Charter in inquiry into suspected £10m fraud by employee

Charter, the engineering group, is investigating a suspected £10m fraud it believes was carried out by one of its employees.

Charter, the engineering group, is investigating a suspected £10m fraud it believes was carried out by one of its employees.

The alarm was raised internally on Thursday and it is understood the employee at the centre of the investigation, who works at the group's head office in London, left the company earlier this week. It is not clear whether the employee left before or after the suspected fraud was discovered.

A statement from the company yesterday said: "Charter is investigating evidence that an employee may have been involved in a fraud against the group. Investigations are at a preliminary stage and the precise nature and quantum of the suspected fraud, which appears at this stage to be confined to a single employee, are still to be determined." Its early indications showed "a series of unauthorised payments in the region of £10m" may have been made. These unauthorised payments appear to have been charged to the company's reserves, according to Charter.

Shares in the company fell 14 per cent on the news, before closing down 18.5p at 157p, as analysts speculated on the nature of the suspected fraud. There were fears that it may have been carried out by a senior employee.

This is not the first investigation into Charter's accounts. Last year, it had to admit to overstating profits in its US divisions, which led to a £3.8m exceptional charge, and prompted a major asset disposal within the business. Charter, which owns a welding division and a gas handling unit, has also suffered during a global downturn in the manufacturing sector over the past few years. Profits slumped to £3.8m last year as it counted the cost of selling and closing factories.

In February, it launched a £48m rights issue to stabilise its balance sheet, which carries about £136m of debt, but in April, its finance director, David Eilbeck, left the company abruptly with a £320,000 pay-off. Richard Careless, who was head of corporate finance at the group, took over. He appointed a new treasurer, and a subsequent overhaul of the finance department is understood to have led to the fraud suspicions.

Charter said it would be able to recover only about £5m of the missing funds through an insurance policy. The company has contacted the police.