Scandals that burned the City
THE Square Mile has been rocked by a number of financial scandals over the years. Here is a reminder of the most damaging.
MAXWELL:
Robert Maxwell's publishing and newspaper empire spectacularly collapsed shortly after his death at 68 in November 1991. It emerged he had stolen more than £400m from pension funds in a desperate bid to keep his debt-laden companies afloat.
Eight years later, a tribunal of the accountancy profession's joint disciplinary scheme (JDS) fined Coopers & Lybrand, auditor of several Maxwell companies, £1.2m plus £2.1m costs. The firm was also heavily censured for its 'incompetence', 'lack of independent judgment' and 'a lack of robust implementation' of audit procedures.
Coopers accountants John Cowling, Stephen Wootten, Ian Steere and Nicholas Parker were also admonished, fined or ordered to pay costs. Michael Stoney, the former deputy managing director (finance) of MGN, was heavily censured and excluded from membership of the profession, but he is known to have worked since.
BCCI:
The Bank of Credit and Commerce International collapsed in 1991. Thousands of mainly Asian investors lost some £800m in the crash, one of the biggest frauds in banking history, when corrupt managers illegally siphoned off funds.
An initial investigation into the BCCI auditors, accountancy firm Price Waterhouse, was halted by the Court of Appeal in 1993 because of pending litigation by the bank's liquidators against its management. The court case was settled in 1999 and a fresh JDS investigation is now under way - 11 years after the scandal.
POLLY PECK:
The fruits, packaging and electronics conglomerate was an Eighties wonder stock led by flamboyant Turkish Cypriot entrepreneur Asil Nadir. The company collapsed in 1990 with £700m of shareholders' money missing. Nadir fled Britain and still lives in Northern Cyprus. The company's UK accountants Stoy Hayward were investigated by the JDS and fined £75,000 plus £250,000 costs.
In May 1998, a JDS tribunal excluded Polly Peck's former group chief accountant John Turner from membership of the Institute of Chartered Accountants, saying his failure to question what he was told by Nadir amounted to 'clapping the glass to his sightless eye'.
Investigations into the three partners at another Polly Peck auditor Erdal & Co are ongoing.
BARINGS:
Britain's oldest merchant bank collapsed in 1995 after debts of more than £800m were racked up by 'rogue trader' Nick Leeson. Barings' London auditor, accountants Coopers & Lybrand, and one of its partners, Gareth Davies, were investigated by the JDS and heavily criticised. Coopers & Lybrand were fined £1m and given a severe reprimand. Davies was fined £65,000 and also severely reprimanded. The fines were reduced on appeal to £250,000 and £25,000 respectively.
VERSAILLES GROUP:
Versailles, a money-lending firm, collapsed in December 1999 amid claims of fraud and false accounting. Former lead auditor Thomas Dales, a founding partner of accountancy firm Nunn Hayward, is facing two complaints being investigated by the JDS. It is claimed he breached the accountancy profession's code of ethics and failed to carry out his work 'with due skill, care and diligence'.
