JD Classics, what have they been up to?

[POORCARDEALER]

Wonder how much the £21M of "clear" stock is really worth .....

[DonkeyApple]

POORCARDEALER said:

Wonder how much the £21M of "clear" stock is really worth .....

Unsold, rather than clear. Possibly the same but not necessarily?

Either way the answer will most likely be that the amount raised will be equal to the final fees.

[silentbrown]

Just saw this in the '17 accounts re the £133m inventory valuation...



I expect the valuer is being asked lots of potentially awkward questions...

[Burwood]

silentbrown said:

Just saw this in the '17 accounts re the £133m inventory valuation...



I expect the valuer is being asked lots of potentially awkward questions...

Given ‘management’ are the subject of an alleged 100m fraud. This pesky note to the accounts is rather meaningless notwithstanding being charged with false statements under Companies Act if it’s untrue. I imagine the auditors are twitching.

[DonkeyApple]

silentbrown said:

Just saw this in the '17 accounts re the £133m inventory valuation...



I expect the valuer is being asked lots of potentially awkward questions...

Why though? Where is the valuation of the assets in dispute?

If anything, it’s the auditors who would be questioned as to whether the market valuation they signed off on was relevant in the event of a rapid fire sale etc?

I’ve completely missed the bit of the thread where the overall valuation has been deemed false?

[Burwood]

DonkeyApple said:

silentbrown said:

Just saw this in the '17 accounts re the £133m inventory valuation...



I expect the valuer is being asked lots of potentially awkward questions...

Why though? Where is the valuation of the assets in dispute?

If anything, it’s the auditors who would be questioned as to whether the market valuation they signed off on was relevant in the event of a rapid fire sale etc?

I’ve completely missed the bit of the thread where the overall valuation has been deemed false?

The missing bit is in fact the assets. Not their value but 100m odd were not owned by JDC. Someone made a few book entries. That’s the fraud. The auditors clearly signed off . But the auditors are not responsible because their remit is ‘existence’. Did these cars exist, well here they are and here are the bank entries relating to their purchase. They won’t check WHO received the money.

It sounds like Hood paid himself. Audacious if true.

I do think the auditors will be embroiled in litigation. The assets are only one aspect. I suspect the 17m profit in 2017 is fiction too.

[silentbrown]

DonkeyApple said:

I’ve completely missed the bit of the thread where the overall valuation has been deemed false?

It hasn't been explicitly deemed false, but the massive reduction in inventory valuation of over £100m is certainly difficult to explain. It certainly isn't down to JD flogging £100m worth of cars in that timeframe.

[lowdrag]

There surely must be a question or two about due diligence when Charme bought the majority shareholding from Derek Hood? Is there a comeback for them here against those responsible? I mean, not noticing that about £100 million of stock was missing is somewhat, er, neglectful?

[Burwood]

lowdrag said:

There surely must be a question or two about due diligence when Charme bought the majority shareholding from Derek Hood? Is there a comeback for them here against those responsible? I mean, not noticing that about £100 million of stock was missing is somewhat, er, neglectful?

It depends on the engagement. Due Diligence engagements aren’t cookie cutter like audits. You focus in the risks. And clearly the assets are a risk. But reliance would have been placed on the audit in many instances. In my experience one would liaise with the auditors and even review their working papers. The cars were obviously on site and there must have been cheques, wire transfers to ‘someone’. It’s an interesting and potentially explosive case of fraud

I’m surprised no one has been arrested.

[DonkeyApple]

silentbrown said:

DonkeyApple said:

I’ve completely missed the bit of the thread where the overall valuation has been deemed false?

It hasn't been explicitly deemed false, but the massive reduction in inventory valuation of over £100m is certainly difficult to explain. It certainly isn't down to JD flogging £100m worth of cars in that timeframe.

But those highlighted bits aren’t showing a valuation write down of 100m at all. That’s why I don’t get why this thread has suddenly gone off in that direction.

The boys you highlight show a valuation at one point of 131. It’s then reassessed at a later date to be 112 and the final point is saying that of the total valuation only 31 was deemed to not be part of legal disputes. It doesn’t say that 100m has disappeared. It’s saying that it’s still there but can’t be sold, only. 31m of the total valuation can.

I’m not getting why people are saying 100m has disappeared from the business just by referencing that screenshot which doesn’t support that at all?

[Burwood]

It may not be 100m but it’s clear JD claimed to own assets (in their asset register/accounts) which they did not.

[BrabusMog]

Burwood said:

It may not be 100m but it’s clear JD claimed to own assets (in their asset register/accounts) which they did not.

That's more than a bit naughty!

