Cashmere directors banned after falsifying accounts

THREE directors of a Yorkshire cashmere business which went into administration in 2007 have been disqualified from holding senior management positions for 10 years.

The move follows an investigation by the Insolvency Service which found that the trio had been involved in supplying false sales invoices to its funders.

The sham meant that when Joseph Dawson, which was founded in Otley in 1871, went into administration, £3.9m of the company’s £5.2m total book debts were false, leaving its funders with a £4.4m shortfall.

William Holdsworth, of Pool in Wharfedale, Lyndon Day, of Ben Rhydding, and Ian McGargle, of Harrogate, have been banned from managing or in any way controlling a company or being a director until 2020.

When Joseph Dawson went into administration, the company supplied cashmere used by the world’s best known fashion houses including Prada, Hermes, Gucci and Burberry and had a turnover of £9.5m.

It was bought for £6.6m by The Holdsworth Partnership led by Yorkshire textile entrepreneur Mr Holdsworth, from Scottish group Dawson International in 2003.

Mr Holdsworth based the trading offices in the Wharfebank Business Centre in Otley, in the same mill where it was started by its eponymous founder.

The company went into administration on November 21, 2007, with an estimated deficiency to creditors of £7.12m.

Joseph Dawson’s operations were funded by confidential invoice discounting and a stocking loan.

The Insolvency Service found that the company manufactured false proofs of delivery, shipping documents and correspondence to back up its claims that the false sales invoices were genuine.

When the funder’s accountants visited the company to undertake a verification of the debtor ledger, the company provided them with false contact details for the book debtors and procured false verifications to be sent to the accountants in an attempt to prevent the discovery of the false sales invoices.

The company also misrepresented the value of its stock to the funders, under its revolving inventory facility loan, under which the funders would advance up to 70% of the value of the stock.

Three days before entering administration, Joseph Dawson claimed its stock was valued at £3.65m when it was nearer £750,000.

In 2003, Joseph Dawson was a loss-making company within the quoted Dawson International group but was bought by Mr Holdsworth who relocated it from Scotland back to offices at the William Ackroyd mill in Otley.

The Duke of York joined fashion and textile industry experts from around the world at Harewood House in 2004 to celebrate the company’s return to Yorkshire.

Joseph Dawson started his original cashmere business in the 1870s. He was travelling through Kashmir – the state the fibre takes its name from – when he noticed peasants separating the fine goat fibre from the coarser outer hair by hand.

He used the knowledge he had gained as a carding engineer at the William Ackroyd Mill to invent a machine that could perform this process and laid the foundations for what is now a worldwide industry worth hundreds of millions of pounds.

The purchase of the business in 2003 was funded by the Holdsworth family and a loan from a commodity trading bank in Holland.