CATTLES EX-GROUP FINANCE DIRECTOR James Corr has been stripped of his licence in a disciplinary hearing by the profession’s watchdog.
The Financial Reporting Council (FRC) tribunal today announced that Corr, the former group FD of troubled sub-prime lender Cattles, will be stripped of his ICAS licence for eight years.
Corr will not face any financial penalties as part of the sanction following an earlier investigation and disciplinary handed down by the Financial Services Authority (FSA), where he was forced to pay a £400,000 fine, a reduction from £750,000.
According to the FSA investigation, with large amounts of the report used as evidence in the tribunal hearing, Cattles’ annual report contained “highly misleading arrears, impairment and profit figures”.
Based on the FSA report of “conclusive evidence of misconduct” Corr admitted the FSA findings and accepted those findings constitute misconduct for the purposes of the tribunal hearing.
The tribunal said the case is “very serious” and involved “significant misconduct”. Taking into consideration Corr’s age (59), his full co-operation and his admission, the tribunal said no financial penalty would be incurred.
The tribunal found the sanction to exclude Corr from ICAS for eight years was “proportionate and appropriate”, although it was added that an application for readmission should not be automatic but based on merit. Corr will lose his licence in 29 days.
Both parties in the tribunal agreed there would be no financial penalty or cost imposed on Corr because of the sanction already brought against him by the FSA.
Shares in Cattles were suspended in 2009 pending a report into the company’s 2008 accounts, when accounting errors were discovered revealing an £850m black hole.
The company’s auditor PwC refused to sign off Cattles’ 2008 annual report in February 2009 which saw the company’s share price drop 74% to 3.5p. The company eventually entered into a scheme of arrangement in 2009 which is supervised by insolvency practitioners from Zolfo Cooper.
The FSA banned Corr from performing any functions in relation to any FSA regulated activities as a result of publishing misleading information about the credit quality of its subsidiary Welcome Financial Services’ loan book, and acting without integrity in discharging responsibilities. The WFS loan book accounted for about 90% of Cattles’ business.
Cattles stated that only £900m of Welcome’s approximately £3bn loan book was in arrears when, if accounting standards had been properly applied, the correct figure would have been around £1.5bn, the FSA said.
The FSA report stated that “Cattles had engaged in market abuse”. It also claimed Corr was responsible for providing the auditors with all the required information.
“James Corr was therefore the director primarily responsible for Cattles’ financial statements and for ensuring that all relevant information was provided to Cattles’ auditors,” the report said.
The FSA found that the FD signed off on two reports; one was given to PwC with some information missing while the Cattles board received a report with all the data.
In July 2009 the FRC began an investigation into PwC’s audit work which is due to look at the conduct of PwC staff and the audit of accounts for the years ending 2007 and 2008. This investigation is on-going. Cattles, led by insolvency firm Zolfo Cooper has launched a legal claim against PwC for its audit work at the company, with a hearing likely to be heard early next year.
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