Three directors of technology company Guardian iT sold shares worth £7.7m just days after they announced a sparkling set of results which have now been shown to be overstated.
Last Tuesday, Guardian's shares slumped 45 per cent after it announced that results over the past two years contained "accounting discrepancies".
The company said operating profit for 2001 would be around £1.5m lower than expected, mainly due to discrepancies in the 2000 accounts, where the company estimated that adjustments of between £2m and £2.5m would be required.
Yet just nine days after announcing the 2000 results, Peter Jakob, the finance director at the time, Richard Raworth, the chairman, and chief executive Peter MacLean sold a total of 1.2m shares. At the time, shares were trading at 630p. Had the 2000 results been more accurate, it is unlikely that the shares would have been at this price. Now, after last week's news, shares are languishing at 47p.
Forensic accountants at KPMG have been called in to investigate the accounts. The Independent on Sunday spoke to several shareholders who said they would wait for KPMG's report before deciding what action to take.
Last week Mr Raworth offered his resignation and said: "Neither I nor the board was aware of any issues that would have given rise to the announcement. Nor ... do I believe that the board could have reasonably been expected to be aware of them."
Last Thursdaya spokesman said the company was in offer talks and could not comment on the share sales.
Guardian iT will now release results for 2001 in April. It is understood the company will reveal it is breaching covenants on a £110m loan, due to reduced levels of underlying profit. One of the banks in the syndicate for the loan is Allied Irish Banks, where an accused rogue trader left a $750m (£523m) hole in the accounts.
Another troubled company, Sportsworld Media Group, which owns the rights to the TV series Popstars, has also proved lucrative for some directors. It announced at the end of January that profits for 2001 would be between £9m and £10m, but a fortnight later it said results would be "substantially" lower. Shares are now at 6.5p.
It is fortunate that chief executive Geoff Brown sold more than £5m worth of shares in 2000 when they were worth between 450p and 600p.
Non-executive director Chris Akers resigned last week. He was also chairman of EuroTelecom Communications, which went into administration a year ago.