The troubled banknote producer De La Rue confirmed yesterday that a number of its employees had falsified paper quality reports for some of its 150 clients, and that the findings of the investigation have been passed on to the Serious Fraud Office (SFO).
The 200-year-old firm said that an initial inquiry had uncovered evidence that a "limited number" of employees had "deliberately falsified certain paper specification test certificates for a limited number of customers". De La Rue did not give details, adding that the investigation was ongoing.
Any questions over the probity of De La Rue's work are likely to hit its reputation as a trusted partner of a number of governments around the world that depend on the company to help anti-forgery measures.
In a statement yesterday, De La Rue's executive chairman, Nicholas Brookes, said: "The behaviour of some of our employees in this matter was totally unacceptable and contravened De La Rue's rigorous standards. We do not tolerate such behaviour and appropriate disciplinary action is being taken."
Mr Brookes took over executive control of the company last month when the former chief executive James Hussey – the son of the former BBC chairman Marmaduke Hussey – resigned after the quality problems came light. He had worked for the company for his entire 25-year career.
It is understood that as part of the investigation, there have been two other resignations at the company: the managing director of its currency business, whom the group declined to name yesterday, and a more junior official. Since the three departures, Keith Brown has been given the job of heading the currency unit. The finance director, Simon Webb, also stepped down in May.
The problems are thought to be related to the company's printing and shipping facilities in Hampshire, while reports, which the company has not confirmed, suggest that the banknote paper in question had been designated for the Reserve Bank of India. De La Rue's contract with the central bank accounts for up to a quarter of its profits.
De La Rue said yesterday that the crisis was estimated to cost the company £35m of profits in the first half of its financial year, adding that it was impossible to say what the final effect on the balance sheet would be. The group's shares fell by 3.2 per cent, to 681p, making it one of the worst performers on the FTSE 250.
"The only good news here is that at least we have some clarification on exactly what has been going on," Paul Jones at Panmure Gordon said. "But the details do show that there is some seriously bad news. When the problems were disclosed in July, I downgraded by £12m in the half year, and I thought at the time that that might have been a bit harsh. Now it seems that it is much worse than that. But the major problem is that this is a company that has built its reputation over many years, and now faces customers who will want to check absolutely everything. Whichever way you look at this situation, it is not good."
Despite the last few weeks being among the worst in the company's long history, the SFO praised its actions yesterday. "We're not launching a full inquiry at this stage," a spokesman said. "The company reported this situation to us, and good for them for doing so. We are monitoring it closely. At this stage the inquiry is still ongoing, but they have shared the early results with us."
Banknotes, and the paper they are printed on, are designed to very detailed specifications, largely to prevent forgery. De La Rue has long lauded its record and the number of countries that have long relied on its services.
The company's shares have lost about a quarter of their value in the last three months as the details of the quality problems have dripped out.