“We are skilled in creating Wireless Smart Cities® GOWEX reinvents and transforms your city into a Wireless Smart City, where people can enjoy free WiFi on the streets, while also improving citizen’s services,” claims the Gowex website. But, in reality, what did well was dupe its investors the company CEO admitted.

Genaro Garcia, founder of Gowex, questioned in Spain for fraud. His wife, Costa Rican Florence Maté, is member of the board.
Genaro Garcia, founder of Gowex, questioned in Spain for fraud. His wife, Costa Rican Florence Maté, is member of the board.

It wasn’t only investors who were duped. In 2013 the Federation of European Stock Exchanges picked Gowex as “best new listed company.” Prime Minister Mariano Rajoy honored García for creating a company that “thought globally.” And in May, Gowex won the top award from the Spanish Marketing Association—though the group says it has taken it back.

Gowex, the company that was founded by Costa Rican Florencia Maté and her Jenaro García Martín 15 years ago, that offered Internet access via Wi-Fi hotspots, had overstated its revenue by almost tenfold in recent years.

García pulled the sham by hiding lies in plain sight. But the most shocking part of Let’s Gowex’s implosion this month wasn’t that the Wi-Fi company, worth 1.9 billion euros (US$2.6 billion) just three months ago, was a fraud. It’s that it wasn’t spotted sooner.

Garcia fabricated clients and contracts, listed a defunct company as a holding company for his stake in Gowex, and put numbers in reports that didn’t make any sense, even as matters of basic arithmetic.

It was all so brazen that Gotham City Research LLC, the short-seller whose July 1 report exposed the sham, even began to question whether its conclusion — that Gowex was overstating revenues — was off-base.

García denied the accusations and threatened legal action against the report’s author, Gotham City Research. He continued his usual routine, posting on Twitter, “Gooooood morning Madrid!!!! Perfect day for a jog.” Then he told his board that Gotham’s report was on target, according to a company filing.

Days later Garcia owned up to the deeds, resigning from the company on July 5 and saying on Twitter he made a “confession” and would cooperate with investigators. He met privately with a judge yesterday and admitted to falsifying financial accounts as early as 2005, using frontmen to create companies that acted as fictitious clients, and stashing more than 3 million euros in a Luxembourg bank.

“The whole system, from regulators to investors, didn’t work properly,” says Tontxu Campos, director of the Entrepreneurship Center at the Deusto Business School. “But at the end of the day, the core failure is the lack of honesty and ethics by the entrepreneur.”

Authorities are now sifting through the wreckage of the one-time darling of the Spanish tech community and the alternative exchange on which it traded. Meanwhile, investors chasing bigger returns in remote corners of the public markets have another reminder that some entrepreneurs who steer clear of highly regulated exchanges do so for a reason.

In Costa Rica, García and Maté are tried to do business with the government of Laura Chinchilla (2010 – 2014) and with the current government of Luis Guillermo Solís, but nothing ever came of it, according to the company’s representative in the country, Ricardo Rodríguez.

“Nothing has been achieved, I was trying. With the change of government and institutions nothing was ever done.

“Those who where there were on their way out and did not make any decision and those coming in were starting to learn about the deal,” said Rodríguez.

According to Registro Publico (Public Registry) records, Gowex Costa Rica S.A. was registered in 2008 and with a capital of ¢100.000 colones (US$186).

Speaking to the press in Spain, Garcí said that on his projects was in Costa Rica in 2009. However, Rodríguez was unaware if really any project was carried out in the country in 2009.

Rodríguez told the press in Costa Rica that is he nothing more than just another employee and has no knowledge of the direction the company will take.

On Thursday, Maté was to have appeared before a judge in Spain. The appearance was rescheduled for July 28, given her time to travel to Spain from Costa Rica.

Maté, is one of four, along with her husband, that form part of the Gowex S.A. board.

Sources: Bloomberg News; Businessweek; Diario Extra

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