Wednesday, October 28, 2020

Viceroy Research accuses asset leasing company Grenke of laundering for criminals


The short-seller that warned about the Wirecard scandal has targeted a second German listed business, this time claiming more than 1,400 British small business owners have fallen prey to an alleged leasing scam.

Viceroy Research has published a report that claims Grenke, a finance group that lends to small and medium-sized businesses, is involved in “swindling” companies, “laundering money for criminals” and accounting fraud.

Last night Grenke was preparing a statement in response to the report. It told German media that it rejected the allegations, adding that the group had “not violated any accounting regulations”. Its share price fell by as much as 29 per cent yesterday.

BaFin, Germany’s financial watchdog, said that it was looking into possible market manipulation by Grenke or third parties, including short-sellers. Possible insider trading before the report’s publication was also under review, it said.

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Established in 1978, Grenke provides leasing, banking and invoice finance services to small and medium-sized companies, often via intermediaries. It says it is active in 32 countries, including Britain, and employs 1,700 people.

Viceroy claimed that Grenke had expanded through the “purchase of dozens of undisclosed related-party franchises” in a scheme designed to “either hide fake cash or siphon off millions of euros to undisclosed related parties, or both”.

It said that Grenke’s banking division was a conduit for “the proceeds of crime and money laundering” and that its leasing model “facilitates the defrauding” of small businesses and charities.

Small companies in Britain claim to have been mis-sold leasing contracts by Grenke’s resellers.

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Viceroy claimed that Grenke had “knowingly” allowed resellers to facilitate an alleged scam that involves small businesses being leased equipment such as printers and televisions.

For example, Viewble Media UK, a now-bust reseller, is accused of leasing screens to companies for £299 a month for three years, with a total sum payable of almost £11,000. Businesses say they were told that as well as benefiting from advertising, the deal was cost-neutral as a second associated company, Shoppers Network UK, would rent the screen for advertising purposes and would pay the shop owner £299 a month. Business owners say the payments stopped soon after the screen was installed, leaving them liable for the full cost of the contract, which ultimately was owned by Grenke.

The same alleged scam is said to have hurt more than 1,000 small businesses in Australia.

Northern Ireland’s Consumer Council, which provides support for consumers and small businesses, has raised concerns with the Financial Conduct Authority about the issue. The City regulator has asked for “detailed evidence” on the claims.

Viceroy, led by Fraser Perring, a former social worker, is best known for betting against Wirecard, the now-disgraced German payments group. The short-seller correctly claimed that Wirecard had an accounting fraud at its heart. Jan Marsalek, its fugitive former chief operating officer, is among the world’s most wanted men.

Viceroy alleged that more than €100 million of acquisitions made by Grenke since 2011 were from undisclosed related parties, including the company’s own executives.

It claimed that Grenke was using the system as an accounting scam that booked goodwill in its accounts by buying franchises with profits that are supposedly “largely fictional”. Grenke was approached for comment.

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