News analysis
Redcentric directors jailed – where was the board?
A former finance director of IT firm Redcentric was jailed for three years, and another was convicted of fraud in a UK accounting scandal.
Former finance director at Redcentric, Estelle Croft, 49, was sentenced to three years imprisonment by the Financial Conduct Authority in the UK (FCU).
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.
Former CFO also guilty
Redcentric’s former chief financial officer, Timothy Coleman, 57, was also found guilty of four charges related to false and misleading statements made to the market. He will be sentenced.
What did they do?
They lied about how much cash the firm had. Croft and Coleman overstated Redcentric’s cash position by £13.1 million and £12.2 million, respectively.
Moreover, they misstated the firm’s net debt position, which resulted in a swift loss for investors when the actual cash situation was revealed.
According to the FCA, Croft falsified essential accounting records to boost the firm’s cash position.
The FCA publicly criticised Redcentric for market abuse in 2020, and shareholders lost about £43mn.
Where was the Redcentric board?
“The false statements were attributable to the appalling misconduct and lack of professionalism of Coleman and Croft,” says David W Duffy, CEO of the Corporate Governance Institute.
“Where was the financial oversight by the NEDs? What did the last board evaluation say about the composition and skills of the board? Were they adequate? The board appears to have been asleep at the wheel.”
Investors affected by the scandal will receive compensation, says Redcentric.
“When a board does not have the appropriate composition and oversight by NEDs and when directors are not properly trained, disasters like this can happen,” says Duffy.