Forensic crisis stalls probe into Morgans' unit trusts

IMRO’s investigation of Morgan Grenfell’s three troubled European unit trusts suffered its first setback last week when it was forced to replace Deloitte & Touche with Arthur Andersen as its forensic accountants.

The move follows the discovery by Deloittes that it had a potential conflict of interest in the case. The firm’s Luxemburg office had been asked to give advice to one of the businesses involved in the scandal.

A Deloittes spokesman said: ‘We identified that our Luxembourg firm had carried out some statutory work for one of the companies involved, but not for Morgan Grenfell or Peter Young, the fund manager at the centre of the investigation.’

John Tiner, the Andersens partner who led the Bank of England investigation into Barings, heads the four-partner team which will take over from Deloittes.

A spokesman for Andersens said IMRO had given Tiner a two-fold brief.

‘We have to establish how much compensation is owed to investors, as well as to try to acertain whether any IMRO regulations were breached by Young or Morgan Grenfell.’

Meanwhile, sources close to Morgan Grenfell said Ernst & Young’s forensic accounting team had completed the first phase of its investigation and had put together a prima facie case against Young. The evidence would be handed over to the Serious Fraud Office at the end of the week.

Morgan Grenfell confirmed that the E&Y team, headed by David Sherwin, will continue to examine breaches of its internal controls and procedures. Sherwin is also understood to be questioning the head of compliance Bruce Hacking, the head of internal audit Tony Watts, and the KPMG team which audited the accounts of the three funds.