Goals calls in fraud squad as tax black hole deepens
Goals Soccer Centres has reported itself to Britain’s fraud authorities after uncovering a multi-million-pound black hole in its accounts and multiple examples of potential malfeasance.
The embattled five-a-side football pitch operator has turned over evidence to the Serious Fraud Office, after being removed from the stock exchange in March for not presenting an accurate picture of its accounts.
The Financial Conduct Authority (FCA), Britain’s financial watchdog, is also investigating the Scottish company.
By self-reporting, Goals may be able to negotiate a smaller fine and potentially avoid any criminal sanctions should the investigation progress. A spokesperson for the SFO acknowledged the reports but said the agency would not comment at this time.
A former SFO prosecutor with some knowledge of the process but who asked to remain anonymous said the main concern the investigating agencies may have is the time it has taken for the company to come forward.
“The FCA expects firms to notify conduct issues at the earliest opportunity,” the lawyer said. “Witness interviews are a major area of risk, and businesses really must be aware that their own investigation could damage a subsequent regulator probe. The fact it has taken Goals several months to come forward, and that the trail wrongdoing stretches back a decade doesn’t have great optics.”
The message for businesses is to have a solid objective for any internal investigation, and to ensure everything is recorded, the lawyer said. “The guidance states you must really think about the expectations of the fraud agency before approaching it with concerns about accounting malpractice,” they said. “Prejudicing an investigation, even unintentionally, can have damaging consequences.”
This means providing witness accounts and any recording, notes and/or interview transcripts, and to identify a witness competent to speak about what the interview is regarding.
Goals was forced to delist from London’s Alternative Investment Market after admitting it could not quantify “with any certainty” the impact of what it called a “misdeclaration of VAT”.
The VAT liabilities emerged earlier this year and led to accountants at BDO producing a report that alleged Goals' former chief executive and chief financial officer colluded to produce fictitious invoices.
The company initially put the figure at £12m but last month warned that the discrepancy could be “materially higher”.
It said it had uncovered “improper behaviour” stretching back a decade, making it impossible to file the latest accounts. The actions of former chief executive Keith Rogers and chief finance officer Bill Gow are still under scrutiny by forensic investigators looking for signs of historic financial irregularities.
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According to reports, BDO obtained evidence that Gow asked Rogers to “work your usual magic” to create fake invoices. Allegations were also made that Gow deleted old emails to “purge” records, as the pair were manipulating numbers to avoid VAT payments and breaching banking rules with the company’s lender, Bank of Scotland.
Rogers, who was behind Goals’ stock market flotation, has previously denied any wrongdoing. Neither he nor former chief finance officer Gow responded to requests for a response.
Goals also declined to offer comment.
The troubled business was put up for sale several months ago and its largest shareholder, Sports Direct, initiated an attempt to buy out the remaining shares.
Mike Ashley, chief executive of Sports Direct, last week called off the buyout and accused the Goals board of using underhand methods to eliminate shareholders from the bidding, adding that their incompetence caused the accounting debacle to be missed.
“Yet again, the independent shareholders of a UK-listed company get wiped out through the skulduggery of others,” Ashley said. “As these constant corporate failures show, the current rules and regulations do not do enough to protect independent shareholders or to prevent fiscal irresponsibility.”
Ashley later criticised the decision to involve the SFO. He told media it was: “far too little, far too late and is a deliberate case of closing the stable door well after the horse has bolted.”
Some commentators have said this is less about Ashley’s concern for the standard of accounting and audit practices than his inability to add another firm to his corporate roster.
“Sports Direct claims that the Goals board attributed the accounting problems which contributed to the suspension and ultimately the cancellation of its listing on AIM to just one person – something which it dismissed as impossible – and accused them of ‘skulduggery’ and failing to engage properly with the takeover,” Russ Mould, investment director at AJBell, said. Goals has denied seeking to frustrate the bid and the ‘accelerated sale process looks set to continue, said Mould.
“Like Debenhams earlier this year, this is another example of Ashley apparently being thwarted in his takeover ambitions despite being the largest shareholder and the company in his crosshairs apparently being in an extremely weak bargaining position,” Mould said.
Sports Direct has not been without troubles of its own in recent months. It was handed a £600m tax bill from Belgian authorities, resulting in a delay to its own results and a subsequent struggle to find an auditor after Grant Thornton quit.
Eventually, RSM, the UK’s seventh-largest audit firm, took on the role and Sports Direct is now the largest client on its books. RSM has also recently taken on the role of auditing collapsed bakery Patisserie Valerie’s accounts, another former Grant Thornton-audited business.