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Businesses The Almighty Buck Wireless Networking

Free Wi-Fi Supplier, Gowex, Files For Bankruptcy 39

Posted by samzenpus
from the creative-accounting dept.
PuceBaboon writes "The BBC is reporting that a Spanish firm, Gowex, which provides free Wi-Fi services in major cities world-wide, has filed for bankruptcy, following revelations that financial accounts filed over the past four years were "false". The company supplies services in London, Shanghai, New York and Buenos Aires, as well as Madrid. Other sources report that up to 90% of the company's reported revenue came from "undisclosed related parties" (in other words, from Gowex itself) and that the value of the company's share price was now effectively zero.
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Free Wi-Fi Supplier, Gowex, Files For Bankruptcy

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  • by Anonymous Coward

    That's what people are told when they want to build a startup. It is legendary that a famous auction site started with an inventory of items that had been highly inflated by employees. Giving new customers a free ride while pretending that they're full paying customers to others seems to be a common strategy. So what do you expect to happen when you "don't make it"? This happens.

    • It's cute when a struggling start-up does it to improve its survival rate,

      but somehow completely distasteful,

      when a large corporation falsifies data on the order of Enronian proportions.

  • Nothing unusual (Score:5, Insightful)

    by ledow (319597) on Monday July 07, 2014 @03:39AM (#47397801) Homepage

    This isn't at all unusual. However, what really gets my goat is how were they allowed to do what they did for four years?

    That's four years of some accountant falsifying accounts. Four years of tax not paid or properly checked (if they were earning what they claim, a lot of tax would be due - if they were lying about it, they'd not want to pay that tax). Four years of operating without anyone questioning.

    And, most importantly I feel, what's happened to the directors and accountants of the company now ( I highly doubt just one person was in knowledge of this)? My guess is that they've already fled with a nice bundle somewhere.

    Happened like mad to the software houses in the 80's, still going on. Why is it compulsory that I have to be sat down like a child when I want to take out a £1000 loan but nobody questions businesses or enforces them to give enhanced accounts or audits in their first few years of operation. It would stop an awful lot of such outright fraud as this if someone from government was poking through their accounts, and they wouldn't even be able to set up a "new" company, transfer the assets and then declare bankruptcy as is also common.

    • by Anonymous Coward

      ... how were they allowed to do what they did for four years ...

      That's why there are external audits. Although we've seen auditors (see Arther Anderson) choose taking a piece of the fraudulent profits over reporting dodgy practices. Unfortunately, the quest for profits is becoming more of "you didn't see what I did and I didn't see what you did" deal where risk and compliance are irrelevant. In a sector like insurance and finance, which totally depends on everyone using the same rulebook, this behaviour will always lead to disaster. And it already has (see GFC).

      ... awful lot of such outright fraud ...

      A co

      • by Anonymous Coward

        In The Netherlands we have had major accountancy companies play along with the fraud of the companies that had the discrepancies. So yeah, their reliability is questionable at best.

    • by Darinbob (1142669)

      But how did they get money, if it was "free" wifi?

      • Imagine you're a coffee shop and you want to provide free wifi for your customers. Some businesses buy equipment and the internet connection and hire an IT guy to hook it all up together. This all costs.

        Now imagine a company like Gowex comes and tells that they could do it all for you, all you need to do is pay them installation and monthly fees. They tell you they are professionals and they will handle everything - from simply configuring and maintaining everything including repairs; to handling all the sc

      • In addition to that mimino says, you get advertising revenue from the landing page that a lot of these free wifi providers take you to the moment you log on.
    • Re:Nothing unusual (Score:5, Interesting)

      by FireFury03 (653718) <slashdot@nex[ ]k.org ['usu' in gap]> on Monday July 07, 2014 @05:25AM (#47398039) Homepage

      Why is it compulsory that I have to be sat down like a child when I want to take out a £1000 loan but nobody questions businesses or enforces them to give enhanced accounts or audits in their first few years of operation.

      Well, to some extent I think people who run businesses are probably expected to have a bit more of a clue to managing finances than the average man-on-the-street. (And I guess you only have to look at the number of "pay day loan" companies that charge several thousands percent APR to realise that there are a *lot* of members of the public who really don't understand how to manage their finances). So the whole being sat down like a child thing is basically to stop people who don't know what they're doing ending up with mountains of debt _by mistake_, it's not to stop people intentionally cooking the books.

      A company cooking the books is serious, but arguably, a privately held company cooking the books is probably not _that_ bad - yes they avoid paying a bit of tax, but auditing costs the government money so you have to weigh up this cost against the amount of extra tax revenues they're going to get (and certainly, my privately held limited company has never been audited by the inland revenue, not that I have any reason to believe that such an audit would raise any warnings).

      Things are a bit more serious with a publicly held company though, since cooking the books will artificially raise the share price and then risk a crash (as has happened here) so innocent third party investors are going to get screwed over. Its hard to decide who should be paying the costs of an independent audit in this case though. Maybe investors should value a company's shares more highly if a independent audit has been published for that company since investing in that company should presumably be a lower risk.

      • by nukenerd (172703)

        Why is it compulsory that I have to be sat down like a child when I want to take out a £1000 loan but nobody questions businesses .... .

        Well, to some extent I think people who run businesses are probably expected to have a bit more of a clue to managing finances than the average man-on-the-street.

