Coopers sucked into Jersey row

Coopers & Lybrand appears to have become the second Big Six firm to become implicated in Jersey’s first major financial scandal.

An Accountancy Age investigation has revealed that Coopers may face the potential humiliation of having a report it compiled for the island’s regulatory body, the Finance and Economics Committee, into the activities of Cantrade Private Bank Switzerland, questioned in a possible Judicial Review.

This latest twist follows the civil litigation against Touche Ross, now Deloitte & Touche, over its role in the affair.

Coopers, which audits the Union Bank of Switzerland subsidiary Cantrade, has been attacked in court submissions by angry investors trying to claw back # 17m worth of foreign exchange losses.

The Cantrade investors have appealed for a judicial review of the finance and economics committee’s decision to commission the report, on the basis that its actions were ‘unreasonable, irrational, perverse, illogical and unlawful’.

They claim Coopers faced a conflict of interest investigating its own client and that it was wrong of the committee to ask Cantrade to commission its own auditors to investigate the scandal, amounting to a ‘whitewash’.

Coopers denied any wrongdoing. A spokesman said the firm had faced no conflict of interest between its duty of care to Cantrade and its role as investigator for the committee while preparing the report.

Experts at the English ICA and on Jersey confirmed auditors are sometimes asked to compile reports on companies under investigation.

The report could hold the key to a string of legal cases, including a civil action against Touche Ross (now Deloitte & Touche), spawned by the scandal.

Cantrade faces a civil action for the losses allegedly run up by an independent dealer, Robert Young, in a ‘low-risk’ investment fund between 1989 and 1993.

Young was sued two weeks ago for fraud after 90 investors worldwide claimed massive losses after trading through him. He is alleged to have accepted # 1m worth of ‘bribes’, in the form of split profits, from Cantrade.

After a flurry of complaints from furious investors two years ago, the finance and economics committee, asked Cantrade to commission the company’s own auditors – Coopers’ Jersey office – to compile the ‘non-specific’ report.

A partner with Coopers in Jersey, David Hill, refused to divulge any details. ‘Any report is covered by client confidentiality,’ he said.

Deputy director of Jersey’s finance department, Roger Bignell, added: ‘It’s normal practice for auditors to be asked to carry out investigations or reviews.’

Investors’ court submissions also allege the committee gave no direction to Coopers on the ‘content, scope, nature or extent’ of its enquiry.

Coopers’ involvement also raises questions about the role of Touche Ross in Cantrade’s affairs and claims Touche Ross audited Cantrade’s trading figures.

The investors’ submissions state that one of the losing companies, Swiss-based Mayo Associates, relied on Touche’s certification of Young’s allegedly falsely-declared profits.

Deloittes denied the allegations, claiming it only carried out ‘accountancy-type’ work for Cantrade.

A Deloittes’ spokesmansaid: ‘We were not the auditors. It’s nothing to do with us. I don’t know where these reports came from.’

F&E Committee members refused to investigate Cantrade beyond the report despite repeated calls from investors. The inaction led to ‘bias’ allegations on the part of committee president, Senator Pierre Horsfall – a Cantrade non-executive director from 1986 to 1990.

Horsfall, who is also the island’s leading supporter of limited liability partnership legislation, denied the allegations. He claimed the unanimous committee decisions were taken after professional advice.

No date has been set for the judicial review, but island sources believe it will be dealt with within a year.

See page 2.