The auditor of failed free wi-fi company Gowex, José Antonio Díaz Villanueva, voluntarily appeared before a judge in the High Court on Friday. Díaz Villanueva was subject to an international arrest warrant after police reported that they had been unable to locate him. Both the auditor and the disgraced founder of Gowex, Jenaro García, have been named as official suspects in an investigation into the company’s accounts.
Gowex, which had previously been touted by politicians as a Spanish business success story, was brought down by a damning report by the mysterious financial analysis company Gotham City Research. The report claimed that Gowex was falsifying its accounts, something that was initially denied by García, but he later admitted to be true. The value of the company’s stock tumbled and it has since filed for bankruptcy.
The M&A auditing company found no anomalies in the Gowex accounts, which reflected massive growth in the midst of the economic crisis. Between 2011 and 2013, its sales reportedly tripled, while its profits increased by five times – but these figures were nothing more than an invention.
The auditor company found no anomalies in the accounts, which grew in the midst of the economic crisis
The Gotham report, which was released on July 1, revealed that Gowex – which supplied free wi-fi networks to city councils and municipal travel services – had inflated its results, and that its actual revenue was no greater than 10 percent of what it had declared. Its biggest client turned out to be Gowex itself, and the fees charged by the M&A auditing firm were surprisingly low given its apparent size. The report saw Gowex lose 46 percent of its value on the alternative market where it was listed.
After several days of negotiations in the face of the accusations, and after the company’s listing on the stock exchange had been suspended, the founder and chief executive of the company, Jenaro García, ended up confessing that the accounts from the last four years were false. During his appearance last Monday before Judge Santiago Pedraz, he admitted that the manipulation went as far back as 10 years. The judge ordered him to be released pending a bail payment of €600,000.
Gowex founder Jenaro García admitted in court that the manipulation went as far back as 10 years
Meanwhile, Díaz Villanueva was released on Friday pending a bail payment due within 15 days of €200,000. He told the judge that his most recent yearly salary was around €300,000, while the magistrate issued a writ stating that Díaz Villanueva had created an environment whereby Gowex could commit fraud, and that his work was not in accordance with the legal framework. The judge also drew attention to the fact that Villanueva was not declaring his income to the Tax Agency.
On Thursday, it was the turn of Gowex’s financial director, Francisco Manuel Martínez Marugán, to appear before the judge. The number two at the company admitted to running parallel accounts. However, he alluded to the “strong personality” of his boss in an attempt to justify so many years being aware of the fraud, but failing to do anything about it.
The financial director confessed in court that in order to make the double-accounting system work, they created three different companies. He also explained how, over the last three months, his boss had suggested the creation of more businesses of this type in order to continue with the fraud. Martínez Marugán told the judge that it was then that he wanted to leave the company, but that he couldn’t because he was too deeply involved in the scam.
The wife of the founder of Gowex was due to appear in the High Court but is in her native Costa Rica
After hearing the explanations of Martínez Marugán, the judge set bail at €50,000, which he will have to post within 15 days if he is to avoid being sent to jail.
Another director of the company, María Florencia Maté – who is also the wife of the founder of Gowex – was due to appear in the High Court but her lawyer explained that she was on a trip to her native Costa Rica. The judge has set a new appearance date for her, on July 28.