        I think the question is, not why "ordinary" people are required to sit down like a child, but why "business" people are not.

        And I think the answer is that bank managers and people generally have an unfounded admiration of anyone calling themselves "business" people. There is the enduring urban myth of the "hard- headed", all-seeing business man. We see it here even on /. with many posters saying things along the lines of "business knows best etc". Having known some businessmen myself, they mostly have

        • No, business are sat down and are interrogated like ordinary people. For some loans they just hit the credit bureau, just like ordinary people. Sometimes they go over the documents with a fine tooth comb, just like ordinary people. And just like ordinary people sometimes business enhance, fudge, or outright lie.

          By the way, did they take out any business loans? I did not see any references in the articles to business loans. If it is stockholders money than one should be asking why the shareholders did not si

          • by nukenerd (172703)

            No, business are sat down and are interrogated like ordinary people

            Some are, no doubt, but it will depend on whether you are already in the Old Boy network or not. In the UK, we call it the "Rotary Club" mentality.

          • No, business are sat down and are interrogated like ordinary people. For some loans they just hit the credit bureau, just like ordinary people. Sometimes they go over the documents with a fine tooth comb, just like ordinary people. And just like ordinary people sometimes business enhance, fudge, or outright lie.

            Also, even if your business is a limited company, you'll usually find that small business investments are often secured against the directors' themselves, so frequently it is _not_ the case that you can just move the money out of the company and declare it insolvant, coz if you do that you'll lose your home too. Where this tends to fall down is bigger companies, where the bank perceives the company itself to be worth enough to secure the loan... which is a problem if the company's value is fictional.

      • by Sarten-X (1102295)

        So the whole being sat down like a child thing is basically to stop people who don't know what they're doing ending up with mountains of debt _by mistake_, it's not to stop people intentionally cooking the books.

        I think this is exactly right. The lenders are not doing credit reviews for the purpose of stopping crime. They're checking for the purpose of minimizing their own risk. Sure, there's a risk that a loan applicant is going to do something criminal that results in the lender losing their money, but there is a much greater risk that an otherwise-honest individual is simply unable to manage their own finances.

        Then, of course, there's the cost/benefit analysis of the investigation itself. If criminal fraud is ra

    • by afidel (530433)

      Four years of tax not paid or properly checked (if they were earning what they claim, a lot of tax would be due - if they were lying about it, they'd not want to pay that tax).

      They were based in Spain, tax dodging is the second national sport after football.

  • Could be NSA (Score:3, Insightful)

    by penguinoid (724646) <spambait001@yahoo.com> on Monday July 07, 2014 @03:45AM (#47397817) Homepage Journal

    Other sources report that up to 90% of the company's reported revenue came from "undisclosed related parties" (in other words, from Gowex itself)

    I hear the NSA likes to invest in internet infrastructure and technology, and not even take the credit. Maybe they're the undisclosed party.

  • by Anonymous Coward

    Theres no such thing as free.

    Was their product saturated with advertisemenst to 'pay the freight' ?

    What kind of service was provided (if it is more trouble to use than not use it did anyone ever use it?)

    Someones idea just to sell it on to someone else before things fell apart ??

  • Gowex appears to be short for "Goto Wex", since Wex is the name of a community-built, freely available legal dictionary and legal encyclopedia hosted by the Legal Information Institute at the Cornell Law School: Wex, LII's community-built, freely available legal dictionary and legal encyclopedia [cornell.edu]
  • by McGruber (1417641) on Monday July 07, 2014 @05:23AM (#47398037)
    The broker's report that exposed the fraud is worth reading: Gotham City Research LLC's Report on Gowex: Let’s Gowex: La Charada Pescanova (a Pescanovan Charade) [gothamcityresearch.com]

    The report includes this tidbit:

    CEO Jenaro Garcia was a Director of Advanced Refractive Technologies, a penny stock fraud whose shares were revoked by the US Securities and Exchange Commission.

  • Fraud! (Score:2, Interesting)

    by Anonymous Coward

    It's a $1 billion stock fraud.

    Gowex claimed 100k Wifi hotspots, selling advertising to the users, and collecting fees to provide the wifi on behalf of cities.
    Gowex biggest declared income comes from another company.
    Gowex's biggest supplier is that other company, so the money is being cycled.
    Other company is connected to Gowex management, so indicator of fraud.

    I lost some money in their stock, only a few $$$ thousand. I read the report 15 hours late, share price had already dropped to 10. I did a quick sani

    • by swb (14022)

      It's funny what you say about Burger King, but one thing I notice commonly in McDonalds is people hanging out for a long time with their laptops.

      A local coffee shop I used to frequent because it had decent wifi, good coffee and a lot of tables with outlets recently eliminated about 2/3s of their tables and replaced them with lounge chairs and couches. And this was long after you had to have the daily password from your receipt to even use the wifi.

      I suspect this was done to minimize people using it as some

  • by Anonymous Coward

    It was FREE! How can this happen? Not enough volume?

  • Buy something and give it away for free then falsify the accounts to show a profit.

    Seriously though they probably thought that they could make money from advertising. They did not work out yet that Facebook and Google must be heavily subsidised by a government black ops program to gather a massive database. There is *no way* that they can make all of that money from people clicking on the adverts in facebook and google, no way. I do not know a single person who clicks on them - let alone buys something afte

  • Surely this got discredited in April of 2001 when the Dot Com period came to a crashing end?

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