On the frontline: Seven Trent's FD

When a PricewaterhouseCoopers probe into alleged accounting discrepancies and
overcharging at Severn Trent Water 12 months’ ago found no evidence of
wrongdoing, the company’s group finance director Mark Wilson must have been
hugely relieved.

At the time, Wilson had only just acceded to the board of Severn Trent plc
after a nine-year stint as finance and regulation director at subsidiary Severn
Trent Water.

As a senior figure at the subsidiary charged with the allegations, he would
have been especially pleased to see the back of the overcharging matter.

A year has passed but it’s not yet water under the bridge. The allegations of
overcharging refused to go away and Wilson eventually agreed to leave Severn
Trent next month.

In January, water regulator Ofwat began its own investigation into the
overcharging matter and four months later, in an unrelated development, Severn
Trent announced Wilson would be stepping down from his position in December.

Wilson’s departure was part of a management shake-up by new chief executive
Colin Matthews, who had taken over as the head of the group just a few months
before the announcement.

Now, with just weeks left to go in his job, Ofwat has referred part of its
Severn Trent Water investigation to the Serious Fraud Office (SFO).

The allegations facing the group emerged in May last year when David
Donnelly, a company veteran of 30 years, sent information to Ofwat claiming
that, between 2000 and 2003, Severn Trent Water sent inaccurate leakage data to
the regulator, allowing the company to raise prices and overcharge three million
customers by £51m.

The company appointed PwC’s forensics unit to look into the matter, and after
the accounting firm completed its work, Severn Trent announced that the
allegations had no impact on the integrity of its accounts and that customers
had not been overcharged, a position it still maintains.

Ofwat would not leave the matter there, however, and launched its own probe
into the allegations. Ofwat has now passed on part of the investigation to the
SFO, which handles complex frauds in excess of £1m and has begun its criminal
investigation into the details handed over by Ofwat.

What will be particularly frustrating for Wilson is that, as of yet, Severn
Trent has no idea exactly what the SFO has been asked to look into, as the
regulator has only referred part of its probe to the investigator. It promises
to be a trying few weeks, as Wilson and his board members wait for more details
to emerge.

The SFO probe, however, will not be the only concern for Wilson in his final
weeks at Severn Trent.

On 6 December, Wilson will present Severn Trent’s first IFRS results, when
the FTSE100 group releases interim figures. In these results, the impact of
changes to depreciation accounting for infrastructure maintenance at Severn
Trent Water will be reflected in earnings for the first time. It will be up to
Wilson to explain the changes and address any concerns from investors.

A difficult few weeks lie ahead for Wilson, who by now has probably given up
any hope of a quiet departure.