The accountant of the collapsed jeweller Vashi has been banished from the profession for rubber-stamping £157 million worth of fictitious diamond stocks in its books.
Rajnikant Chhotabhai Patel was also fined £14,000 for his “shameful and deplorable” certifying of stock he had never seen, which was used to attract investors, many of whom were based in the Middle East
The company folded in April 2023 with debts of £170 million and it emerged that the diamond stocks it held were worth only £147,000.
Its founder, Vashi Dominguez, vanished as his UK-based firm was wound up and an investigation by The National revealed how he was able to raise millions to fuel his global ambitions using the diamond stock and inflated sales figures.
Mr Patel faced a disciplinary tribunal at the Institute of Chartered Accountants in England and Wales (ICAEW) but didn’t attend to defend himself.
Counsel for the tribunal, Jessica Jones, said that Mr Patel had signed off 28 stock certification letters for Diamond Manufacturers Limited (DML), which traded as Vashi, from 2014 to 2023.
Each year the value increased, beginning with around £2.7 million rising to £157 million.
She said that after the appointment of the liquidators, “what became clear was that the stock value was nowhere near what had been advanced either by Mr Patel in the letters of certification or as appeared in the accounts”. He also certified that the company had machinery worth £7 million when in reality it was worth £58,000.
Ms Jones said accountants have to provide what’s known as an assurance opinion, which outlines the risk associated with their assessments, and they need to have “sufficient and appropriate evidence” rather than it being “a tick-box exercise”.
The ICAEW would expect Mr Patel to carry out procedures over the stock “to the point where he was satisfied that any risk was reduced to avoid a false assurance”.
But no standards were followed, which she said was “staggering given the amount of money Mr Patel was prepared to certify DML stock as being worth”.
Instead, he admitted that each month a director provided a breakdown of the various types of stock, which was reconciled with the monthly management accounts, before he issued the certificates.
Mr Patel “does not possess any special skills, qualifications or experience in the valuation of diamonds”, Ms Jones told the hearing.
“He also confirmed that the stock had not previously been physically verified for the purposes of issuing these certificates. Indeed, it would appear Mr Patel never even saw the stock.
“He virtually did nothing of substance, and there is literally not even an envelope of paperwork to provide a rationale or reason as to how he was or felt he was able to sign these letters of certification, valuing stock finally at over £157 million. His behaviour can rightly be considered shameful and deplorable.”
While Patel has co-operated with the investigation, “he has shown little to no insight into the conduct, limiting himself to comments regarding the fees that he has not received”.
Mr Patel was given an exclusion order permanently revoking his right to use the “ICAEW Chartered Accountant” designation. In addition to the fine, he was ordered to pay costs of £11,200.
The collapse of Vashi is now being investigated by the Met Police, Ms Jones said.
The latest report from the liquidator shows that it has reached an out-of-court settlement with Mr Patel’s company Inger and Co for £750,000.
Mr Dominguez sought to disrupt the jewellery business by attracting younger customers and opened a dazzling 4,476 square foot store in London’s Covent Garden.
Among those reported to have backed the company are Nick Wheeler, founder of the shirt maker Charles Tyrwhitt; Sinclair Beecham, the co-founder of sandwich chain Pret a Manger and William Jackson, chief executive of London-listed private equity firm Bridgepoint.
At one point, the hype surrounding him led to media coverage and a regular slot on the popular UK TV show This Morning as its in-house jewellery expert, giving tips about buying precious gems.
As the company was going under, staff were made to pretend to be customers to attract investors.
