Pressure group takes Reed Elsevier to court over goodwill accounting method

Reed Elsevier, the Anglo-Dutch publishing group, yesterday became the latest big company to be forced to defend itself against allegations of accounting irregularities.

An obscure private corporate watchdog in the Netherlands has issued Reed with a court summons objecting to the way the company had accounted for goodwill in its 2001 accounts and accusing it of seeking to flatter its profits.

News of the summons drove shares in Reed to a nine-month low, although they later recovered to end 5.5p higher in London at 561.5p.

The Foundation for the Investigation of Corporate Information, a tiny pressure group which has pursued Dutch companies for years, said Reed had given "incorrect and incomplete information on the consequences" of a change in 2001 accounts allowing goodwill to be amortised over a maximum 40 years rather than 20 years previously. The complaint relates to Reed's $4.5bn (£3bn) takeover of the US educational and medical publisher Harcourt a year ago.

The group's founder, Pieter Lakeman, is demanding that Reed Elsevier annul its 2001 accounts and restate them. "We object to the company stating incorrect and incomplete information on the consequences," he said. Mr Lakeman is a 60-year-old econometrist who founded the organisation in 1976 and has launched 26 cases against companies, most of which he says he has won.

A Reed spokesman rejected the complaints made by the group. He said Mr Lakeman had confused how the group complied with US accounting rules, which prevent goodwill from being amortised, and UK and Dutch rules, which allow the amortisation of both goodwill and intangible assets. "There is absolutely no substance to any of the issues raised. Our reports and accounts are completely transparent and we receive regular praise for their clarity," he said.

Mr Lakeman said an initial court hearing would be held on 25 July at Amsterdam corporate court. An official at the court's registry said it had yet to receive notice of this, but the court would customarily not register such a request until the week before the hearing.

Deloitte & Touche audited Reed Elsevier's 2001 results. Deloitte is buying up parts of Andersen, which has hit the skids after the Enron scandal.