Deloittes could be in Railtrack firing line

Institutional investors say they will bring legal action against the government over its decision not to give any more state money to Railtrack. As unsecured creditors, they will be among the estimated 250,000 shareholders who get the last piece of the pie when the company is wound up.

Speaking through law firm Allen & Overy, a group of investors also warned today it was not clear that there had been proper grounds for the government to force Railtrack into administration. Threatening litigation, the group also said the move has serious implications for private sector investment in government projects, news agency Reuters reported.

And, according to rail transport analyst John Stittle, shareholders could also sue the auditors for going concern issues. ‘Shareholders could argue they should have been warned that going concern is not applicable,’ he said.

‘The auditors could have stated the going concern was dependent on continued government funding. Perhaps the auditors should have realised the company could be heading for severe funding difficulties,’ he added.

Stittle added the problem was not entirely the auditor’s fault. ‘The situation has deteriorated in the last six months. On March 31 things didn’t look as bad as now.’

With the collapse, Deloittes stands to lose £2.9m in fee income from audit services this year.

CIMA fellow Steve Marshall resigned as Railtrack’s chief executive. He succeeded Gerald Corbett in November 2000 after serving as Railtrack?s FD.


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