Versailles’ vanishing funds

Versailles Group, the high-profile trade finance company, has spiralled into receivership in the space of two months and is currently the subject of an official inquiry by the Serious Fraud Office. The problems began in December when the company admitted accounting irregularities which could have overstated turnover figures. Its shares, were suspended at 250p – they stood at 90p a year earlier – valuing the group at UK£631 million and it was later revealed that Carl Cushnie, Versailles’ chairman and chief executive had failed to disclose continuing Department of Trade and Industry investigations into the company when he sold UK£29 million of his personal holding in November last year. According to a report in the London Times (26 January) he also overstated the firm’s customer list by up to 300 companies; the true number was nearer to 50. In December, Pricewaterhouse-Coopers was appointed to review accounting systems by Barclays, National Westminster Bank and the Royal Bank of Scotland after they became concerned about the security of their loan exposure to the company which is believed to total about UK£65 million. The problems appear to concern trading between Versailles and a number of companies that may exist as little more than vehicles for handling funds; the validity of transactions and hence turnover is in doubt. Attention has been focused on an account held in the British Virgin Islands which is believed to have taken in funds from offshore private interests who backed the company. Details are also beginning to emerge of other associated overseas accounts and companies incorporated in the Cayman Islands and Australia. A spokesman for PwC has said that there is prima facie evidence of a major and long-running fraud involving the misappropriation of company money. Frederick Clough, finance director and the co-founder of Versailles with Mr Cushnie, has been suspended from his post while inquiries continue. His whereabouts are unknown. PwC was appointed administrative receiver to Versailles after it revealed its findings to the board on 20 January. Baker Tilly, the accountancy firm, has been charged with making a separate report to the Stock Exchange on the state of the company’s accounts by the end of January.