Alpha Airports, the airline caterer, parted company with its chairman and took a £3m charge yesterday after a special investigation into the group's finances concluded that its behaviour had fallen below that expected of a public company.
Graham Frost is the third director of Alpha to fall on his sword following the disclosure that the company helped a customer, Excel Airways, manipulate its financial results ahead of the flotation of its parent company Avion on the Icelandic stock exchange.
Chief executive Kevin Abbott and finance director Heather Rae resigned in May after Alpha suspended its shares and brought in the law firm Ashurst to help a special board committee investigate the scandal. The former Selfridges boss Peter Williams, who took over as the chief executive from Mr Abbott, will fill in as chairman until a replacement is found.
Mr Williams said that the costs of the investigation coupled with severance payments for the three former directors would result in a one-off charge of £3m. Alpha shares fell 8 per cent to 77.5p after coming back from suspension.
The investigation began after Alpha's auditors, PricewaterhouseCoopers, withdrew their approval of its accounts for the year ending 31 January 2006.
The inquiry found that there was no need to restate the accounts, nor was there evidence of personal gain on the part of any individual. But it concluded that Alpha's behaviour nevertheless "fell short of the levels of corporate governance that a public company should adhere to".
Excel is understood to have asked Alpha to invoice it for a £7.5m catering contract in the autumn of 2005 rather than the summer. This had the effect of flattering the stated profits which appeared in the prospectus for the subsequent float of Avion, a large Icelandic holding company which is controlled by one of the country's richest men, Magnus Thorsteinsson. Alpha agreed to the request on the advice of its former legal adviser Berwin's.
Avion, which has called in the accountants KPMG to investigate its role in the affair, has now made a $10m (£5.44m) provision to cover its potential liability.
A spokesman said it could not explain why Excel had asked for the invoices to be delayed but maintained it had not had any material effect on the flotation because Avion had been priced on the basis of its future earnings. "As far as the IPO is concerned, investors were not misled because the budgets for 2006 remain as stated in the prospectus," he added.
Jonas Jonsson, the director general of Iceland's financial regulator, Fjarmalaeftirlitid, said he could not comment on whether it was carrying out its own investigation or planned to take action.