Crossing the ruby con: Failing firm valued £8,000 gem at £11m


Click to follow
The Independent Online

Two company directors have been disqualified from business after using a falsely valued ruby to inflate their failing company’s accounts.

David Unwin and Nicholas Ibbotson received significant bans after trying to assuage their construction company’s woes with “The Gem of Tanzania”, which had purportedly been valued at£11m uncut ruby but was actually worth just £8,000.

The 10,700-carat lump of anyolite, a practically worthless grade of ruby, was sold by administrators after Shropshire-based firm Wrekin Construction went into liquidation. The directors’ disqualification came after an inquiry by the Insolvency Service. Investigators found Mr Unwin bought the uncut gem in 2006 and transferred it to the assets of Wrekin after he took over the firm in 2007. It was listed as an £11m asset, based on a valuation supposedly carried out in Italy.

Wrekin collapsed into administration in March 2009 with losses of more than £45m to creditors. When the administrators tried to sell the gem, they found that the document showing the £11m valuation was a forgery.

After attempting to interest London auction houses in the jewel, the administrators were eventually forced to list the “ruby” in Rock ‘n’ Gem, a magazine for mineral collectors.

Pabitar Powar from the Insolvency Service said: “The purchase of an uncut ruby gemstone by Wrekin was extraordinary and questionable. It is clear that the gemstone was included in the accounts to portray Wrekin’s financial position as a sound one, whereas its true position was the exact opposite.”

The gem was discovered in 2002 by a mining company carrying out excavations in northern Tanzania.

A South African businessman, Trevor Michael Hart-Jones, bought it for £13,000 before it eventually found its way into the possession of Mr Unwin, who was banned from being a director for 10 years. Mr Hart-Jones has since claimed that “The Gem of Tanzania” is “jinxed”.

Mr Unwin was also found to have made payments of £768,177 and £516,959 from Wrekin to two other companies controlled by him, knowing the construction firm was under severe financial pressure and unable to pay its debts.

Mr Ibbotson, 56, of Sutton Coldfield, was disqualified as a director for seven years. A third director, Peter Greenwood, 62, from Telford, was banned for nine years.

Wrekin Construction Company Ltd, founded in 1960, had an annual turnover of more than £100m by 2007, but having incurred trading losses,  it had a deficit of £7.6m. Through the inclusion of the gem as an £11m asset in the accounts, the directors gave the impression the company had a financial surplus, while in reality it was insolvent.

Mr Powar said: “Directors who recklessly present misleading information in this way damage the confidence of companies to do business with each other and undermine the business environment.”