This blog has followed relentlessly the unfolding drama of AssetCo, the company in charge of London and (until last week) Lincolnshire’s fire engines, which nearly went bankrupt last year and had its shares suspended until recently on the stock exchange.
But nothing can compare with the latest revelations in a dry annual report on the AssetCo website (link for anoraks who want the lot is http://bit.ly/HVeFEN ). This much delayed report for an 18 month period – it had to be produced to allow its shares to be retraded- tells the real story behind the company’s near collapse which saw its share price drop from 60p to junk stock 1.75p. It has now emerged that dividend payments may have been unlawful, the company has been seriously ripped off by its former chief executive and the accounts were false for both 2009 and 2010.
Revenue had been overstated by a massive £18.6m and a claimed operating profit of £17.4m was actually an operating loss of £11.4m.
But the company still owes banks a massive £43m – despite creditors taking a 78 per cent hit and its auditors, Grant Thornton (also owed most of their fees) resigning.Even the restated figures cannot be guaranteed and PriceWaterhouseCoopers,who independently audited the firm, have qualified these accounts. Grant Thornton incidently missed all this -just as they did over MetPro-Barnet’s bust private security firm-bankrolled by Barnet Council.
As the company itself says:”errors include the effects of mathematical mistakes, mistakes in applying accounting policies,oversights or misinterpretations of facts, and fraud.”.
Worse it is quite clear that the only major source of money for the firm in Britain is the council taxpayer in London which is keeping it afloat to the tune of £3om a year. Even here banks are going to have to give another bail out and Lloyds have a massive interest because they currently own the London fire engine that comes out on call.
This is where the scandal of Brian Coleman, the Tory chair of the London Fire Brigade, and John Shannon its former chief executive come in.
Coleman was entertained at least four times by Shannon and accepted an expensive Christmas hamper from Harvey Nicks (see the armchair audit of Brian Coleman in previous blog) and has been AssetCo’s cheer leader.
Now it is clear from this report that Shannon was dismissed by the board of AssetCo because of this financial shenanigans.
I quote: “The new board have been informed that under the stewardship of Mr. Shannon and Mr. Flynn there was a lack of transparent reporting, requests for information were ignored, and related party transactions were entered into without full board approval. The new board cannot be certain that all issues have been captured.
Mr Shannon was dismissed as an employee for breaches of fiduciary duty and whilst the company has not carried out a full investigation, as previously announced in May 2011 in connection with the claims against the Company by Messrs Shannon & Flynn in support of the winding up petition, it identified counter claims against John Shannon of £4.6 m and also counter claims for breach of fiduciary duty of £3.4m against Frank Flynn.
Frank Flynn was the chief financial officer and a mate of John Shannon.
The report reveals that Shannon and Flynn also shared the bulk of a £847,000 pay out in dividends that are probably illegal. And Shannon before he was dismissed managed to up his salary and benefits to a staggering £492,000 and Flynn got an unapproved £30,000 redundancy payment.
Even worse they appears to a dodgy property loan amounting to £1.5m to Shannon. This involved a property company called Jaras.
The report says: “In respect of the ‘Jaras’ transaction, AssetCo have reviewed internal communications between the date in December 2009 when the £1,500,000 was first paid, and finalisation of the 2010 audited accounts,the management and statutory accounts for the business occupying the property and concluded that:
a) on an arms length basis it would be difficult to substantiate effectively paying six years rent in advance in respect of the property,
b) the payment was originally classified as a Directors’ Loan and was subsequently reclassified as
prepaid rent in order to satisfy audit disclosure requirements, and
c) the business occupying the property is now in Liquidation. ”
It adds: “there is sufficient doubt that either Jaras (where a Receiver has been appointed) or John Shannon will repay the amount.”
The report also reveals that London AssetCo which has assets of the London fire brigade has been moved to another off the shelf company and the firm’s Middle Eastern operations (see another blog they are servicing the military in the United Arab Emirates) are now based in a Bermuda tax haven, to keep them secure from any other collapse in Britain. Wise move, as Lincolnshire have sacked AssetCo.
The real scandal in this story is that this woefully badly run company has been kept afloat by politicians in London. Coleman and Gareth Bacon should shoulder this blame -with their blind belief that privatisation is the only answer.
But Coleman is more culpable because of his personal links with Shannon and acceptance of gifts from a man now dismissed from the firm. Shannon may get away with all this but you do have a choice next month to make sure that Coleman never darkens the London fire brigade again.
Removal would be a service to Londoners and you have a vote at the Greater London Assembly elections in Barnet and Camden.