[Burwood]

The administrators report is unclear on the precise shortfall. It will all come out in time.

[AW10]

Given that Pandora's box has been opened how many recent buyers of JD Classics' stock will be going through the provenance of their purchase with a fine tooth comb to see if they have been hoodwinked?

[arguti]

Burwood said:

lowdrag said:

There surely must be a question or two about due diligence when Charme bought the majority shareholding from Derek Hood? Is there a comeback for them here against those responsible? I mean, not noticing that about £100 million of stock was missing is somewhat, er, neglectful?

It depends on the engagement. Due Diligence engagements aren’t cookie cutter like audits. You focus in the risks. And clearly the assets are a risk. But reliance would have been placed on the audit in many instances. In my experience one would liaise with the auditors and even review their working papers. The cars were obviously on site and there must have been cheques, wire transfers to ‘someone’. It’s an interesting and potentially explosive case of fraud

I’m surprised no one has been arrested.

I am struggling a bit with the valuation of inventory which at the time comprise the majority of the tangible value of the company - surely amongst the accountants, auditors and due diligence, there would/should have been some audit trail of when the cars were brought into the company and examination of where the funds were transferred to/invoiced to - unless of course most paperwork was forged but even then there should be money leaving accounts, etc.

I run a small company and the accountants are quite fussy about such issues especially with respect to any cars or substantial assets on the books especially if the transactions are related party transactions.

[silentbrown]

DonkeyApple said:

It doesn’t say that 100m has disappeared. It’s saying that it’s still there but can’t be sold, only. 31m of the total valuation can.

While it doesn't say it's disappeared, It certainly doesn't say its still there, it's just not mentioned at all.

While it's *possible* that there's actually £100m more stock with easily defended legal claims, you'd think the auditors would consider that an asset worth mentioning? The only other mention of stock is realizing £21m from the cars which WM are now selling on commission.

[Burwood]

I have experience auditing plc’s and Running large due diligence, we have never traced a cheque. Was a payment made? Yes. Ok fine. I have no experience with cars. I audited a Land Rover group. We counted the cars and ticked them off the stock list then vouched the carry value to the source invoice from JLR.

You need to understand that auditors rely on directors representations heavily in some instances. If there is fraud and or collusion it is very difficult to spot. The assets didn’t appear in one year in which case you would audit the movement. But I accept as some initial point entries were made in the ledger which were clearly false. If the accounts showed plus 30m say in cars. Hood says there they are, here are the contracts/invoices (all false), cheque book stubs, bank statements, then in my view it’s audited correctly. It’s not like the payments will be cashed by a Mr Hood. It will be someone in on it.

We don’t know what DD Charme conducted, if any.

[DonkeyApple]

silentbrown said:

DonkeyApple said:

It doesn’t say that 100m has disappeared. It’s saying that it’s still there but can’t be sold, only. 31m of the total valuation can.

While it doesn't say it's disappeared, It certainly doesn't say its still there, it's just not mentioned at all.

While it's *possible* that there's actually £100m more stock with easily defended legal claims, you'd think the auditors would consider that an asset worth mentioning? The only other mention of stock is realizing £21m from the cars which WM are now selling on commission.

They’ve published the June 2018 values of the assets that they can. They can’t publish the balance as it isn’t known because all of those remaining assets are stated as being in some form of dispute. This is why no one can say there has been a £100m fraud or loss. It’s an unknown at this moment in time. In fact £100m is impossible as the most recent valuation is 112, so remove the 30 and we’re looking at a worst case scenario of 80 but it might also be zero. Arguably it will be somewhere in between as the goods are all tainted now regardless and their values damaged by association with JD and the question marks that will always hang over the cars?

[Mr Teddy Bear]

Mr H seem's to have been an expert 'Man For All Seasons'; how he did it has been described by a previous poster " he seemed a nice guy, he showed me around, made me a mug of tea and we talked about classic cars".

Anybody in the right set of circumstances can be caught out by this sort of character.

It appears that he had so many different scams running at once, cars on the books that he didn't own, other cars that he did own and then claimed to purchase on Mr T's behalf for sums in excess of those actually paid.

The scale of the alleged deceit is staggering.

[skwdenyer]

If you're thinking fraud, I can imagine something like this:

DH takes vehicle on consignment from vendor
DH "sells" vehicle to JDC
JDC declares value in books

Unfortunately, if DH doesn't pay the money to the vendor, whose title is good? DH->JDC is not an arms-length transaction, so not necessarily possible (IANAL) for JDC to rely upon good faith belief in some way. Effect is that DH has the money whilst JDC is out the vehicle and the money.

That's just one scenario. I can imagine quite a lot more.