Bank prize money used to buy shares from senior Iris execs

Aug. 8, 2011 - PRLog -- The founders and senior managers of marketing agency Iris Nation Worldwide were able to use £3.3 million of the funds awarded under the Bank of Scotland’s Corporate Entrepreneur Challenge to realise a gain on their existing shareholdings while the company was losing money and needed to conserve capital to support its declared global expansion ambitions, according to a report published today in Marketing Services Financial Intelligence.

The aim of the Bank of Scotland’s Challenge was to find entrepreneurs who showed the greatest potential for growth and success. Iris won the competition in 2007 and the award was formalised in the early part of 2008. It comprised £5 million of interest-free loan capital for the business and an investment of almost £2.8 million in shares by the bank’s private equity subsidiary Uberior Equity.

“If growth and success were key objectives, the Iris experience raises questions about how well the Bank of Scotland award scheme was conceived and administered, and about whether the bank’s funds were used in a manner that was most likely to achieve its stated aims”, the Marketing Services Financial Intelligence report says.

“No-one can doubt that Iris had growth ambitions”, the publication continues, quoting the following extract from Iris annual report for 2008:
“The performance in 2008 reflects the continued commitment to establishing Iris as one of the world's leading independent integrated advertising networks. The accelerated international growth shown in 2008, resulting in Iris establishing 15 offices globally, has created the platform for further future overseas expansion.”

Yet, even as the 2008 financial year was closing, the company was applying £3.3 million of its newly awarded funds, not to pay for international expansion, but to provide a big capital gain to 10 of its senior managers, despite the fact that the group would show a loss of £1.6 million for the year (of which £0.4 million of costs were not discovered until the following year).

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