Problems mount for Versailles Group as second financial adviser steps down

VERSAILLES GROUP, the trade finance company hit by possible accounting irregularities, received a fresh blow yesterday with the resignation of Raphael Zorn Hemsley, its financial adviser and broker.

Versailles also confirmed reports that it would be seeking a new finance director, and that it would split the roles of chairman and chief executive, both currently filled by Carl Cushnie.

Mr Cushnie, who owns 53 per cent of the group, will remain chief executive and a new non-executive chairman will be sought. The company said that the current finance director, Frederick Clough, will retire, but set no date for his departure.

The loss of Raphael Zorn Hemsley follows the resignation last week of Teather & Greenwood, the group's other financial adviser. Versailles said RZH's departure was by mutual consent. It said it intended to appoint a replacement financial adviser early in the New Year and a broker soon after that.

It is understood that RZH withdrew its services in frustration at continuing secrecy from Versailles, which had its shares suspended earlier this month amid concerns that its turnover may have been overstated. One source close to RZH said: "RZH could not act as financial adviser because there was no meaningful relationship with Versailles. It found it impossible to continue."

Teather & Greenwood and RZH have said they were kept in the dark by Versailles about a Department of Trade and Industry inquiry into Versailles' accounting practices, which began several months ago. After news of the DTI inquiry was made public earlier this month, RZH felt it could continue as broker and financial adviser on condition it was fully informed of developments at the company. It is understood that did not happen. There was also confusion yesterday about which company is conducting the investigation into Versailles' accounting practices.

It emerged over the weekend that KPMG, the global accountancy firm, had been appointed by Versailles to examine its accounts. But it is unclear how the KPMG investigation relates to that mounted by Baker Tilly, the auditors also asked by Versailles go over its books. Both KPMG and Baker Tilly said yesterday that they were seeking clarification from Versailles.

Industry sources said Versailles appeared to be trying to shore up its credibility by appointing "big name" advisers.

Versailles said last night that trading remained strong and that it had received strong support from its clients.

Mr Cushnie said that the company did not intend to comment further until the accounting report is available.