The directors of a Shropshire-based construction company have been disqualified from acting as company directors for a total of 17 years for inflating the company’s accounts using a precious gemstone.
Following suit of Peter Greenwood who signed a nine year disqualification starting June 2011, David Unwin and Nicholas Ibbotson agreed to respective ten and seven year bans starting November 2013.
Wrekin Construction Company Limited, founded in 1960, had an annual turnover of more than £100m by March 2007, but having incurred trading losses it also has a deficit of £7.6m on its accounts.
After acquiring Wrekin in 2007, Unwin transferred a ruby gemstone called ‘The Gem of Tanzania’ from another of his companies, Tamar Group Ltd, to Wrekin in return for shares.
The 2kg gem was valued at £300,000 when included as an asset in Tamar’s account, but following an alleged valuation carried out in Italy, the value of the gem was £11m when transferred to Wrekin’s accounts.
Following Wrekin’s entry into administration in 2009 with over £45m in losses to creditors, an attempt to sell the gem revealed that the document stating the £11m valuation was a forgery.
In the course of the investigation by The Insolvency Service it was discovered that Unwin acknowledged some uncertainties about the gem’s value before it was transferred to Wrekin.
Ibbotson, aware of those uncertainties, told the company’s new auditors that £11m was a genuine market value.
Through the inclusion of the gem as an £11m asset in the accounts, the directors gave the impression that the company has a financial surplus of £6.3m, while in reality it was insolvent.
Pabitar Powar, head of the authorisations team at The Insolvency Service, said: “Transferring funds to connected companies for no financial gain at a time when Wrekin was insolvent and under severe financial pressure clearly put the creditors at increased risk.
“Furthermore, a business deal which involved the creation of a sham invoice ought to have set alarm bells ringing for the directors and made them question the appropriateness of the whole deal in the first place.”