John Gunn faces disqualification: DTI report on B&C's purchase of Atlantic Computers criticises BZW and accountants Spicer & Pegler

JOHN GUNN, a former City star, faces disqualification as a company director over the collapse of British & Commonwealth, along with five other former executives, after a four-year review of B&C's disastrous acquisition of Atlantic, the computer leasing company.

The prospect of disqualification follows the publication yesterday of a 380-page report on the 1988 deal, which led to losses of more than pounds 500m and the ultimate collapse of B&C. Disqualification is one of the strongest weapons available to the Department of Trade and Industry.

Mr Gunn promised to fight the disqualification proceedings 'like billy-o - the report is unbalanced and contradictory'.

Prompted by the inch-thick report, Michael Heseltine, President of the Board of Trade, is also seeking the disqualification of two former senior executives of B&C, Peter Goldie and the finance director, Andrew Ashman, and three former directors of Atlantic Computers. They are the chief executive, David McCormick, and Nicholas Scott and Mrs Sien Yen Cheng Kai On, directors.

The report also criticises Spicer & Pegler, former auditors of Atlantic, who are now part of Touche Ross, as well as Barclays de Zoete Wedd, Barclays' investment banking arm. 'We are critical of the standard of auditing of Atlantic's financial statements carried out by Spicers,' the report said. A spokesman for Touche Ross had no comment.

Atlantic deliberately misrepresented liabilities during the bid talks in 1988, but B&C and its advisers should have spotted frequent warning signals, the inspectors said.

And, with its name on the offer document, the DTI said BZW should have ensured proper evaluation: 'Having closely examined the process of B&C's inquiries into Atlantic between May and July 1988, we are of the view that BZW did not fully discharge their responsibility in this regard,' the inspectors said.

In April 1994, B&C administrators issued a writ claiming pounds 600m for alleged negligence by BZW and the strategy consultants Outram Cullinan & Co, now part of Coopers & Lybrand. They have also already won pounds 172m from the bankers Samuel Montagu over another B&C deal.

BZW noted that the inspectors concluded they had 'seen nothing to suggest that BZW did not perform these functions in a wholly satisfactory manner'.

The bank said: 'In the light of that conclusion and its own evidence BZW strongly rejects any suggestions that BZW's responsibilities went beyond the conventional merchant banking role and that it did not fully discharge its responsibility to B&C'

The report also called for a shake-up of bid document wording so investors are not led into placing too much credibility on recommendations, subsequently disclaimed.

The 1988 acquisition of Atlantic for pounds 400m proved the undoing for the stock market success story, as a black hole was discovered in the company's accounts. B&C had to write off pounds 550m and in 1990 collapsed with pounds 1bn of debt.

The DTI set up an investigation under Section 432(2) of the Companies Act 1985, headed by Eben William Hamilton QC and James Alexander Scott, an accountant.

Mr Gunn said: 'I am still deeply distressed for those who, like me, lost a great deal - and some almost everything - in the collapse, and I will continue the battle to see that those responsible for the web of deceit which finally overwhelmed us are brought to book'.

The report says Atlantic never made a profit from its inception in 1975 and employed practices that went beyond the bounds of acceptable accounting policies. 'If the report is correct, it is clear that B&C was sold a pup,' Mr Gunn said.

Mr McCormick, who became Atlantic's chief executive following the B&C takeover, said: 'Despite taking nearly four years to report their finding, the inspectors have criticised me for failing to solve all of Atlantic's problems in little over one year. I am obviously disappointed at not having been more fully vindicated.'

The collapse of B&C and Atlantic prompted a blizzard of legal actions totalling more than pounds 1bn.

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