RKT Stock – Solutions 30: from Romania to Mauritius, with love
Solutions 30 was once a little-known name on the French stock market. On the surface the outsourcer was a mundane man-in-a-van operator providing last-mile services on behalf of European corporate giants such as EDF, Vodafone and Unitymedia.
Up until December, its shares had been on a rocket ship. Since listing in 2005, they’d risen a staggering 21,000 per cent, giving the company a valuation of €2.1bn, and making its chief executive and co-founder — an Insead-educated Italian named Gianbeppi Fortis — worth close to €350m.
The story has rapidly unwound since.
The troubles began when an anonymous short report hit the French press just before Christmas 2020. Activist short seller Muddy Waters, who had been short the stock since May 2019, followed up with a series of open letters to Fortis. In April, an independent audit commissioned by Solutions 30 by Didier Kling & Associates and Deloitte found the various accusations by the short sellers “unfounded and erroneous”.
Then this past weekend, Solutions 30 revealed that its auditor, EY, had refused to sign off on its full-year accounts. The news followed a two-week suspension of trading in the company’s stock, a move that had been self-initiated. Alongside the unaudited results released by the company on Sunday, EY said the company “did not provide us with access to certain information necessary to perform our audit” and that it had:
. . . not been able to obtain sufficient and appropriate evidence supporting the nature, the substance, the value and the compliance with laws and regulations of certain transactions of the group and to determine if these transactions were made with related parties including with members of management.
It went on to state that “the possible effects on the consolidated financial statements of undetected misstatements may be both material and pervasive”.
Solutions 30 said it “strongly disagrees” with EY’s reasoning, adding that the Big Four firm had not rejected or qualified the accounts. Investors would usually expect an unqualified audit report of a major listed firm, confirming that the accounts were accurate and could be relied upon.
On Monday morning, the shares crashed by over two-thirds. The company’s market capitalisation now stands at €300m.
EY’s statement highlighted related party issues from Solutions 30’s most recent financial year.
But FT Alphaville has also been researching ties between a Solutions 30 supplier and entities tied to the company’s senior management, including Gianbeppi Fortis, between 2013 and 2014. In this post, we thought we’d share what we’ve learned so far.
That story starts in North Africa, with a business called FNT International.
From Tunisia . . .
According to the local Tunisian company register, FNT International — of which Solutions 30 chief executive Gianbeppi Fortis was once a 99.5 per cent shareholder — was founded by an Italian named Federico Niccoli in February 2012.
It was registered to a single office space in a nondescript commercial block in central Tunis, not far from the local Juventus football academy.
But these are not the office block’s only ties to Solutions 30. Since 2013, the company’s Tunisian subsidiary, Telima Tunisie, has also called the same address home, alongside an accounting firm called Audasco, according to its website. Audasco did not reply to a request for comment.
FNT’s founding director, Federico Niccoli, could not be reached for comment.
What we do know is that, according to a notice in Tunis daily Le Temps and local filings, three months after FNT was founded, in May 2012, Niccoli sold the majority of his stake to Fortis as well as a tiny fraction (0.5 per cent) to a woman called Maria Creti, the wife of Fortis’s brother Ruggero. Ruggero has been the chief executive of Solutions 30’s Italian business since 2008.
Two and a half years later, in December 2014, Fortis and Creti sold their stakes to an Italian named Giuseppe Nicolosi, according to local filings. Nicolosi then moved his majority shareholding into a Cypriot entity named Nabitek Ltd.
. . . to Romania . . .
Giuseppe Nicolosi is a call centre operator whose businesses have served as an outsourcer for Solutions 30 for almost a decade. His name can be found on records for various companies in both Romania and Italy, and he was once a shareholder of former subsidiary Solutions 30 Eastern Europe.
It’s clear Nicolosi was friendly with Solutions 30’s management. His Twitter account posted a photo of with himself and Ruggero Fortis back in late November 2014, just weeks before he took control of FNT International.
At that time, Nicolosi was running a business in Romania called Gainglobal, which had provided outsourcing services for Solutions 30 Italia since September 2013, according to a contract seen by FT Alphaville.
On the surface, it was not an unusual relationship: Solutions 30 has long outsourced some of its back-office operations to Eastern Europe. What was different about Gainglobal, however, was that it had a direct commercial relationship with Gianbeppi Fortis’s FNT International.
