Wrekin Construction and the mystery of the £11m ruby

Mar 13 2009 by Tom Scotney & Anna Blackaby

Collapsed engineering firm Wrekin Construction issued £11 million worth of shares a year before it collapsed in exchange for what the company’s accounts describe as probably the world’s most expensive ruby.

Shropshire-based Wrekin was taken into administration on Monday after winding up petitions worth millions of pounds were filed by unpaid contractors.

Its accounts for the year ending December 31, 2007, show the firm bought a ruby known as the “Gem of Tanzania” in exchange for the shares, from Derbyshire construction firm Tamar Group Limited, which was at the time a minority shareholder, but later took overall control of Wrekin.

Accounts filed at Companies House say the Gem of Tanzania was bought “in exchange for the issue of £11,000,000 2 per cent cumulative redeemable preference shares.” It says the gem was valued by “a professional valuer at the Instituto[sic] Gemmologico Italiano, based in Valenza, Italy, on August 31, 2007.”

However, the Istituto Gemmologico Italiano, a government-recognised Italian institution, said it had no records of the “Gem of Tanzania”, was not open in August, and did not do any valuations at its site in Valenza, which was solely for teaching.

What was believed to have been the most expensive ruby in history, as of 2006, was a 38-carat cut gem sold at an auction for $5.86 million.

Tamar Group took over Wrekin Construction, which is based in Shifnal, Shropshire, in 2007. When contacted by the Birmingham Post, Tamar Group said: “We don’t give anything to the press.”

Nearly 500 people lost their jobs when Wrekin Construction collapsed earlier this week. It was taken into administration by its bank RBS, who appointed Ernst & Young as administrators to the firm after several contractors called in their debts.

Ernst & Young refused to comment about the “Gem of Tanzania”, but said it had identified some other financial issues.

The spokesman said: “While the Administrator’s investigations are at an early stage, there are a number of issues which have already been identified.

“Over recent months, credit insurance for Wrekin Construction has been significantly reduced or withdrawn completely.

“Amounts due to the Crown in respect of VAT and PAYE appear to exceed £3.5m. Amounts believed to be due to Wrekin Construction in respect of government contracts exceed £2m.

“Over the last 12 months Wrekin Group has invested approximately £2m in relation to land for redevelopment and the acquisition of two businesses – Toft Johnson Construction and Watson Dallas.

“At Appointment, Wrekin Construction was the subject of five winding up petitions and approximately 40 County Court Judgments.

“The level of overdue creditor balances is not currently available.

“At this time no further information will be available until the Administrators proposal is made to the Group’s creditors in April.”

A day after they took over administration, Ernst & Young made 412 people redundant, keeping on a skeleton staff of 72.