The beleaguered doorstep lender Cattles was yesterday forced to admit that it lost nearly £200m more in 2008 than its original estimates.
With accountants crawling all over its books and its very existence in doubt the company said it lost £745m in 2008 against £96.5m the previous year. The company has yet to unveil its 2009 figures, but another thumping loss is expected when they are released within the next few weeks.
Margaret Young, the executive chairman, also said that former executives had withheld facts from the company's non-executive directors. That was the conclusion of a "forensic" review into the business conducted by the City law firm Freshfields.
Ms Young said: "The forensic review demonstrated that certain of the former executive directors of Cattles and certain of the former senior executives of [principal operating subsidiary] WFS, over a period of time, had provided incomplete and misleading information and documents and/or failed to escalate matters of concern relating to [loan] impairments to the full board and audit committee.
"The provision of such incomplete and misleading information and documents to the full board and audit committee, in conjunction with the withholding of certain other information and documents, combined to mask the true state of Welcome's loan book and, in particular, the correct level of arrears within that book."
Ms Young said that despite the company's reported strong record of growth with stable credit quality and a strong earnings performance, its non-executive directors had "regularly challenged certain executives about key matters such as the level of cash being generated by the business, the quality of the rapidly expanding loan book and the adequacy of the loan loss provision".
She said that in response "certain executives had provided a range of presentations, documents and verbal reassurances to the non-executive directors that everything was entirely as it should have been and that there was no reason for concern.
"In addition to this robust and consistent reassurance from such executives, the audit committee regularly sought and received reassurances on a number of matters, including specific assurance about the adequacy of the loan provision, from the external auditors to the company's accounts at that time."
Grant Thornton is now auditing Cattles' books after the company demanded the resignation of PricewaterhouseCooopers. The latter is being investigated by the accounting watchdogs, although it has strenuously denied any wrongdoing.
The company owes its syndicate banks – led by the state-owned Royal Bank of Scotland – £2.7bn. That is £400m more than the company's outstanding loan balances even if its predominately low-income clients pay back everything they owe – something not even the most optimistic observer would countenance.
Cattles shares were suspended in April last year after it admitted to finding an "incorrect application" of bad debt charges that had resulted in a huge funding deficit. Several executives were fired and the chief executive and chairman stepped down after what the lender described as "a breakdown in internal controls". The Welcome subsidiary has now been closed to new business and is being run off in the hope of paying the company's banks off as much as possible. Meanwhile they are locked in dispute with bondholders over who should get what. At Welcome the 2008 loan loss charge for 2008 was hiked to £737m.