Accounting fraud: Got ’em, Gotham

Now it’s thumbs-down for Gowex

JENARO GARCÍA was an eloquent cheerleader for Gowex, helping to propel the Spanish Wi-Fi firm to European startup stardom. When investors asked detailed financial questions of its founder and boss, however, he would clam up. Short-sellers, who bet against companies by selling borrowed shares, in the hope of buying them back more cheaply later, began to act on this reticence early this year. But the killer blow was a report by an opaque outfit called Gotham City Research, alleging that Gowex had far fewer wireless hotspots than it claimed and that 90% of its sales were bogus. On July 6th, five days after the report’s publication, the firm said it would file for bankruptcy and that Mr García (pictured) had resigned after admitting to fiddling the accounts for at least four years.Gowex’s dramatic collapse marks one of the biggest victories for a relatively new breed of company-accounts “detectives”: small, independent research-and-investment outfits that revel in unearthing alleged book-cooking. Having focused largely on China’s fraud-filled market until now, they are branching out. Gotham is a secretive…

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