Timothy Coleman, the former CFO of IT services company Redcentric, must pay a confiscation order of £355,369 within a month or else he faces more prison time in addition to the five and half years he is already serving.
Southwark Crown Court also ordered that Coleman pay £119,630 of prosecution costs.
The confiscation order comes after the jailed CFO was found guilty in February 2022 of two counts of making false and misleading statements for the years ending March 2015 and March 2016.
Coleman, alongside the AIM-listed company’s former finance director Estelle Croft, was at the centre of Redcentric’s false statements and false accounting. As a result, the IT service provider issued false and misleading unaudited results in November 2015 and false and misleading audited final-year results in June 2016.
Both of these results materially overstated Redcentric cash position by £13.1m and £12.2m, and as a result shareholders lost millions when the company’s true financial position was revealed.
False accounting and misleading statements
Coleman inflated the accounting records and presented these false figures to the board and investors. He then used these same false figures to assure investors about the company’s financial position, and to persuade them into not selling their investment in the company. These false statements caused Redcentric’s shares to inflate, which left investors having to pay more for shares than they were worth.
When Redcentric announced in November 2017 that it had “identified misstated accounting balances” in its profit and loss (P&L) accounts, Coleman was placed on gardening leave with immediate effect, and Deloitte and Nabarro were brought in to carry out an independent review.
In February 2022 Coleman was found guilty on two counts of making a false or misleading statement at Southwark Crown Court in 2021 and was sentenced in March 2022.
Steve Smart, joint executive director of enforcement and market oversight at the Financial Conduct Authority, said: “As CFO of a public company, Mr Coleman was supposed to uphold the highest standards of integrity on which his shareholders depended.
“By cooking the books and misleading the market, he caused serious harm to those people – this order sends a signal to anyone who misleads the market that they will be liable to pay even when they’re behind bars.”
Another audit failing
The saga around Redcentric came to light following an independent investigation into the company’s accounting practices.
PwC, Redcentric’s former auditors, were also embroiled in the scandal after a Financial Reporting Council (FRC) investigation found that the Big Four firm failed to “exercise professional scepticism”. In 2019, the accounting regulators fined PwC £4.5m for the audit. PwC had previously given the all-clear to the 2015 and 2016 financial statements.
Redcentric’s customers included NHS Trusts, the Ministry of Defence and several local councils.
