NIHL, page-144

Just looked back in here to see if anything has changed. I see it hasn't - the 'ra ra'brigade have got even louder. The old saying: "never let the truth get in the way of a good story" is fully in play here.

I'm still holding, based on the premise the SP doesn't anticipate much improvement, when logic suggests that with everyone focused on it and the fundamental need to record better results and prospects the next time SGH is forced to tell people something, despite SGH's woeful management as a result of AG's apparent inability to learn from past mistakes and delusional presentation of the whole sorry affair as 'someone else's fault', it is likely there will be some glimmers of light pointing to a slow recovery. The share price might then recover accordingly - or at least that's what I hope. As soon as I can then get out (unless sense prevails and Grech gets the order of the boot) without too much damage, I will.

Just for the record, I see the warranty claims against WTG as a desperate move by desperate people. The FCA concluded its investigation of QPP shortly after the PSD deal without major comment. The 'accounting regulatory people' (I forget what they're called) did likewise. The SFO had by then begun its investigations but it is clearly known they are not interested in what has gone on since the current management team has been in place - they are going after Robert Terry and previous management for all kinds of things it is clear went on before RT left, some 7 or 8 months before the PSD deal was signed.

PwC (which had not at any time previously been associated with QPP) was appointed (December 2014) by WTG's current management before Grech arrived on the scene later that month. He was at all times aware of what PwC was doing and why. It is highly likely in the circumstances that PwC's periodic reports to QPP management were made available to SGH, which made many subsequent statements that it knew all about QPP's problems, had carried out extensive due diligence of its own (which included 70 of its own lawyers working through 8000 legal cases SGH selected across the whole PSD business over an extended period, taking legal ownership of these cases in return for a payment to QPP of £15m (inc VAT) which also gave SGH a 3 month period of exclusivity to 31 March 2015. Read what Grech said at the time - it's available if you know how to use google.

KPMG was appointed auditor of QPP in Oct 2013. It remains auditor today, despite it having been concluded by PwC that the accounting policies having been applied by former QPP management had been "at the aggressive end of what was acceptable - but acceptable nonetheless" and (in the case of NIHL
claims) in some cases inappropriate. In regard to the NIHL claims, it was acknowledged that there was no prior claims history to draw guidance from as to how income would play out (basically PwC was saying WIP was overstated).

I would ask the following basic question: how likely is it that two of the world's most respected accounting firms would risk their reputations by (1) in the case of PwC leaving themselves open to subsequent criticism of the nearly 6 months of work they were engaged to carry out, which led to the QPP accounts being fundamentally restated and (2) KPMG would have remained auditors if they were thought to have been responsible for signing past accounts that turned out to be 'wrong' (application of different accounting policies can materially affect declared results in any company) or that they would have wanted to remain auditors if they felt QPP's (now WTG's) new management was likely to guilty of deception?

Everything material was out in the open by the time SGH concluded the purchase of PSD (which I personally felt at the time was madness, although I was delighted by as a late entrant to QPP after RT had gone, on the basis the shares had been shorted to death and beyond - in much the same way as SGH's were when Greach finally spotted that something was wrong, some 6 months after the deal had completed).

The accounting affairs of SGH at the time the PSD deal was transacted were under the control of a CFO who presided over published accounts of an ASX 100 company that included GST in both income and expenses - how basic an error is that? It speaks volumes about the competence of the SGH BoD (all of whom - except the former CFO - remain today despite having run the ship onto the rocks). Grech was all about growth, however it was achieved - that much is obvious if you look back and read what was written and said at the time. In acquiring PSD, SGH was acquiring a collection of different businesses that in total were twice the size of the existing SGH, had been only recently been put together by RT and whose employees had been 'under the cosh' for a long time. These employees had been incentivised to stay until the PSD completed by well-publicised share participation arrangements in their favour.

Grech sent new over to the UK to get on the the business of making the profits he naively thought would flow and it appears not to have been until the October or November following the acquisition that anyone told him something might be wrong somewhere.

It must have been a devilishly cunning fraud to fool all the people it did. Except, of course, SGH - which finally discovered it 18 months after the event. It can only have been discovered recently because SGH told everyone in its last accounts not to expect a payback under the escrow.

Funny that.