Page 17 - How Not To Cook The Books Article

There were two separate, although related, frauds committed by the
management at Wrekin Construction.

FRAUD 1: The Insolvency Service (9) found that in the weeks before the
gem was transferred to Wrekin, Unwin acknowledged in a meeting with
the company’s former auditors that there were uncertainties about the
gem’s value. Furthermore, Ibbotson, Wrekin’s finance director, was
aware of those uncertainties, but nevertheless told Wrekin’s new

auditors that £11 million was a genuine market value. In addition,
Ibbotson and Wrekin’s managing director Greenwood approved Wrekin’s
accounts to December 31, 2007, which included the gem as an asset
worth £11 million without checking the reliability or authenticity of the
Italian valuation report.

By including the gem as an £11 million asset in the accounts, Wrekin
gave the impression that it had a financial surplus of £6.3 million (See
Diagram 3), whereas its true position was an insolvent one. This was
fraud perpetrated to hide that it was a company on life support and had
been acquired at zero cost.

FRAUD 2: A total of £1,285,136 was embezzled from Wrekin
Construction by Unwin. Unwin’s motivation for taking the money was
probably his feeling that the company was failing and had decided to
syphon off funds to his other companies. Furthermore, he already had a
track record of failed or liquidated companies so clearly knew the ins-
and-outs of a failing company. In addition the phony purchases helped

reduce taxable income by £1,285,136. Part of the motivation for this
fraud was therefore tax evasion.

It is noticeable that the Unwins gave up their directorships in the month
prior to the liquidation (See Appendix 4).