December 1, 2022

Donalds Hobby

World Finance Reviews

Ex-Redcentric directors convicted over accounting scandal

An ex-finance director has been jailed for three years and another former executive convicted over a 2016 accounting scandal at an AIM-listed IT provider Redcentric.

Estelle Croft, 49, a former finance director at Redcentric, was sentenced to three years in prison in the criminal prosecution brought by the Financial Conduct Authority, it can now be reported. 

Croft pleaded guilty in August 2021 to two counts of making a false or misleading statement, four counts of false accounting and seven counts of making a false or misleading statement to Redcentric’s auditors PwC.

Croft admitted the charges and was sentenced before the start of a jury trial of two other former Redcentric executives which began at Southwark Crown Court in November 2021 and ended on Friday.

Timothy Coleman, 57, former chief financial officer of Redcentric, was found guilty on Friday by the jury at Southwark Crown Court of four charges concerning the making of false and misleading statements to the market. He will be sentenced in March.

His co-defendant Fraser Fisher, 51, former chief executive, was acquitted by the jury on Friday of all charges. 

Redcentric, an IT service provider and AIM-listed company, issued false and misleading unaudited interim results in November 2015, and false and misleading audited final year results in June 2016, the FCA said in a statement.

Both results materially overstated Redcentric’s cash position – by £13.1mn and £12.2mn respectively – and misstated its net debt position, meaning that investors suffered immediate losses when the true position was revealed. 

In 2019, Redcentric’s auditors PwC were fined £4.6mn by the Financial Reporting Council for botched audits of the company.

Croft falsified key accounting records to inflate the cash position and accepted that she was involved in the making of the false statements, the FCA said. The jury trial heard that Coleman further inflated those figures for financial reports that were then presented to the board and both Croft and Coleman knew that the market was misled when the statements were published. 

The FCA estimated losses to affected shareholders were around £43mn and it publicly censured Redcentric for market abuse in June 2020. The company has agreed to pay compensation to affected investors.

Mark Steward, executive director of enforcement and market oversight at the FCA, said the false statements were “directly attributable to the appalling misconduct of Mr Coleman and Ms Croft”.