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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.

30th Oct 2019
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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.

Forensic investigation

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.

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.

Ashley anger

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.

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By AndrewV12
31st Oct 2019 10:29

'Goals was forced to delist from London’s Alternative Investment Market'

It just goes to show you any old Company with quite a lot of Investors money can list on AIM (Alternative Investment Market) and they often do, a lot of Companies on AIM rarely make profits but the Directors are paid a fortune, yet again never has failure been so well rewarded.

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By tedbuck
31st Oct 2019 10:33

I know that we are watchdogs not bloodhounds but surely a £12m or greater hole in the accounts might have been noticed. If the fraud was based on false invoices you would have thought someone might have noticed so there were obviously no checks within the Company itself. Shouldn't that have signalled to the auditors that they ought to take a bit more care?
Again one is forced to think that the auditing practices developed 50 or more years ago and merely updated are not really sufficient in the digital age.
Seems to indicate that a total rethink about auditing is well overdue.

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By indomitable
01st Nov 2019 14:27

With everything being process and checklist driven these days, my feeling is that many auditors cannot see the wood for the trees anymore. Just so long as the computer says yes and the check lists have been completed , clean bill of health.

Absolutely agree audits need to be looked at, there have been too many failures and these sorts of things.

As in many things in business these days, you still cannot beat experience and an instinct for something being wrong

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By Mr J Andrews
31st Oct 2019 11:54

So; by self reporting Goals MAY be able to negotiate a smaller fine and POTENTIALLY avoid any criminal sanctions SHOULD the investigation progress.....................
With allegations of a decadent decade of faked invoices , purged records , manipulating numbers and breaching banking rules met with no response / no comment , I do wonder if we are on the same hymn sheet with this optimistic view of what may be.
Rather than an overhaul rethink of auditing practices , I suggest change the term AUDIT to OR DID IT ?

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By rememberscarborough
31st Oct 2019 16:40

Mr Ashley isn't having a good day today is he.... (no sniggering at the back)

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By [email protected]
31st Oct 2019 16:48

Due to cuts in public funding, there are not the resources available to prosecute all white collar crime.

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By k743snx
01st Nov 2019 10:55

Due to political correctness and pandering to the Easily Offended, the police seem to have the resources to tackle everything except crime these days.

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By C.Y.Nical
01st Nov 2019 11:06

'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'
“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.

I am confused. If Ashley or one of his companies is a shareholder of one of his targets why cannot he obtain the other shareholders' names and addresses under s.116 Companies Act 2006, and then make an offer directly to all the other shareholders, thus cutting the board out of the loop?

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