> All the big AIM fraud exposés
> 300 articles and podcasts a month
> Hot share tips
> Original investigations by our experienced team
> No ads, no click-bait, no auto-play videos
By Tom Winnifrith, The Sheriff of AIM | Tuesday 23 January 2018
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
The Financial Reporting Council has today fined audit firm ArrandCo, formerly known as RSM Tenon, £1 million ( reduced by 30% for co-operating) and audit partner Jeremy Filley £80,000 ( reduced to £56,000) for allowing the fraud Quindell (QPP) to publish fraudulent 2011 accounts. No doubt Snot Gobbler Dan McCrum at the FT is again about to produce a timeline taking credit for this but the FRC has stated explicitly that it widened its enquiries to include the 2011 accounts only because of specific allegation raised by me as you can see HERE. These fines are down to my work, not that the deadwood press will ever acknowledge that. So how did Rob Terry and his associated in the Quenron gang, cook the books with the help of Filley and RSM Tenon.
It is clear that the sins were grave. The FRC states that:
Tenon and Mr Filley, a member of the Institute of Chartered Accountants in England and Wales (ICAEW), have admitted that their conduct fell significantly short of the standards reasonably to be expected of a Member and a Member Firm and that they failed to act in accordance with the ICAEW's Fundamental Principle of Professional Competence and Due Care. The admitted acts of Misconduct related to two elements of the audits, and included failure to obtain reasonable assurance that the financial statements as a whole were free from material misstatement, failure to obtain sufficient appropriate audit evidence and failure to exercise sufficient professional scepticism.
Those elements related to the accounting treatment of the reverse acquisition of Mission Capital plc, and a number of transactions entered into in 2011 by Quindell entities and TMC (Southern) Limited. These were both the subject of prior year adjustments in the financial statements of Quindell plc for the financial year ended 31 January 2014.
The remaining part of the investigation, which does not relate to the above parties, and which was announced in August 2015, is ongoing.
I also made major submissions to the FRC about other years which are still being studied. I cannot remember the shenanigans relating to the RTO into Mission - perhaps the fine firm of Daniel Stewart can elaborate as it banked huge fees for doing the deal. TMC Southern is where I come in.
TMC was a firm run by a chap Mark Ford, known as Mark Fraud to us Quenronologists. TMC was a two bit firm doing sweet FA but prior to the IPO it was awarded a slug of Quenron shares for reasons that I fail to grasp. It did not pay for the shares. Post IPO as Rob Terry started to ramp away TMC sold those shares on the market and indeed was awarded some more shares which it sold on highly spurious grounds ( all signed off by Daniel Stewart). TMC then used the cash from the share sales to buy bogus services from Quindell.
It opted not to bank a £5 million + profit for its shareholders but to spend its entire windfall with Quindell. It seems to have obtained no assets as a result. Its last accounts published were for the year to April 27 2012, since 2014 it has battled various attempts to wind it up but it finally went into liquidation in March 2017. Its tangible assets at that point were £7,685 and creditors were left whistling.
The net results of this panama pump fraud was to overstate 2011 profiuts and sales in a material way. I estimated in the article which revealed this scam HERE:
1. 41% of 2011 sales occurred only because TMC was given Quindell shares, which it sold and then placed orders with Quindell
2. Without those share sales and the recycling of the cash Quindell would not have reported a material PTP or operating cash inflow but would have been loss making and burning cash.
3. If I am correct - and I am 100% sure that I am - the trading statements used to ramp the share price ahead of corporate deals – using paper – and share issues in late 2011 and early 2012 were wholly misleading. Folk took Quindell paper on the basis of a wholly misleading prospectus.
Indeed Quindell has now restated historic accounts to unwind that fraud.
Moreover TMC was a related party. We know this because at the height of my campaign to expose Quenron, Rob Terry panicked and stated that Mark Fraud was a key member of his management team. That related party status was not disclosed in the Quenron accounts.
TMC was not the biggest fraud Quindell and Terry pulled off but it was the one that created illusory profits which started the share price ramp allowing him to issue shares like confetti to either raise cash or buy other businesses. As such it was the cornerstone of what ended up as a £3 billion fraud.
That Tenon has been fined a mere £700,000 net is not enough. Small fines like that will encourage auditors to sign off on more frauds treating such matters simply as a "cost of business". As for Filley, his fine is trivial and it defies belief that he is still allowed to practice.
It is individuals whop commit fraud and individuals who assist it, not companies. The only way to stamp out fraud is to punish these men and women with fines that bankrupt them and lifetime professional bans, pour encourager les autres.
Personally this is very satisfying. Read the FRC letter to me HERE and you can see that today's news only happened because of my work. That is a source of some pride not that my critics or the deadwood press will ever acknowledge this.
And, of course, this news shows that in due course Rob Terry and others will also face their own day of judgement when the SFO investigation reaches its, inevitable, conclusion.
Never miss a story.
This area of the ShareProphets.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ShareProphets.com. ShareProphets.com does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ShareProphets.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ShareProphets.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.
Comments are turned off for this article.
Search ShareProphets |
Stock market news |
Recent Comments |
Site by Everywhen