It was 10:37 a.m. on July 1. Jenaro García was preparing for a meeting with Madrid’s mayor aimed at fostering Spain’s entrepreneurial spirit when a message popped up on his phone. A short seller in New York had just released a report saying that Let’s Gowex, the company García founded 15 years ago to offer Internet access via Wi-Fi hotspots, had overstated its revenue by almost tenfold in recent years. 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.
Gowex shares fell 60 percent before trading was suspended on July 3. García resigned on July 5 and said on Twitter that he’d made a “confession” and would cooperate with investigators. In a meeting with Judge Santiago Pedraz of Spain’s National Court on July 14, he 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 ($4.1 million) in a Luxembourg bank, according to a statement issued by the court. Pedraz said charges could include falsifying accounts and improperly using insider information. The company filed for protection from its creditors the same day. García and his lawyer declined to comment.