Barings case against Deloitte set for May
Deloitte Touche Tohmatsu has failed to get a negligence claim struck out after the High Court yesterday upheld the claim against the former auditor to the collapsed Barings bank.
Justice Evans-Lombe ruled that the negligence claim worth £200m brought by Barings’ liquidators KPMG against Deloittes should go ahead in May.
Deloittes audited Barings Futures Singapore in 1992 and 1993, two years before the merchant bank collapsed after rogue trader Nick Leeson ran up losses worth £830m.
Rick Murray, director of legal and regulatory affairs at Deloittes, said: ‘The evidence developed during the preliminary hearing has established much of the foundation of our several defenses, including the suitability of the Singapore audit services.
‘We now look forward to an early resumption of the trial, long delayed by the PwC settlement, as the opportunity to finally establish that D&T Singapore has no liability for the self-inflicted wounds that proved fatal to the Barings bank.’
The former auditors had tried to get the claim struck out on the basis that it was entitled to rely on ‘representation letters’ signed by Simon Jones, BFS finance director and Leeson’s boss. Representation letters are papers signed by management about the company’s finances and used by auditors in the audit process.
The judge ruled that although the letters singed by Jones were inaccurate, the trial should go ahead.
Unless Deloittes reaches a settlement deal with liquidators KPMG the trial is expected to last well into 2003. The trial and its outcome will be closely scrutinised by the profession to see how much auditors can rely on information from company management.
Barings’ group auditors, Coopers & Lybrand, now part of PricewaterhouseCoopers, was last year successful in avoiding the protracted negative publicity when thefirm reached a last-ditch settlement deal with the liquidators.