S Tel: Hunt for £11 million ruby as owner goes under

Discussion in 'Bankruptcy' started by mugglefuggle, Mar 15, 2009.

  1. mugglefuggle

    mugglefuggle Guest

    Hunt for £11 million ruby as owner goes under
    Investigators were last night trying to establish whether a gem
    purported to be worth £11 million was used to inflate the assets of a
    building firm which has gone into receivership.

    By Patrick Sawer

    Sunday Telegraph
    Last Updated: 11:41AM GMT 15 Mar 2009

    Rubies remain sought after - but does the Star of Zanzibar really
    exist? Photo: Reuters
    The mysterious ruby - called the Star of Zanzibar - was bought by
    Shropshire-based Wrekin Construction. On paper, it is the most
    expensive ruby on record.

    But officials from Ernst & Young, the administrators called in to
    handle Wrekin's affairs, are now understood to be trying to establish
    why the gem was bought, and indeed whether it exists at all.

    Wrekin reported in its accounts for 2007 that it had bought the Star
    of Zanzibar from Tamar Group, one of its shareholders, for a "fair
    value" of £11 million. This was paid for in interest-bearing
    preference shares.

    The purchase transformed the appearance of Wrekin's balance sheet,
    helping to turn an £8 million liability in March 2007 to net assets of
    £6 million by the end of that year.

    At the time that appeared to be enough to save the company from going
    into liquidation.

    But since the £11 million worth of shares had already been issued
    against the value of the ruby, it could not be sold when creditors
    subsequently came knocking at Wrekin's door to recover debts.

    Although the company had £2 million worth of unpaid contracts with a
    number of Whitehall departments it owed £3.5 million in tax and VAT
    and had also run out of credit. The firm went into receivership last
    week with the loss of over 400 jobs.

    One creditor affected by Wrekin's collapse told the construction
    industry website Contract Journal: "Preference shares can be called in
    at short notice. It's no wonder the banks were worried. We were as

    The hunt is now on for the Star of Zanzibar.

    Peter Greenwood, Wrekin's joint managing director, says the ruby is
    locked away in safe deposit box in the UK. But he also denies ever
    having seen the gem.

    A valuation note filed by Wrekin in its accounts states: "The fair
    value of the ruby gemstone was determined by a professional valuer at
    the Instituto Gemmologico Italiano, based in Valenza, Italy on 31
    August 2007."

    But Loridana Prosperi, a gemmologist at the Instituto's head office in
    Milan, said: "That is impossible because we were on holiday on Aug 31,

    She also said that not only does IGI never assess the price of
    gemstones, only their quality, the office in Valenza does not even
    carry out that function.

    The highest recorded price paid for a ruby to date was £2.6 million in
    2006, according to Christie's.

    An Ernst & Young spokesman said: "While the Administrator's
    investigations are at an early stage, there are a number of issues
    which have already been identified.

    "Over recent months, credit insurance for Wrekin Construction has been
    significantly reduced or withdrawn completely.

    "Amounts due to the Crown in respect of VAT and PAYE appear to exceed
    £3.5 million. Amounts believed to be due to Wrekin Construction in
    respect of government contracts exceed £2 million.

    "At appointment, Wrekin Construction was the subject of five winding-
    up petitions and approximately 40 County Court Judgments.

    "The level of overdue creditor balances is not currently available. At
    this time no further information will be available until the
    Administrators' proposal is made to the Group's creditors in April."

    David Unwin Jnr, managing director of Tamar Group, refused to comment
    when asked about the whereabouts of the ruby and whether it really

    Among Wrekin's creditors are RBS, which is majority-owned by the
    Government. That leaves every taxpayer with a part share in the Star
    of Zanzibar - should it ever turn up, that is.

    mugglefuggle, Mar 15, 2009
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