The Wrekin Ruby: Britain’s Most Infamous Gemstone Fraud

The story of the Wrekin Ruby stands as one of the most audacious gemstone valuation frauds in UK business history. This case reveals how creative accounting, forged certificates, and an inflated gemstone valuation brought down a construction company and cost 530 people their jobs.

In this article, you will discover:

• How a Tanzanian ruby increased in value by 3,700% in just one year through fraudulent accounting practices.
• The parallels between the Wrekin Ruby scandal and the recent £170 million Vashi diamond jewelry company collapse.
• Why the stone valued at £11 million eventually sold for just £8,010 as a collector's curiosity.
• The role of forged gemological certificates in perpetuating one of the UK's most significant construction company failures.
• What happened to the 530 workers and company directors after the Wrekin Construction Company collapsed in 2009.

The Vashi Diamond Scandal: A Modern Parallel to Gemstone Fraud

A recent UK documentary explored the case of Vashi Dominguez, who established "Vashi" as a major retailer of bespoke diamond jewelry. The documentary traced the company's journey from its first store opening in London's Covent Garden in 2021 through its short existence to its eventual collapse in 2023.

The company claimed a turnover of £105 million ($202 million) in one year according to the accounts. However, the true figure reached only £5 million ($6.75 million). The company used this inflated figure as an incentive to encourage more investment, which in turn created additional support from creditors and investors.

When the company collapsed in 2023, the liquidator discovered some alarming discrepancies:

• The accounts showed a stock of £150 million ($210 million) of diamonds, which would almost cover the £170 million ($230 million) debts the company and its owner had accrued.
• The actual stock figure totaled only around £100,000, a staggering difference from the reported valuation.
• The director and founder quickly disappeared after the collapse, with witnesses last seeing him on a flight to Dubai.
• He has not been heard from since his disappearance.

This case reminded observers of another UK scandal that, although not on the scale of £170 million, made the national papers and involved similar creative accounting practices centered around gemstone valuation.

How Gemstone Valuation Creates Opportunities for Fraud

The price or value of gemstones can be subjective. Buyers and sellers frequently hold different views regarding the true worth of a gemstone. Usually this discrepancy amounts to only a few hundred pounds or dollars, even on some of the largest stones. However, occasionally very significant differences emerge that can have devastating consequences.

One such stone came to light in 2013 in the UK and sat at the center of a multi-million pound construction company collapse.

The Discovery: From Tanzanian Mine to UK Investment Asset

Where Was the Wrekin Ruby Found?

The background of this story starts in 2002 in Tanzania, specifically in the northern region around Arusha. Ideal Standards, a mining company operating in the region and searching for minerals, unearthed a large red sample that was subsequently identified as ruby.

The stone weighed 10,725 carats (approximately 2kg). This weight would have ranked it as one of the largest ruby finds ever and certainly would have attracted interest from many sources.

The First Sale and Journey to the UK

The stone received its initial sale to one of Ideal Standards' investors for approximately £13,000 ($17,500). However, stories abound that this individual had a shady past involving diamond smuggling and various questionable mineral deals.

This large gem eventually traveled to the UK, changing hands several times. Finally it came into the possession of Mr. Unwin in a deal that, according to reports, involved land and Rolls Royce cars. The transaction saw the stone valued at £300,000 ($400,000).

This represented a remarkable increase in value:

• The stone jumped from £13,000 to £300,000 ($17,500 to $400,000) in the space of 4 years.
• This represented almost a 24-fold increase in value over a relatively short period.
• The stone subsequently appeared on the accounts of Unwin's company, The Tamar Group, valued at the same amount and listed simply as "gemstone."

This transaction highlights an interesting area of accountancy where companies "invest" in assets not directly related to their area of business.

The Astronomical Revaluation

How Did the Gem of Tanzania Increase in Value So Rapidly?

The mathematics took a turn into the twilight zone at this point. The stone, now referred to as the "Gem of Tanzania" (sometimes also called the "Star of Zanzibar"), appeared in The Tamar Group's accounts in December 2006 with a value of £300,000.

However, the following year's accounts included an extraordinary entry:

• The accounts contained a line entitled "revaluation of gemstone."
• Alongside this line appeared the figure £10,700,000.
• This brought the final value to £11 million ($14.8 million).
• In the space of one year, this stone had increased in value by nearly 3,700%.

The accounts included an accompanying statement explaining that the value was not distributable to shareholders, suggesting some awareness of the unusual nature of this revaluation.

The Wrekin Construction Company Acquisition and Asset Transfer

What Was the Financial Condition of Wrekin Construction in 2007?

The year 2007 proved disastrous for the Wrekin Construction Company. Despite generating a turnover in the millions, trading losses completely wiped out profitability and left the company in a precarious position.

Unwin came onto the scene at this critical point and secured the company's future by buying it from the previous owners for a nominal sum. He aimed to turn around its finances and reclaim profitability for the struggling construction firm.

How Did the Gem of Tanzania Move to Wrekin Construction?

Towards the end of 2007, Unwin took the unusual step of transferring the "Gem of Tanzania" from The Tamar Group (which he owned) to The Wrekin Construction Company (which he also now owned). The deal involved the exchange of shares, with the "Gem of Tanzania" being exchanged for £11 million worth of preference shares.

The accounts detailed the transfer and stated that a "professional valuer" had provided the valuation. Unwin included a statement explaining why the accounts appeared favorable.

Since the stone wasn't technically "sold" but rather "exchanged," it gave a much-needed boost to the balance sheet:

• The transaction made a company that was actually in severe financial difficulty appear to have a surplus of somewhere in the region of £6 million.
• Some "dubious payments" that Unwin made to other companies he owned would have reduced this surplus.
• The creative accounting temporarily masked the true financial position of Wrekin Construction.

