Directors face disqualification

PETER MANDELSON, the Secretary of State for Trade and Industry, is to seek to bar three former directors of Chancery plc, a quoted banking group which collapsed in 1991 as a result of the property crisis.

The decision to seek disqualification orders against the company's former chairman and chief executive, Harvey Cohen, 64, who founded the company, and two other directors follows a damning report by Department of Trade and Industry inspectors.

The inspectors - Robert Chandler, an accountant seconded from KPMG, and Anthony Fausset, a DTI lawyer, - concluded after a five-year inquiry that in the run-up to its collapse in February 1991, Chancery indulged in creative accounting, inflating profits and providing a misleading impression of its financial position to the Bank of England, which was responsible for its supervision.

The result was that of the pounds 7.9m pre-tax profit Chancery declared for the year to 31 March 1990, at least pounds 2m was doubtful.When the results for the year to 31 March 1991 were published the following October, they revealed losses of pounds 45m, after bad-debt provisions.

The company, which specialised in lending to the property sector, enjoyed a spectacular run after listing on the Stock Exchange in August 1988, turning in double-digit profit increases year after year, even after the property market started to turn down.