The CEO of Vancouver’s Webtech Wireless says there was “no warning bell” for any fraudulent activity at a former U.K. office where nearly $1 million went missing over four years.
The company launched an internal investigation earlier this year when a forensic review revealed discrepancies between payments made to U.K. tax authorities and what authorities actually received, CEO Scott Edmonds told investors during an August 18 conference call.
“At no time did the tax authority audit us or otherwise point out any shortfalls in our remittances, thus there was no warning bell from the other side,” he said.
“Imagine a pitcher throwing a pitch and the catcher not suggesting that the full amount didn’t get there.”
Between 2009 and 2012, a former employee allegedly diverted both legitimate tax payments and payments on doctored tax invoices into a fraudulent bank account, according to results from the company’s internal investigation.
Smaller amounts were then sent to U.K. tax authorities along with falsified reports.
The company originally announced in July the fraudulent activity could result in a liability between $550,000 and $750,000.
But when updated to include estimated interest payments, Webtech Wireless CFO Trevor Greene said the figure is closer to $800,000.
He added management is working with external auditors to see if there’s any impact on previously filed financial statements. That review has not been completed.
The U.K. office closed in 2012 and auditors at Webtech Wireless only discovered the discrepancies as they were winding up accounts at the British operation.
Edmonds said the company would pursue a claim through insurance and attempt to recover money directly from the alleged fraudster for any funds not covered by insurance.
“I’m pretty upset about this and I won’t let it go until we’ve exhausted every avenue of recovery and other recourse,” he said.
Meanwhile, Webtech Wireless also released its second quarter financials on August 18.
The company had $7 million in revenue, down from $8.1 million during the same period a year ago.
Webtech Wirless posted a net loss of $1.9 million in the second quarter of 2014 compared with a $1-million profit earned during last year’s second quarter.
