the deal with Wong.

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Wong, among the first 50 to sign up as a lifelong member at California Fitness, said he had tried to change the company’s sale tactics, slammed earlier by the Consumer Council, since he took over.

But he said he faced resistance from Cheng, in charge of operations, and gym trainers, some of whom earned as much as HK$100,000 per month after Cheng hiked commissions. Employees’ wages cost up to HK$18 million out of the HK$40 million revenue, he said. Wong said all the senior management had abandoned ship since he got on board.