Vietnam police summon Leflair CEO

Police in Ho Chi Minh City have issued a notice asking for the cooperation of Loïc Gautier, chief executive of Vietnam-based ecommerce startup Leflair, to assist in their investigations.

The move comes after the city’s police department received complaints from several businesses, as Leflair failed to pay suppliers some 6.5 billion Vietnamese dong (US$280,000) for goods. Gautier could face charges such as misappropriation of goods and criminal breach of trust.

Speaking to Tech in Asia, Gautier explained that the sum Leflair owes to suppliers amounts to “roughly US$2 million” in total and is equivalent to “about a month of cost of goods sold.”

Leflair co-founders Pierre-Antoine Brun (left) and Loic Gautier (right) / Photo credit: Leflair

So why did the complaints only cite US$280,000?

The CEO adds that the “vast majority” of Leflair’s former suppliers aren’t “out for blood and revenge” because they understand that “losses occur when it comes to running a business.” “They’re willing to let the court do its work,” he says.

But he and Brun were caught off guard by the police summons, as they hadn’t received “any news” from the People’s Court despite filing for bankruptcy months before. “It’s possible that there are simply too many bankruptcy applications following the lockdown of Vietnam’s economy,” explains Gautier.

“It seems that a number of creditors had been coercing the police to look into the matter so they would be able to disclose that to the press,” he says. “They’re probably doing this in hopes that Leflair would pay up,” he adds.

Gautier says the debt stemmed from the startup’s decision to operate for another month, despite already experiencing financial troubles. Leflair shut down its Vietnamese and Philippine offices in February and started bankruptcy proceedings in May.

“We should have thrown the towel a little earlier, but we overreached for about a month,” he says. Gautier adds that some suppliers have “actually been paid” from the deposits it gave them to be able to consign their goods in its warehouses.

Leflair previously told Tech in Asia that it runs on a consignment model. It’s an arrangement in which a consignor, who is typically a vendor, leaves goods in the possession of a third party – in this case, Leflair – to sell. The consignor receives a percentage of the revenue from the sale in the form of a commission.

If Gautier doesn’t come to work with the police within 30 days from the date of notice, the Vietnamese Investigation Police Department will “handle the case in accordance with the law,” according to local media reports.

Gautier says he’s “not downplaying responsibility” and that it’s “his job to face those accusations.” He also defended the decision to keep Leflair open despite being short on cash, saying that “it’s in no way illegal.”

“It’s regrettable that we have to come this far, but if it helps provide transparency to our creditors and show them that we have not misused the company funds, then so be it,” he stresses.