Tomkins investors turn fire on auditor

Arthur Andersen to be questioned over how much it knew about Greg Hutchings' conduct at conglomerate
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Tomkins' auditor, Arthur Andersen, are to come under pressure from shareholders after it emerged that the accountants received £12.8m of fees from the conglomerate last year, and over £30m worth of work in the last five years.

Tomkins' auditor, Arthur Andersen, are to come under pressure from shareholders after it emerged that the accountants received £12.8m of fees from the conglomerate last year, and over £30m worth of work in the last five years.

Andersen has been asked to review the current and historic board practices at the group following accusations of corporate excess levelled against Greg Hutchings, the Tomkins chief executive who resigned on Thursday.

David Newlands, the former GEC and Saatchi & Saatchi finance director, has taken over the role of executive chairman, and will review the structure of the company.

Shareholders are expected to demand to know how much the board, and the auditors, knew about alleged abuse of company funds and assets by Mr Hutchings. These include entertaining; use of the company's two London flats; the use of Tomkins' corporate jets for holiday and the payment of a salary to Mr Hutchings' wife and housekeeper.

Meanwhile, fresh allegations of corporate excess have emerged from the company's internal investigation. In 1995, Mr Hutchings and his teammates at Richmond Hockey Club are said to have flown to Portugal at the company's expense. Also, it has been confirmed that Tomkins donated £15,000 to the club. There are also reports that Tomkins donated £85,000 to Lord Archer's bid to become London mayor.

The auditors have not highlighted these problems in the past, despite having worked for Tomkins for more than a decade. If the accountants' fees are anything to go by, Andersen should have done a thorough job.

Last year Andersen charged £3.7m for Tomkins' audit and another £9.1m of fees for non-audit services, which include consultancy and tax advice. In 1998/9, Andersen charged £3.5m for the audit and received another £2.3m for other services. In 1997/8 the figures were £3.5m and £2.7m while in 1996/7 they were £3.3m and £2.2m and in 1995/6 they were £2.2m and £1.3m. Andersen also received £500,000 from a subsidiary that was sold in 1997 taking its total income from Tomkins over five years to £34.4m.

Leading investors such as Prudential, Standard Life and CGNU have attacked high fees to auditors for non-audit work, claiming this could compromise their independence.

Andersen declined to discuss the quality of its work or the fees paid by Tomkins, citing client confidentiality. Another focus of the internal investigation is likely to be the conduct of Tomkins' non-executive directors, in particular Ali Wambold and Roger Holland. Tomkins' investigation may also become a matter for the Inland Revenue if benefits received by Mr Hutchings were not revealed to the taxman.

Since resigning, Mr Hutchings has chosen to keep his own counsel. However, sources close to him suggested that reports that he would seek a £2m compensation package from Tomkins were wide of the mark.

The future of the engineering and automotive business he built will be decided by the outcome of a strategic review likely to be announced at Tomkins next set of results in January. Tomkins is under pressure to break itself up, a process which began earlier this year with the sale of its Rank Hovis McDougall food arm to venture capitalists Doughty Hanson.

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