Free Wi-Fi Supplier, Gowex, Files For Bankruptcy

PuceBaboon writes "The BBC is reporting that a Spanish firm, Gowex, which provides free Wi-Fi services in major cities world-wide, has filed for bankruptcy, following revelations that financial accounts filed over the past four years were "false". The company supplies services in London, Shanghai, New York and Buenos Aires, as well as Madrid. Other sources report that up to 90% of the company's reported revenue came from "undisclosed related parties" (in other words, from Gowex itself) and that the value of the company's share price was now effectively zero.

Comments

Nothing unusual

[ledow]

This isn't at all unusual. However, what really gets my goat is how were they allowed to do what they did for four years?

That's four years of some accountant falsifying accounts. Four years of tax not paid or properly checked (if they were earning what they claim, a lot of tax would be due - if they were lying about it, they'd not want to pay that tax). Four years of operating without anyone questioning.

And, most importantly I feel, what's happened to the directors and accountants of the company now ( I highly doubt just one person was in knowledge of this)? My guess is that they've already fled with a nice bundle somewhere.

Happened like mad to the software houses in the 80's, still going on. Why is it compulsory that I have to be sat down like a child when I want to take out a £1000 loan but nobody questions businesses or enforces them to give enhanced accounts or audits in their first few years of operation. It would stop an awful lot of such outright fraud as this if someone from government was poking through their accounts, and they wouldn't even be able to set up a "new" company, transfer the assets and then declare bankruptcy as is also common.

Re:Nothing unusual

[FireFury03]

Why is it compulsory that I have to be sat down like a child when I want to take out a £1000 loan but nobody questions businesses or enforces them to give enhanced accounts or audits in their first few years of operation.

Well, to some extent I think people who run businesses are probably expected to have a bit more of a clue to managing finances than the average man-on-the-street. (And I guess you only have to look at the number of "pay day loan" companies that charge several thousands percent APR to realise that there are a *lot* of members of the public who really don't understand how to manage their finances). So the whole being sat down like a child thing is basically to stop people who don't know what they're doing ending up with mountains of debt _by mistake_, it's not to stop people intentionally cooking the books.

A company cooking the books is serious, but arguably, a privately held company cooking the books is probably not _that_ bad - yes they avoid paying a bit of tax, but auditing costs the government money so you have to weigh up this cost against the amount of extra tax revenues they're going to get (and certainly, my privately held limited company has never been audited by the inland revenue, not that I have any reason to believe that such an audit would raise any warnings).

Things are a bit more serious with a publicly held company though, since cooking the books will artificially raise the share price and then risk a crash (as has happened here) so innocent third party investors are going to get screwed over. Its hard to decide who should be paying the costs of an independent audit in this case though. Maybe investors should value a company's shares more highly if a independent audit has been published for that company since investing in that company should presumably be a lower risk.