Gowex and Bloomberg

I have written twice about Gowex's fraud.

Bloomberg, the financial news powerhouse (normally a pretty good source of information) also entered the fray:

"How Gowex CEO Went From Defiant to Disgraced in Five Days"

An interesting and informative article with lots of good stuff in it.

But one "tiny detail" was left out, that in the past Bloomberg also fell for the fraud. Only one year ago it wrote the following article:

"How the Founder of Spain's Gowex Bet the Farm (Twice) and Won"

Some snippets:

One company that has managed to stand out and become a global brand is Let's Gowex SA, a Madrid-based provider of free outdoor Wi-Fi services. Its growth, largely from increasing smartphone and tablet usage, has also been fueled by founder Jenaro Garcia's willingness to bet the farm.

The company makes money from selling roaming, advertising, e-commerce and other services to local governments and mobile carriers. Garcia said business was slow until the iPhone arrived almost six years ago. Last year, Gowex's revenue climbed 71 percent to 114 million euros ($146 million). Profit rose 136 percent to 17 million euros ($22 million).

(the company has admitted it cooked the books over at least the last four years, so the above numbers are extremely unlikely to have been realistic)

To finance that growth, Garcia, who is now renting a 150-square-meter apartment in downtown Madrid, recently turned again to his significant other. He said his wife "went nuts" when he suggested putting all of their savings for a new house into the company once more. As it turns out, the investment has almost doubled in value. "She is very, very happy, even if we still don't have our own house," he said.

Is she still very, very happy?

I noticed the older Bloomberg article in this link:

"Gowex Shows Why Lending is the Best Venue for Accounting Control Fraud"

A classic accounting control fraud, Gowex, has collapsed in Spain.  Gowex was a wi-fi firm.  It was able to run its scam for at least four years.  It was a crude scam that involved simply making up contracts and borrowing to grow rapidly.

“The US firm Gotham City Research had described Gowex as a ‘charade’ and said that its revenues were ‘at most’ 10% of those reported.”

As soon as Gotham City Research blew the whistle on Gowex it made it impossible for Gowex to borrow additional funds and avoid collapse.

The whole article is pretty interesting, for instance that Gowex received several awards. It is written by William Black, about whom I blogged before.