Staff Reporter

The fraud was revealed over the last two weeks when it became apparent that a number of X Arts suppliers had not been paid even though the companys books claimed that they had been.

Checks on X Arts main trading account revealed that payments had been made to unknown bank accounts. Police and X Arts accountants are working with the banks and suppliers to establish exactly what has happened.

It is understood an employee who worked close to X Arts accounts department allegedly diverted company funds to their own personal bank account and a number of other accounts by writing out cheques with faked directors signatures.

Directors discovered some unauthorised direct debit transactions on X Arts main bank account and it is believed some funds were channelled out this way.

X Art managing director Simon Templeman said X Art continues to trade but admitted the incident almost pushed the company into liquidation.

The company is solvent. We have had a lot of support from creditors and customers for which we would like to thank them. We are still trading at this time. We are investigating the last six to seven months of accounts. Accountants have spent the last five days going through the accounts.

The fraud has seriously diminished our cashflow. We almost decided to wind the company up. I became suspicious because the company is profitable but we were experiencing cashflow problems. The main bank account has (Cont P2) been frozen. The bank has opened up a second account so that we can continue trading during the investigation. It appears a number of creditors have been lied to and that payments to a number of suppliers went into other bank accounts.

An unauthorised direct debit has also been set up on the company bank account.

We have recovered copies of cheques that contained fake signatures. We will be holding the banks liable for paying any cheques that have false signatures.

We estimate that around 100000 of company funds have been paid to a number of bank accounts without authorisation.

The individual concerned may not have been working alone. Police are continuing to investigate and are hopeful of being able to charge the individual shortly said Templeman.

In addition early adapters could experience some dropped calls becuase the network will launch before handset testing has been completed.

3s head of external relations Edward Brewster said the network will be going ahead with services as planned.

We are not delaying our services or the launch. We will be offering 3G services to 45 per cent of the country in the second half of the year. This is what we have always said and there is no change to that. We are doing something that has never been done. We are more than a year ahead of our competitors in this respect.

There are challenges involved. Technical challenges are a part of that. But the technical challenges are nothing that we havent anticipated. We dont see it as being a huge issue.

Brewster said a 3G launch should not be judged by conventional network standards.

It would be a mistake to see the launch in the second half of the year as a simple launch. It is more complex. We are looking at it as the first step. By Q1 2003. (cont P2)

By the end of the first quarter of 2003 we will be at a more

When asked why mloop continued to accrue debt knowing it was insolvent to the tune of 1.38 million Rose answered:

If you ever run a company close to the edge you will do whatever it takes to keep the company going. We had been told the 2 million plus from the (planned) flotation would be available and we would be able to pay back the money owed.

Rose made his admission at mloops creditors meeting held on July 25 at a London hotel.

Mloops liquidator Jonathan Sinclair appeared with Rose and financial director Simon Jones and admitted the debt was huge.

We are talking about a lot of money. The business plan was a very clever idea. But the margins were very thin at less than two per cent.

The initial conception of the idea was made at a time when the market was going crazy for telecoms. But a lot of the demand had disappeared by the time the company was up and running.

Among the 80 or so creditors are ex-Orange head of sales Gareth Jones ( 9410.89) PR company Porter Novelli 25000) Reuters ( 44347) BDO Stoy Hayward ( 56037) Ernst & Young ( 14393) and International Supply Chain ( 502524). (Cont P2).

Rose is listed as a creditor owed 132488 for loan repayment.

Not even the hotels used by mloop personnel got paid.

The swish Hotel Martinez in Cannes is owed 1965.88 and The Hemple Hotel in West London is owed 1921.20.

A relaxed Rose and an uncomfortable Jones heard creditors inquiries into the immaturity of their business attitudes and their decision to continue racking up debt while they knew the company was in desperate straits.

Right up until the day that we went into insolvency we were being told that there were ways in which we could keep the company as a going concern.

Up until that time it looked as if we had potential deals going forward to save the companysaid Rose.

The companys flotation had been set for November 2001 but was delayed first for three months and then for a further two months.

The directors tried to find private investors but no-one was found willing to pay off the creditors and pump in a further 2 million necessary to keep the business afloat until it came into profitability.

Mloop generated transactions of 4.4 million but only made a profit of 89000.

Rose said that the proposed flotation would have brought in 3.6 million. This would have been enough to pay off the companys debt and allow it to have enough working capital to see it through to when it became cash generating which was forecast to be February 2003.

Up until the ending of the business and the information we had was that we could be successful by floating the business he said.

Rose was asked why he lied about the companys finances just days before the company ended trading (he was reported in Mobile News on June 2 as saying I can categorically refute the suggestion we are in any sort of difficulty.

His excuse for hiding the true state of mloops affairs was:

We were trying to save the company and we didnt want to have anything printed that could endanger the company or its future.

Creditors were told they would receive a questionnaire as to how they felt mloop had been run.

Once liquidator Jonathan Sinclair has finished his report the matter will be passed to the Department for Trade and Industry (DTI).

The DTI could then decide whether or not Rose or Jones could be made to account for any breaches of company law which forbid directors to knowingly trade while unable to pay debts as they fall due.

Mloop started trading last November. It was heralded as being able to solve the problem of handset imbalances around the world.

