E-fraud floodgate to open
Fraud cases involving technology companies are due to surge as the fallout from the dotcom crash begins to filter into the law courts, forensic accountants have said.
In a desperate attempt to fulfil City expectations during the technology gold rush, some companies may have overstated profits and hits on their websites whilst maintaining high cash burn rates, making legal fallout inevitable.
Accountants expect investigations of dotcoms to continue for the next ten years.
Steve Cohen, forensics partner at Grant Thornton, said ‘We’re just getting to the stage where people are looking around to find someone responsible.’ PKF partner Hugh Matthew-Jones added: ‘There have been some very serious losses the value of which can’t be ordinarily explained.’
He alleged that in some cases shareholders lost money through means which amounted to fraud.
Predictions indicate claims against market analysts could also increase.
Matthew-Jones said: ‘It has got to come because it was an area of outrageous valuations.’
Besides criminal cases, Cohen said shareholders could bring civil action against analysts for not doing their job properly, as many decided to buy shares or not as a result of their recommendations.