(Corrects July 14 story to show Garcia Martin did not have his
passport seized and was not banned from leaving Spain)
MADRID, July 14 Spanish wireless networks
provider Gowex filed for bankruptcy on Monday, a week
after an accounting fraud at the firm was revealed, while the
High Court said its founder could face a jail sentence of more
than 10 years.
Law firm Velez & Urbina said Gowex had decided to file for
bankruptcy because it was in a state of "imminent insolvency"
and faced a "financial standstill" after a high number of
contracts were ended and new projects were cancelled.
Former Chief Executive and Chairman Jenaro Garcia Martin
said on July 6 that he had misrepresented the financial accounts
for at least the last four years. Last week he was charged with
false accounting, distortion of economic and financial
information, and insider trading.
Following his testimony before the High Court on Monday,
Garcia Martin was given 15 days to pay a 600,000-euro ($818,400)
bail or face jail.
High Court examining judge Santiago Pedraz said the ruling
was justified because Garcia Martin might attempt to flee as he
faced a jail sentence of more than 10 years and had at least 3
million euros in a Luxembourg-based bank account.
Pedraz did not rule out taking further measures against
Garcia Martin but decided not to seize his passport, ban him
from leaving Spain or require him to report to a court every
week, as requested by the public prosecutor.
He said Garcia Martin was collaborating with judicial
Gowex started insolvency proceedings last week and had a
maximum of four months to reach a deal with creditors or enter
into administration - a formal bankruptcy process in which a
judge takes over the company and appoints who should run it,
often leading to it being wound up or radically restructured.
A judge now has to rule on whether Gowex was correct to file
The financial and management situation at the company
Gowex said earlier this month that it had hired
PricewaterhouseCoopers (PwC) to carry out a forensic audit of
its accounts. However, PwC said on Monday that it could not
carry out the audit because it could not find authorised
representatives of Gowex and get access to the information it
($1 = 0.7331 Euros)
(Reporting by Julien Toyer; Editing by Sarah White, Pravin Char
and Dale Hudson)