Quindell faces fraud inquiry as reported profits evaporate

New accounts show massive writedowns as SFO launches investigation

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The Independent Online

The Serious Fraud Office has launched a criminal investigation into the scandal-hit insurance outsourcer Quindell.

The SFO said it was looking into the business and accounting practices of the AIM-listed company, which is already being investigated by the Financial Conduct Authority for misleading public statements relating to its 2013 and 2014 accounts.

Quindell said it would “continue to co-operate with all relevant regulatory and law enforcement authorities”.

The SFO inquiry emerged shortly after the long-awaited publication of the company’s annual results and accounts, which revealed the scale of its accounting inaccuracies.

Quindell made a £238m loss in 2014 after writing down the value of its assets – including acquisitions made by founder and former boss Rob Terry – by £157m.

Mr Terry, who quit in November last year amid a controversial share-dealing scheme, was given a £1.5m golden handshake on his departure worth almost twice his annual salary.

Quindell also restated its accounts for 2013 to post a pre-tax loss of £8.6m, compared with a previously reported profit of £107m, on revenues of £61m, which were knocked down from the previous £380.1m.

The company is searching for a new chief executive following the departure of Robert Fielding, who moved to the Australian law firm Slater & Gordon as part of the £637m sale of Quindell’s legal arm earlier this year.

The group said it now had close to £600m in cash and has plans to return up to £500m of this to shareholders later this year.

The Financial Reporting Council also revealed that it is investigating two accountancy firms related to Quindell, thought to be its former auditor RSM Tenon, now part of the Baker Tilly group, and KPMG, which took over Quindell’s  accounts in October 2013.

The US short-seller Gotham City Research first raised questions about the group’s accounting policies in April 2014, wiping 39 per cent off Quindell’s stock market value in a day, at a time when it was worth some £3.5bn.

Gotham City claimed that as much as 80 per cent of Quindell’s reported profits were “suspect” and said it was suspicious about how the former country club operator was able to generate “Google-esque profit margins” in just two years.

The US company, which last September lost a libel case brought by Quindell and Mr Terry when it failed to turn up to the London court hearing to defend itself, said the lawsuit and statements made were “defamatory, malicious and untrue”.

Quindell said it expected its shares, which have been suspended since 23 June, to resume trading on Thursday, now that the overdue annual accounts have been published.

Richard Rose, who was parachuted in as chairman in May, described the accounts as “the most complex” he had ever seen, but insisted the new management had turned the troubled firm around.

He added: “Investor trust in the company and its board was eroded and it became clear that decisive action was necessary to bring stability back to Quindell and rebuild the confidence of employees, investors, regulators, customers and suppliers alike.”