Punishment of errant company executives

Tuesday, Jul 21 2015 by
11


The Financial Reporting Council has just published its decision and report in the case of the conduct of the CFO of a company that collapsed several years ago, a company called Healthcare Locums. I had been a shareholder but sold long before it went belly up.

Here's the link:

https://www.frc.org.uk/News-and-Events/FRC-Press/Press/2015/July/Outcome-of-disciplinary-case-against-Ms-Diane-Jar.aspx

It makes for very interesting reading.

I'm sure we would all have our own lists of other CFO's (or CEO's) who would also make suitable cases for investigation, if only the FRC were much more active in pursuing fairly obvious cases of abuse, or had the resources to do so.

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10 Posts on this Thread show/hide all

janebolacha 21st Jul '15 1 of 10
2

And for today's comedy break from the Financial Conduct Authority, we have this:

"The irony is that just a few days before the election, Wheatley signalled a significant change of direction for the regulator. In a speech at a financial conference organised by communications consultancy Lanson, he signalled that the focus of the Financial Conduct Authority was moving from the era of heavy enforcement and fines that has so upset the banks and insurance companies to supporting the growth agenda."

http://www.standard.co.uk/business/markets/anthony-hilton-policies-need-fixing-in-the-wake-of-regulator-martin-wheatleys-departure-10404287.html

Where was the "heavy enforcement"?

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Cisk 21st Jul '15 2 of 10
2

Hi Jane, owning shares in a company you believed to be worth something, but that ultimately ends up being worthless, is one of the most painful experiences for an investor.

When it's a result of fraud rather than bad judgement, it hurts even more.

Here's my potted history of total loss investments (that I can remember), spanning nearly 25 years:
Eagle Trust - Fraud, larger-than-life characters running the operation
Parkfield Group, a mini conglomerate in the late 80s / early 90s. Fraud - I think, but can't be sure
XN Checkout - become Torex - several directors prosecuted for fraud and now serving time.
ROK - housebuilder with a wild CEO. Not sure if fraud there...
Silverdell - Fraud / lying to market. Hopefully ex CEO will get what's coming to him.

5 over 25 years probably isn't too bad - but still a little high. But at least 60% were due to fraud.

I'm not sure if any / many of these companies will be familiar to readers - but would be very interested to hear from others about their 'total loss investments' - and how many were due to fraud / negligent behaviour by directors?

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janebolacha 21st Jul '15 3 of 10
2

Hi Cisk,

I've had no total losses at all, although I did hold Healthcare Locums, Connaught and Rok (0ver the last twelve years or so) but got out of all of them in good time. I monitor my holdings very closely, trying to get behind the facade presented to the public and to investors by managements. That takes quite a bit of time but for me it's a way of building a second margin of error into my investments. To be able to to have the time to research and understand thoroughly the companies I invest in, I deliberately limit my holdings to between 10 and 15 companies. I think that has certainly helped me.

Best wishes,
Jane.

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hayashi22 21st Jul '15 4 of 10
1

The Silverdell case is unbelievable. Blatant lying. Shocking case.

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SteMiS 2nd Aug '17 5 of 10
1

Why was Jarvis not prosecuted for false accounting and conspiracy to defraud?

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Blissgull 2nd Aug '17 6 of 10
1

In reply to post #103334

Hi Cisk, yes I was in Silverdale too.

Still not sure what to make of it. The only occasion that I have known when a company goes bust after a director admits to making payments into the company from his own pocket.

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Zipmanpeter 2nd Aug '17 7 of 10
3

In reply to post #103325

janebolacha - I always admire and read your posts and aspire to a similar research driven approach as I have the time and inclination to do proper research. For instance, I followed through on all the IQE links you posted and did some further reading around the 'compound semi-conductor' space and downstream markets before investing.

However, do you have any general or specific tips about doing company research (or suggested reading that does). I want to learn how others do it well. It is so different from company to company that I find it difficult to generate a standard (research) process which is usually the basis for success.

Big believer in the the 'If I stand tall today, it is because I stand on the shoulders of giants before me" school of thought (aka 'Steal with pride' in the emerging market FMCG space I work in).

Anyway, please keep posting. It is superior, reasoned commentators like yourself who really add value to the Stockopedia community - especially when posting countervailing views. Would be easy for you to withdraw and save your insights for yourself but the overall site would be poorer for it.

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janebolacha 3rd Aug '17 8 of 10

In reply to post #204235

Peter, thank you, I sent you a detailed reply early this morning through the Stockopedia messaging system but it seems to have disappeared into Stocko-ether somewhere! Certainly, it is not showing up in my "messages sent" list. Unfortunately, I had not saved it. Please let me know if you do receive it or perhaps it is retrievable through the Stockopedia nerds!

Best wishes,
Jane.

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muckshifter 3rd Aug '17 9 of 10

In reply to post #203971

The chap who built a fraudulent and enormously overvalued company IMHO, in Jarvis the building company, left long before the brown stuff hit the fan. He may well have left the country after selling his shares, his name was something like Moyeadi. His departure was one of the things that prompted me to predict their bankruptcy within 18 months on tmf, and they were saved at about that time by the rescue CEO giving back his bonus. That allowed the company to stagger on for several years, making it even more difficult to hold the real culprit to account.

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millen 3rd Aug '17 10 of 10
1

In case some investors are unaware, you can sometimes claim income tax relief (as an altrenative to a CGT loss) on small company equity investments that are of 'negligible value'. This can include some quoted companies as well as unquoteds. The initial investment doesn't have to have been EIS-qualifying. hmrc helpsheet 286 summarises the rules and reporting deadlines (which can be quite tight).

Over the years I've suffered several total losses. I recall the largest such company was Aero Inventory, which was on the point of moving up from AIM to FTSE250. There may have been an element of fraud in that one, though most were simply mismanagement.

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