Tribunal opens doors on 'dishonest' accountant

The financial controller of Mayflower’s principal subsidiary, Transbus, was
this week accused of ‘wearing a badge of dishonesty’ because he failed to make
basic enquiries, follow a paper trail or question obvious fraudulent practices
at his cash-strapped company.

The tribunal began this week, throwing light on an aspect of disciplinary
procedures for accountants that has for many years remained private.

Ian Shelton, an ACCA member, became the first accountant to be forced to face
public complaints, at Fleet Street’s International Dispute and Resolution Centre
(IDRC).

Shelton, the financial controller of Transbus International Ltd, was accused
of being complicit in maintaining fraudulent spreadsheets intended to mislead
the company’s bank, HSBC, since becoming financial controller in April 2001.

Shelton denied the complaints, and claimed to have told one of the company’s
former executives that the company could not hit cash flow targets because of
substantial sums of money owing to HSBC.

In one instance, Shelton claims, he went into a meeting with a cash flow
statement prepared, which included plans to repay HSBC. The executive, he said
in a statement, was furious and told him that if he was not prepared to do the
job, he ‘would find someone who will’.

‘His failure can be analysed as a failure to blow the whistle… given that
Shelton’s role was passive, we do not describe or label him dishonest. However,
we do find it necessary to allege squarely that his actions in December 2003
were dishonest and known by him to be dishonest,’ the AIDB’s counsel Patrick
Lawrence QC said.

Transbus was a principal subsiduary of listed company Mayflower, whose
advisors PwC are still to appear before the tribunal.

The tribunal heard that the practice of misleading the bank had gone on for
several years. Shelton is accused of failing to stop the fraudulent practice.

The practice involved Transbus misleading the bank as to when money had been
received to alleviate its troubled cashflow.

One claim form, which Shelton authorised in late 2003, requested early
payment of £3,716,478.

In a sign of uncertainty as to how public the AIDB proceedings will be, the
panel had to discuss a request by Accountancy Age for documents
mentioned in the proceedings. The parties were left open to decide the issue.

The panel will rule on the case itself at a later stage.

Call to charge defendants upfront

As the Accountancy Investigation & Discipline Board held its first public
proceedings, an institute has urged it to review its funding structure so that
large cases do not bankrupt its supporting bodies.

ICAS, which has itself adopted a principle of ‘polluter pays’, allowing it to
force defendants to pay the costs of tribunals up front, has recommended the
practice to the executive counsel Cameron Scott.

ICAS has warned that the institute could face financial difficulties if it
has to pick up the costs of complex cases heard by the AIDB in the future. ‘With
a big case, we could face crippling bills,’ said Tom McMorrow, ICAS director for
regulation and compliance.

Under the AIDB’s predecessor, the Joint Disciplinary Scheme, institutes
picked up a small percentage of costs on an ongoing basis for trials. However,
they will have to stump up the full costs under the new model.

McMorrow welcomed AIDB’s willingness to discuss the issue, but expected them
to see how the scheme would work for ICAS’ own tribunal, which has yet to put
any members through the ‘polluter pays’ scheme.

Kevin Reed