A one-year agreement seen by FT Alphaville, signed on January 3, 2014, details that FNT was to provide hotline services for Gainglobal for a total contract value of over €100,000.
If this tale is getting confusing, let’s take a step back. Here’s what we’ve outlined so far.
Solutions 30’s Italian subsidiary contracted a Romanian company, run by a close affiliate, which then contracted a Tunisian business owned by Solutions 30’s chief executive and his sister-in-law. The Tunisian business, FNT International, was then transferred to the owner of the same Romanian company almost exactly a year later.
FNT’s local filings state it was created to export technical assistance, so it might have been able to provide these services to Gainglobal. Yet, apart from the company documents, there seems to be no trace online of the business, either in the form of employees, suppliers or customers.
In mid-January 2014, just a week after the contract started, Gainglobal transferred 225,050 Romanian leu — or €50,000 — to FNT on request of an invoice, according to documents seen by FT Alphaville.
It wasn’t the only payment that FNT International received in 2014. According to other documentation, from June to December 2014 it received just under €575,000 in cash in a series of transfers. Of this money, almost a tenth arrived from Solutions 30’s Tunisian subsidiary, Telima Tunisie. After each transfer arrived, an almost identical sum was transferred out several business days later.
It is not clear where FNT International transferred the money to.
Mr Nicolosi did not reply to a request for comment.
. . . to the shores of Mauritius
FNT International, however, is not the only business Solutions 30’s chief executive Gianbeppi Fortis has been discreet about his interests in.
Since at least January 2013, Fortis was the director and owner of a Mauritian investment trust named Piscon International, according to the local business register and people familiar with the matter. The business is now defunct.
The trust was registered to the Mauritius office of Swiss trust company Trident Trust, on the waterfront of the African island’s capital, Port Louis. Trident Trust declined to comment.
Like FNT International, Piscon may have also had a commercial relationship with Gainglobal. According to a contract seen by FT Alphaville, Piscon was to provide hotline services for Gainglobal for a one-year period starting on January 3, 2014, at a set per-ticket cost.
You may note the contract shares the same start date as the agreement between FNT International and Gainglobal.
It is unclear if the contract was executed or if any payments were made from Gainglobal to Piscon during 2014.
Fortis’s involvement with FNT and Piscon leaves open the question as to why they were not disclosed to shareholders. Particularly when in Solutions 30’s 2014 annual report, the chief executive’s directorships, including one at his own private investment vehicle Federol, were listed:
In a statement, Solutions 30 said:
The company has already indicated that it will no longer respond to allegations being made in the public arena. It reiterates that it has complied with all disclosure requirements in accordance with the applicable regulations. The company also reserves the right to take legal action against any material that is taken out of context again.
Gerry Brown, a corporate governance expert, told FT Alphaville that “any commercial interests of the chief executive should be disclosed to the board of directors” and that such disclosures would usually be part of the chief executive’s contract with the company. Even if it was not a contractual requirement, he added, that the best approach “is to be transparent and to disclose the entities”.
Benedikt Timmerman, a former Insead classmate of Fortis who was a board member at Solutions 30 between 2007 and 2013, said he was “very surprised” by the recent allegations against the company as it was “managed very professionally with impeccable ethical standards” during his stint at the business. Timmerman made his comments to FT Alphaville before the events of the past fortnight.
He could not recall whether Fortis’s interests in FNT International and Piscon International had been disclosed to the board.
Timmerman did add, however:
I think it appropriate that all is clarified, and that any blame is properly investigated. And I would expect that to be done knowing Gianbeppi Fortis. Any links, except those that are explicitly personal, should be clarified by the company.
Solutions 30: a €1.1bn question mark — FT Alphaville
Solutions 30 and the disappearing audit letter — FT Alphaville
Solutions 30’s stock craters after EY refuse to sign off on accounts — FT Alphaville
Solutions 30: suspended in animation — FT Alphaville
Oddo call for an independent audit at Solutions 30 — FT Alphaville
Solutions 30 suspends shares after Muddy Waters joins the fray — FT Alphaville
Solutions 30 falls a fifth on news of an unpublished short report — FT Alphaville