Versailles figures were 'made up each month'

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The Independent Online

The former finance director of the collapsed company loans business Versailles yesterday admitted in court that he had produced figures which were "wholly inaccurate".

Frederick Clough owned up to the falsehood after he agreed to be the star witness for the prosecution against his former business partner, Carl Cushnie. Mr Cushnie has been charged with fraudulent trading at Versailles, which folded in 2000 owing its banks more than £70m.

Mr Clough has admitted to trying to defraud Versailles, and has been charged with siphoning off £19m from the company, which has not been recovered by its receivers, PricewaterhouseCoopers. He will be sentenced after the trial of Mr Cushnie, as will be his assistant Lorraine Jones, who is also charged with conspiring to defraud the company's shareholders and creditors.

Mr Clough, appearing in the witness box at Southwark Crown Court for the first time, said he was not sure how much money he had taken from Versailles, but added it "certainly ran into millions".

It emerged that years before Mr Clough took up an offer of a senior position at Versailles, set up in 1991 by Mr Cushnie, he had been struck off the register for chartered accountants and had also served a 12-month prison sentence in Jersey for false accounting.

At Versailles, whose business model was based on lending money to small companies which had cash flow problems, Mr Clough made up data showing how well the business was doing in order to keep shareholders and the company's banks happy.

"I produced false figures every month," Mr Clough said. These figures bore "no resemblance whatsoever" to the true numbers produced by Versailles' client services department, which was not involved in the alleged fraud.

Mr Cushnie, who is alleged to have bought three houses in London and a £5m villa on the Cote d'Azur with money he took from Versailles, has argued he was deceived by the hundreds of bogus transactions which inflated the group's turnover during the 1990s.

Asked if Mr Cushnie was aware of his finance director's approach to compiling Versailles' accounts, Mr Clough said: "Every month we would discuss the sales figures and every month we would talk about what we would show to the non-executive directors."

The running of Versailles involved Mr Cushnie and Mr Clough setting up a complex web of companies to move money around in order to satisfy banks which had lent it money that its finances were healthy, the court heard. One of the lenders was Prudential, it emerged.

To make the structure even more complex in order to fool creditors, Mr Clough said he planned to set up a company whose name would have been sufficiently similar to an existing Versailles offshoot. In the end Mr Clough could not register the name as a company because it was not available.

The case continues.

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