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


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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
well."

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,
2007."

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
exists.

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.

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/4992167/Hunt-for-11-million-ruby-as-owner-goes-under.html
 

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