Stoys: Astra fine largest ever
JDS issues biggest penalty after catalogue of errors by auditor. Lawrie Holmes reports
Group A firm BDO Stoy Hayward has been fined #150,000 plus #600,000 costs by the Joint Disciplinary Scheme for an appalling catalogue of errors as auditor to Astra Holdings, the defence company at the centre of the arms-to-Iraq scandal.
The fine is the biggest in the JDS’ history. Its 50-page report lists the fines and reprimands against the firm and partners Paul Smith, still Stoys head of UK equities, and Philip Rusted.
Peter Moss, the audit partner in 1986 and 1987, was not included in the report because he is a member of the South African ICA.
Stoys admitted failing to identify a fraud in 1986 followed by a series of four unqualified audit reports until 1989 despite continually overstated profits. Stoys was also criticised over a supporting letter for Astra takeover bid for PRB in 1989, which wrongly stated the enlarged group would have adequate working capital.
Administrative receivers were called into Astra in 1992 following a ‘disastrous’ rights issue in 1989.
Chris Dickson, head of JDS investigations, said: ‘Shareholders that put up #91m lost everything and unsecured creditors got nothing back.’
Managing partner Adrian Martin admitted the firm, which is understood to have been insured, was at fault but said it was a one-off. He said: ‘It has been an extremely laborious process.’
He said it was regrettable that former Astra chairman Gerald James and former finance director James Miller currently being investigated were not looked at first by the JDS.
‘They created a false invoice in 1986 and hid it from our audit team,’ he added.
James, who denied the allegations, is to pursue a case of malicious prosecution against the DTI which dropped their investigation of him in May. His solicitors Owen Mitchell are waiting for confirmation from the legal aid board which is expected to take five to six weeks But James’ position may be weakened by the recent government reshuffle which saw minister Margaret Beckett replaced at the DTI by Peter Mandelson. ‘It is very unfortunate because Beckett demonstrated a desire to get to the bottom of this,’ said James’ lawyer Madelaine Abbas.