Overview: court battle over cartoon

Two senior KPMG partners are involved in what is set to be a bitter court
battle over the demise of a media company owning the rights to cartoon
characters the ‘Butt Ugly Martians’.

Mick McLoughlin, the firm’s global head of recovery, and Allan Graham, are
facing allegations involving criminal breach of trust, perverting the course of
justice and perjury.

The claims are being made by Mark Hardy, currently holding a power of
attorney over the company the two were involved in the administration of EDI
Realisation Ltd.

What’s happened

The claims, which are detailed in court papers, relate to the administration
of a group of companies called Just Group.

The company owned the rights to the cartoon characters, but it went bust in
2002, leaving tens of thousands of shareholders out of pocket. The claims relate
to a subsequent rescue deal, that took the form of a CVA.

Shareholders raised funds to resuscitate the companies and make money out of
the brands. But Hardy alleges cash raised at that time was directed
inappropriately to a subsidiary, EDI Realisations Ltd.

Hardy claims that was a breach of trust. Further to that, he claims court
proceedings currently underway are an attempt to muddy the water and ‘pervert
the course of justice’ and further alleges that Graham has perjured himself in
witness statements.

Hardy has some history of making bold claims about big firms. In the early
1990s, he applied to have Coopers & Lybrand wound up on the basis that not
enough of its partners were qualified accountants.

His grudge against Coopers stemmed back to their liquidation of his company
that left him bankrupt. Coopers at the time described Hardy’s move as ‘an
irritant, nothing more,’ and sources within KPMG have expressed similar
sentiments now.

The firm said in a statement: ‘Having seen the allegations made by Mr Hardy,
we regard these as unsubstantiated and without merit. In view of the ongoing
court process, it is not appropriate for us to comment in details, except to say
that these allegations will be defended vigorously and we are confident of a
positive outcome.’

What’s going to happen

The case currently being brought by KPMG is about who should receive £500,000
in EDI. But there are separate claims too.

Another respondent to the action, Christopher Jones, who owned shares, is
alleging false accounting in relation to the prospectus provided to shareholders
involved in the rescue plan.

Sources involved in the case said there would be a direction hearing in
February, with a view to further hearings later in the year.

For more on the action group and the companies involved go to
www.just-think-action.co.uk