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ICAEW July disciplinaries: The gem of Tanzania

6th Jul 2015
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The most recent ICAEW disciplinary report read like a 90’s thriller, involving an uncut Ruby gemstone known as ‘the gem of Tanzania’ and a disgraced financial director.

Nicholas Ibbotson’s company, Wrekin Construction, acquired an uncut Ruby gemstone known as “the gem of Tanzania” in return for shares in the company.  The gem was valuated at £11,000,000 by “an institute in Italy”. However, this valuation report was subsequently found to be a forgery.

Subsequently, the gem was sold for £8,000 by administrators after the company collapsed in 2009.

The gem was used to inflate Wrekin Construction’s asset value, plastering over the company’s insolvency. “Mr Ibbotson should have made more extensive efforts to confirm the valuation of the gem before its acquisition, especially given the significance of the valuation to the company which was substantially insolvent,” said the Institute in its conclusion.

He had attended a meeting before the financial statements were signed, where the auditors had advised of the need to appoint a lapidary to value the gem.

Ibbotson was excluded from membership and ordered to pay £5,000 in costs after the ICAEW said his actions as director in an unnamed firm demonstrated “that he was unfit to be a director of a company”.

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By The Minion
12th Aug 2015 11:14

Ok i give up

How does buying a gem for £11m increase the value of a company's assets?

 

Surely the current assets went down when the cash was taken out of the bank, stuffed in a bag and put behind the bike sheds awaiting delivery?

 

Or did the cash just come out from under a mattress?

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By jonbryce
28th Dec 2016 12:40

The Minion wrote:

Ok i give up

How does buying a gem for £11m increase the value of a company's assets?

 

Surely the current assets went down when the cash was taken out of the bank, stuffed in a bag and put behind the bike sheds awaiting delivery?

 

Or did the cash just come out from under a mattress?

They issued shares in exchange for the stone, so assets went up and share capital/share premium went up.

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By Sheepy306
12th Aug 2015 11:21

I assume also that in the absence of a proper valuation that the audited accounts were never signed off, or were they qualified?

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