Troubled engineering group Powerscreen has brought in forensic specialists from Price Waterhouse to oversee a KPMG probe into massive losses at one of the company’s subsidiaries.
The move was welcomed by major shareholder groups concerned that KPMG, the company’s auditor, would face conflicts of interest during its investigation.
Powerscreen issued a profits warning in January after it discovered losses of over #40m in its Matbro materials-handling division. The discovery shocked investors, many of which had bought their options in a #3m rights issue in December 1996.
The company, based in Dungannon, Northern Ireland, issued a statement this month claiming a preliminary report by KPMG confirmed that losses at Matbro were unknown prior to the rights issue. But the company refused to release the preliminary report.
Last week, it was alleged that finance director Barry Cosgrove, a member of the Irish ICA, attended a meeting at Matbro only weeks before the rights issue.
A spokesman for the company refused to comment on the allegations but said they had been passed to KPMG to consider as part of its report.
He defended the appointment of KPMG to undertake an examination of the subsidiary’s internal controls. ‘KPMG was appointed to get the investigation underway as soon as possible. Price Waterhouse has been employed to give greater confidence to the review process.’
Des Doran, director of investments for Standard Life, which owns over 4% of the company and purchased shares in the rights issue, said he was concerned the final report should get to the bottom of the affair.
‘If the implications of the reports in the press so far are that some of the board members knew some of the problems, and knew the seriousness of those problems, then there are all sorts of questions that are raised about their conduct,’ he said.