The day a great plan began to fall apart: Russell Hotten traces the story of Britain's second-biggest corporate collapse

Staff at Brent Walker were accustomed to their chief executive's explosive temper. But nothing could have prepared them for his mood on 8 August 1988.

George Walker was incandescent with rage.

That morning the Independent had published the results of a three- month investigation that raised serious questions about the accounts in the company's key film division.

What angered the former boxer about the Independent's articles was not so much that he had been wronged but that it had upset his plans. With the company's share price in free fall, all his grandiose ambitions for the future seemed to lie in ruins.

Success in the film division was to be the springboard for Brent Walker's launch into the big time. The Independent's stories could not have come at a worse time.

Brent Walker was in the final stages of preparation for a massive rights issue to fund expansion. His plans were now unravelling before him.

Doubts in the City about Brent Walker had surfaced even before the Independent's story. A few months earlier Time Out magazine had revealed that in his youth Mr Walker had spent time in prison for robbery.

With the rights issue now in effect impossible, the company went on to fund its dramatic expansion through heavy borrowings - a strategy that later proved Mr Walker's undoing as recession gripped the property market. To raise the money Mr Walker first had to repair the company's credibility. Key to this was the appointment of KPMG Peat Marwick, one of the world's top accountancy firms, as auditor. Previously the company had been audited by the little-known Leigh Carr.

What Mr Walker did not know at that time was that there might have been close colleagues working behind his back. During the trial he agreed there were flows of money out of the company that he could not explain. Mr Walker said that, too busy to deal with detail, he would often put his signature on documents without reading them. And he agreed that on some papers his signature had been forged. Any wrongdoing appeared to be the work of other directors, the defence argued.

By 1990 Mr Walker had built a company turning over pounds 1.5bn a year in a hectic series of deals. It took less than two years for the house of cards to come tumbling down. By 1991 the edifice was insolvent, with debts of pounds 1.5bn, leaving Mr Walker the country's second-biggest bankrupt - behind Kevin Maxwell - with debts of pounds 180m. After Maxwell it was the biggest recent corporate collapse, another potent embarrassment to the Square Mile.

Mr Walker was yesterday acquitted of all charges against him. In his defence it was suggested that two film division directors, John Quested and Donald Anderson, were chiefly responsible for any wrongdoing.

Mr Walker was said to have trusted these 'two evil men' too much. Mr Anderson, the company's Mr Fix-it, vanished without trace some years ago. He remains at large with a warrant out for his arrest. Mr Quested, who ran the film division, now lives in America, where he is trying to rebuild his business career.

Using leaked internal working papers, the Independent said that a large proportion of Brent Walker's growth in profits came from the sale of film rights which appeared never to have taken place. Two deals were particularly suspicious.

The leaked papers, shown to the jury, showed that a 13-part drama series on the paranormal was sold in the US for pounds 3.23m. A further sale for pounds 4m was booked in the 1987 accounts. Called Worlds Beyond and starring the late Denholm Elliott, the figures were as fantastic as the series' subject matter.

Industry experts said the size of the sales would have made Worlds Beyond one of television's great money-spinning ventures. In fact there was no evidence of distribution or broadcast in America and the series proved hard to market elsewhere, pulling in only dollars 400,000.

Another film, Return of the Soldier, starring Glenda Jackson and Alan Bates, was said to have been snapped up in 1986 by Lorimar, the Los Angeles film group, for a total of dollars 1.5m. But Lorimar told the Independent it never bought any rights. A host of other film deals proved equally fictitious, it was claimed.

According to the prosecution, the so-called purchasers were in fact front companies controlled by associates. They were buying the film rights with Brent Walker cash or loans guaranteed by the company.

Between 1984 and 1987, the prosecution said, up to 16 fake sales were arranged, giving potential investors the impression of soaring profits.

In two months alone pounds 11m was said to have been laundered through an offshore bank and returned to Brent Walker as bogus profit. On 27 December 1987 about pounds 7m was deposited with the Royal Trust Bank, Isle of Man, passing through three in- house accounts before being returned to Brent Walker that very day. A month later, another pounds 4m went by the same route.

The money went to a Canadian company, then to Royal Trust Bank and on to Brent Walker. The bank's former managing director, William Cowie, later admitted that he should have been alert to alleged money laundering, but added: 'We were dealing with established customers of many years. Why should we think it was money laundering?'

Mr Cowie was not the only one to be fooled by inconsistencies in the accounts. Brent Walker's solicitor, Simmons & Simmons, fired off a libel writ against the Independent saying it had seen the film contracts and confirming they were proper arm's-length purchases.

An elaborate facade was created to cover up the fake profits, the prosecution alleged, in which the name of John Love was to feature prominently. Paperwork was produced claiming Mr Love, who had died some months earlier, controlled Universal Talent Management, an Isle of Man company said to have bought film rights from Brent Walker. In fact UTM was controlled by Mr Quested. Mr Love had nothing to do with the company.

The prosecution claimed that another forged letter showed that a Brent Walker consultant, Michael Eland, head of Paris-based Anglo French Investments, was paid pounds 5m in commission.

Some of the fake documents, supposedly created more than a year apart, contained the same simple errors and spelling mistakes. Given the number of so-called experts who looked over Brent Walker's accounts, it is odd that no one spotted inconsistencies earlier.

Brent Walker's long-standing auditor, Leigh Carr, had signed off the company's accounts year after year without question. Many people in the City found it strange that an ambitious company like Brent Walker should be using a small firm like Leigh Carr.

But after doubts about the accounts KPMG Peat Marwick was brought in to do a special review. Philip Hardacre, a KPMG partner, gave them a clean bill of health. Mr Hardacre, who appeared as a witness for the prosecution, said during the trial that he had been duped.

Leigh Carr faced a stinging attack during the trial. The prosecution said the firm was less than vigilant, adding: 'Auditors should play a watchdog role, but in this case it seems the bogus transactions were accepted and, at the very least, the auditors were asleep.'