E-district shareholders attack settlement for chief executive

Minority shareholders in e-district, the internet company hit by accounting irregularities, condemned a settlement that saw the company drop legal proceedings against its former chief executive.

E-district yesterday revealed that it had reached an out-of-court deal with Mr Laitman, who is accused of inflating the company's turnover and visitor numbers to its website.

The deal will see Mr Laitman, who was sacked in the spring, keep his north London mansion and his other assets. He will hand over his remaining 11 per cent shareholding in e-district to the company, who will distribute it to minority shareholders. No money changes hands.

Michael Sinclair, who became e-district's chairman this month after buying a 29.9 per cent stake in the business from the Laitman family trust, said the case against Mr Laitman is "extremely strong".

He added: "The legal costs that would be incurred in bringing the matter to conclusion could easily exceed the amount of damages ultimately recoverable [from Mr Laitman]."

David Greene, a solicitor at Edwin Coe representing 140 e-district shareholders, said: "We would regard this settlement as a hostile act. Shareholders will not look kindly to this early relief of Laitman from liability."

Mr Greene said he was surprised by the deal as his clients were contemplating a joint case with the company against Mr Laitman. He also questioned e-district's assertion that further action against Mr Laitman would be prohibitively expensive. Mr Greene said he is seeking a "summary judgment" against Mr Laitman, a quick and inexpensive procedure.

It also emerged yesterday that e-district's auditors, PricewaterhouseCoopers, had resigned "in the light if a potential claim against them". Ernst & Young have replaced PwC.

Edwin Coe will now pursue Mr Laitman, PwC and e-district through the High Court for compensation for minority shareholders who backed the company on the basis of false financial figures.