The Forged Gemological Certificate Scandal

What Documentation Supported the £11 Million Valuation?

To support the inflated valuation of the stone and enable the company to appear solvent, an independent valuation was required. This documentation duly appeared, issued by a laboratory called "Instituto Gemmologico Italiano."

This name represented a very close approximation to a genuine laboratory called "Istituto Gemmologico Italiano" (based in Milan). However, the genuine laboratory had no connection to the stone in question.

Key problems with the certificate:

• The report was issued on a day that the genuine lab was closed: August 31, 2007.
• The genuine lab only identifies stones; it does not give valuations or appraisals.
• This forged report date fell 4 months prior to the transfer, making the increase in value for the stone even more amazing.
• If the valuations were to be believed, the 3,700% increase happened in the space of 8 months rather than a full year.

Why Didn't the Valuation Raise Red Flags?

Alarm bells should have been ringing for the accountants and auditors. The valuation of £11 million far exceeded the then-current world record for the sale of a ruby. The record was set in 2006 with the sale of the Graff Ruby, an 8.62-carat stone that achieved a hammer price of £2.5 million ($3.6 million).

Since then, several rubies of greater value have come to auction. The most expensive was the Estrela de Fura ruby, weighing 55.22 carats and achieving £27.7 million ($34.8 million) at a Sotheby's auction in New York in May 2023. However, this stone benefited from several advantages:

• It was backed by not one but five separate laboratory reports.
• All reports attested to the exceptional quality of the stone.
• All certificates came from highly reputable laboratories with international standing.
• These rubies all benefited from being cut stones, showing their full beauty.
• The Wrekin Ruby remained uncut and therefore of unknown potential.

Several newspapers also quoted that in the final days of the Wrekin Company, another valuation appeared (although not from a recognized expert gemological laboratory) that valued the stone at between £20 and £23 million, further increasing its alleged worth.

The Collapse: When Reality Met Fantasy Valuations

What Triggered the Wrekin Construction Company's Administration?

The true scale of the deception came fully to light in 2009 when the company went into administration. The company owed somewhere in the region of £45 million to various creditors. The UK Insolvency Service started an investigation to recover as much money as possible from the company's assets in order to reimburse the creditors to some degree.

The asset classified as the "Gem of Tanzania" seemed a prime target to provide considerable funds for this purpose.

What Did Independent Gemological Experts Discover?

To apply due diligence, the administrators sent the gemstone to qualified gemological experts. The experts determined that the stone was not of sufficient quality to be classified as faceting material. This meant that it would only appeal to private collectors or the public who might have an interest due to the fame (or infamy) of the stone, or that it might be suitable for cabochon stones.

Subsequent analysis revealed further details about the true nature of the stone.

The Truth About the Wrekin Ruby

What Is the Gem of Tanzania Really Made Of?

Although initially described as ruby, many sources thought the 4.5lb/2.1kg (10,725ct) stone was a material known as anyolite, a common red stone in many East African regions.

Understanding anyolite:

• Anyolite does contain ruby within a mass of green zoisite.
• The ruby crystals typically aren't suitable for cutting into faceted gemstones.
• As a carving material, anyolite does have value, just not as high as the "appraisals" stated for this sample.
• This identification would reduce the "Gem of Tanzania" to the status of a doorstop or paperweight.

Some UK newspapers quoted the stone as only being worth £100, a far cry from the £11 million pound value listed in Wrekin's accounts.

The Final Sale Price

How Did the Administrators Attempt to Sell the Stone?

Initially, the administrators had considered auctioning the stone through traditional channels. However, the UK-based auction houses they approached were not interested in handling such a controversial item with questionable provenance and quality.

The famous "Gem of Tanzania" was eventually advertised for sale in the "Rock n Gem" magazine, a quarterly collectors' magazine targeting mineral and gemstone enthusiasts.

What Was the Final Sale Price?

According to the Financial Times, the Wrekin Ruby was sold for £8,010. The purchaser allegedly remained optimistic, believing that the stone could realize anywhere between £200,000 and £2 million when 'broken up,' potentially for cabochons.

However, nothing has been seen or heard of the stone since the day of that sale. It probably still adorns a desk as a large, if somewhat ugly, paperweight.

The Human Cost: Jobs Lost and Directors Banned

What Happened to Wrekin Construction Company Workers?

The outcome for the workers of the Wrekin Construction Company mirrored the downfall of the infamous stone. With the company in liquidation, 530 jobs were lost, affecting families and communities across the UK.

What Penalties Did the Directors Face?

The courts held the directors accountable for their actions:

• Unwin received a court order banning him from being a company director for 10 years.
• Ibbotson received a court order banning him from being a company director for 7 years.
• These bans prevented them from holding similar positions of corporate responsibility during their prohibition periods.

Lessons Learned: Gemstone Valuation Fraud Warning Signs

How Can You Identify Potential Gemstone Valuation Fraud?

What Is the Moral of the Wrekin Ruby Story?

As always, if something seems too good to be true, then it invariably is. The Wrekin Ruby case demonstrates how:

• Gemstone valuations require verification from multiple reputable sources.
• Assets listed on company accounts should relate to the core business operations.
• Independent auditors must scrutinize unusual asset valuations with particular care.
• Forged documentation can temporarily deceive investors and creditors but eventually comes to light.
• The human cost of corporate fraud extends far beyond the boardroom to affect ordinary workers and their families.

The Wrekin Ruby remains one of the most cautionary tales in both the gemstone industry and corporate accounting practices, serving as a reminder that proper due diligence and skepticism of extraordinary claims can prevent devastating financial collapses.