DTI begins Iceland insider dealing inquiry

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The Department of Trade and Industry has launched a wide-ranging insider dealing investigation into Iceland, the beleaguered frozen food retailer whose share price collapsed in January.

Stephen Byers, the former trade and industry secretary, is understood to have ordered the investigation at the end of May and appointed Ronald Lindsay, a barrister, and Peter Thornton, a Scottish accountant, to investigate whether there had been breaches of the Criminal Justice Act in respect of dealings in Iceland shares. The two inspectors have now started to summon witnesses to give evidence under oath. They are not believed to have begun the process of interviewing Iceland directors or employees. Iceland refused to comment, as did the DTI. It has a policy of neither confirming nor denying that it is carrying out an investigation unless the inquiries lead to a criminal prosecution.

Iceland became mired in controversy in January when its founder and then-chairman Malcolm Walker was forced to resign in the wake of a profits warning. Five weeks earlier he had sold four million shares when they were at a high of around 399p, netting £13.5m.

Iceland's share price fell dramatically following the profits warning in late January. But it also fell sharply in the two days preceding the warning which was blamed on poor sales in the crucial period run-up to Christmas.

Mr Walker was forced to cut short a holiday in the Maldives. He resigned a few days later, severing all links with the company he founded 30 years ago. Yesterday Mr Walker's wife Rhianyidd was fielding calls on his behalf. He was unavailable for comment.

There is no suggestion that the insider dealing investigation is targeting any one person or share transaction. It is understood that the DTI is interested in a number of share deals. One person familiar with the investigation said: "There was some share selling on the two days before the company's profits warning on 22 January which the DTI might want to have a look at."

Mr Walker hit the headlines again last week over his plans to set up a new frozen food business despite having a two-year "non-compete" agreement with his former firm.

Iceland has been in turmoil over the past few months. As well as issuing three profits warnings this year, it has suffered a fast turnover of senior management. The company is now headed by Bill Grimsey, who replaced Mr Walker.