A businessman has been given a suspended jail sentence for failing to keep proper accounting records for his online company supplying fireplaces and stoves.
Leeds Crown Court heard John Hughes was the sole director of Wentworth Northern Limited which was wound up in December 2011 on his own petition.
Conor Quinn, prosecuting, told the court today (Wednesday) of the 496 orders taken, 208 were not filled leaving the company owing £170,980.
He said the liquidator requested the company’s financial records to ascertain the position and see if creditors could be paid and discovered problems.
Between June to July 2011 there were records of only six orders when 234 had been placed, of which 188 were not delivered.
Around £43,000 had been withdrawn in cash between June 2010 and August 2011 without record of where it had gone while £10,500 was issued in cheques in the same period for which no explanation was provided.
Mr Quinn said £11,311 was found to have been paid out in health care, child support, squash club membership and vehicle finance which appeared to be personal finance without explanation.
Hughes gave his salary as a director in the tax year April 2010 to 2011 as £5,280 but in September 2010 had used £6,000 from the company to repay a personal guarantee on a previous company and not recorded that as a director’s loan.
As a result of the paperwork available the liquidator was not able to identify who had paid for fireplaces and not received them making them creditors of the business or whether £71,000 in unexplained transactions could have been used to repay creditors.
David Taylor, representing Hughes, said he accepted he was the sole director of Wentworth trading as Fires Galore. That firm had been incorporated in March 2010 and initially did very well.
However, the prices from his suppliers were increased and he was not able to pass that on to the customers in time for a cash flow crisis to be avoided.
“It was a classic case of robbing Peter to pay Paul,” said Mr Taylor. Hughes used money from orders to pay suppliers to keep the stock coming but eventually realised he could not keep going. He relied on a book keeper and an accountant to keep records but accepted they were not as full as they should have been.
Mr Taylor said: “He is genuinely remorseful how the operation ended and lost money himself.”
He had now been accepted under the New Enterprise scheme and intended to run a taxi and private hire business from Britannia Mills in Slaithwaite.
Hughes, 57 of Titanic Mill, Low Westwood Lane, Linthwaite, admitted failing to keep adequate records and was given a five month prison sentenced suspended for 12 months with 300 hours unpaid work.
Judge Sean Morris told him if there had been a “whiff” of him being a “fly by night” who set up one company and then moved on to another when it had financial problems he would be locked up immediately.
He added: “But I am sentencing you on the basis of your guilty plea and it seems a case where you genuinely over reached yourself and you were paying suppliers in the hope of keeping the business going, but it was never going to work and as a consequence a lot of people have lost money.”
He said he hoped they would pursue Hughes in the small claims court given he could be earning money while retaining his liberty.