However despite the backing of mobile comms heavyweights such as Carphone Warehouse CEO Charles Dunstone ex-Orange head of sales Gareth Jones and GSM Association chairman Jim Pratt the company ran into financial troubles in January when funding ran out. It was wound up at the end of July.

Jones told the creditors he was selling his house as a result of the investment he lost in mloop.

According to mloop documents Jones had invested around 20000.

Rose said he didnt draw a salary throughout his time with the business and that he and his other company Fonexco lost 1.5 million.

Fonexco is listed as an unsecured creditor owed 310228 (see Comment and White Lines).

In his new role Ward will be responsible for driving sales of Motorola products to O2 global and Ireland.

Ward who started as a Mitsuibishi sales executive in 1988 worked his way through the ranks to become Trium head of operations for the last four years says he is looking forward to a new challenge.

I was approached by Motorola and they made me an offer I couldnt refuse said Ward.

Im looking forward to a new and exciting challenge ahead. When you have been with one company for many years it is a tough decision to leave. But Motorola is a company that is realigning and restructuring itself as it looks to grab a greater market share.

Trium National sales manager Rob Whellams said who has worked alongside Ward for 12 years said the company would be sad to see Ward go.

We are very sad to lose Richard. Everyone in the team wishes him the best of luck. We understand he wanted a new challenge.

Trium says product marketing director Koji Miyashita will become acting head of operations for the UK until it can make a permanent appointment.

Ali Khan is understood to have invested 500000 in TAP prior to its postponed OFEX flotation that was due to take place in January.

He wrote a letter to TAP customers and suppliers on July 26 saying:

I have many hats to wear on behalf of The Accessory People. I am the second largest shareholder in the company. One of my other roles is non-executive director.

As of the morning of July 25 I have resigned from my role of director of The Accessory People.

I am involved in legal negotiations to sever all further business ties with TAP. I no longer can act as an ambassador for TAP. I wish them well for the future.

He declined to discuss the matter any further.

TAP sales director Bav Majithia told Mobile News the company was disappointed with Ali Khans decision and issued a statement saying:

We have accepted Ali Khans resignation as a non-executive director. The executive board has expressed disappointment in his departure.

Industry sources say Ali Khan who runs his own consultancy in Scotland was brought in to The Accessory People by chairman Nasa Khan as an investor to bolster the companys bid to float on the OFEX market. He is believed to have injected 500000 but become disilusioned over the delays in TAPs proposed flotation.

The company which has call centres in Manchester Sheffield and Bolton is looking to make 5000 connections for the first year from the office which will employ six staff.

There has been no bust-up with Switch. We paid them upfront for any stock and they have received a share of the profits for continuing to maintain its business said TAP sales director Bav Majithia.

There is no dispute and we are unaware of any legal action against us. TAP bought Switch in April for an undisclosed amount.

Majithia hinted TAP was about to conclude another acquisition deal.

The phone retails at 79.99 and also offers picture messaging predictive texting vibration and a 200-name phone book.

It is understood the handsets were generic SIM-free handsets in standard Nokia packaging and did not carry any Orange logo or branding.

They were being returned to Nokia to have the software upgraded pending a July launch for business customers.

The handsets were in the possession of an Orange supplier when the theft occurred and have been blacklisted on the Orange network in the UK. We do not expect this to have any significant impact on our customers an Orange spokesperson confirmed.

T-Mobile told dealers that they had to run the promotion and that they had to sign a written agreement. Dealers were also warned that mystery shoppers would be sent out to ensure stores displayed the appropriate promotional posters.

But distributors and dealers were unable to get their hands on the Nokia 8310 handsets throughout the promotional period.

We havent been able to find an 8310 for love or money. We have spoken to T-Mobile and they have just told us that a new batch would be coming in soon. It is now half way through the month and we still havent received anything said George Christos of London-based dealership Tagrose.

What is the point of running a promotion when you dont have any of the promoted items (Cont P2) available? It seems like the left hand doesnt know what the right hand is doing said Christos.

T-Mobile distributor European Telecom has also been unable to get its hands on any of the handsets.

T-Mobile just doesnt seem to have any of the 8310s left ET finance director Jim Mann said.

We have about 20 of the old priced 8310s that had a higher retail cost. But well have no difficulty getting rid of them because the dealers want them.

The problem is that as soon as we get rid of them we wont be able to get anymore. And there is nowhere other than T-Mobile to get them.

North-East distributor Cityphone has also had difficulty getting stock for its Talk4All shops.

We have had a real problem with shortages over the last three weeks. We have spoken to T-Mobile and it has told us that the stock is on allocation but we havent seen any handsets. We also have a problem obtaining Samsung T100s.

I had heard that there was an internal meeting at T-Mobile last week about the lack of handset availability and the general handset situation. If there are internal meetings then the situation must be quite serious said Talk4All commercial director Julien Parven.

It is always the smaller dealer who suffers. Our two or three thousand phones are ordered to meet projected demand. If a smaller dealer orders 30 handsets it will be because he has already sold them. Those 30 handsets will be his lifeblood.

T-Mobile head of external communications Patrick Barrow said the network was not aware of any shortage and maintained that stocks exist in line with dealer forecasts.