KPMG to investigate £67m fraud allegations at Safran

has appointed KPMG to look
into claims of serious accounting fraud, as board members seek to resolve a
bitter dispute that has rolled on for almost a year. 

The probe was put into motion after Safran’s audit committee urged it to look
into possible fraud within the company, following the discovery of ‘unexplained’
accounting documents at its defense security unit.

Safran said in a statement: ‘During the audit committee meeting of the Safran
Supervisory Board on 11 December 2006, the executive board, the independent
auditors Constantin et Deloitte, and the auditing firm KPMG reported that
unexplained accounting entries were discovered in the files of the former chief
financial officer of Sagem Défense Sécurité.

‘During the meeting, the audit committee asked the executive board to
immediately start a fraud investigation. It was also requested that this mission
be carried out with all due diligence, by an external firm, assisted by the
Safran audit department. The executive board proposed that KPMG be chosen for
this mission, and this proposal was accepted.

‘At this point, the impact on the financial statements of the company Sagem
Défense Sécurité is estimated at 100m euros.’

Snecma and
Sagem merged to create Safran, but the new board, made up of executives of
the two companies, have been at loggerheads for 10 months. 

The company also warned that profits could suffer from the
review findings, coupled with a trading slump in its mobile phones and defensive

Safran said it now expected operating margins of 4% against market forecasts
of more than 6% and consolidated sales of 11bn euros.

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