Whitewash worries at Wickes

Lawyers' report expected not to urge action against former chief over pounds 50m of overstated profits
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The Independent Online
Fears are growing that a long-awaited report into DIY chain Wickes's overstated profits of at least pounds 50m will amount to little more than a whitewash of top management.

Directors are considering the latest draft of the report, by City lawyers Linklaters & Paine, before discussing the findings at a board meeting this week. They will report to shareholders next week.

On Friday, the company said it would miss a self-imposed deadline tomorrow to explain what went wrong over the accounting of pounds 87m of supplier rebates in 1994 and 1995. It now expects to make an announcement tomorrow week.

Investors, as well as current and former members of staff, fear that the group will recommend no action against former chairman and chief executive Henry Sweetbaum and other directors over their management of the DIY chain.

Mr Sweetbaum resigned in June after discovery of the accounting irregularities in an investigation pursued by former finance director Stuart Stradling, who was appointed last year.

Wickes shares have been suspended at 69p pending the review and negotiations with suppliers over the rebates.

So far only two other executives, group trading director Les Rosenthal and UK commercial director Chris Miles, have also resigned after first being suspended by the group.

The report is understood to conclude that Mr Sweetbaum, as well as administration director Michael Corner and Trefor Llewellyn, Mr Stradling's predecessor, "should have known" about the irregular practices.

Other executives interviewed by the lawyers say attempts will be made by the board, headed by chairman Michael von Brentano, to lay some blame on managers - including former managing director Bill McGrath - who left as long ago as 1993.

This is despite the fact that rebates demanded from suppliers totalled just pounds 26m from 1987 to 1993 and were in line with industry practice, against the accelerating amounts subsequently which concealed falling trading profits from Mr Sweetbaum's price-cutting strategy.

Several non-executive directors, as well as Mr Corner, retain close links with Mr Sweetbaum.

Suppliers were forced to sign two sets of documents to conceal the true nature of cash rebates and discounts from the auditors, which should have been accounted for over three years.

Trade sources say Wickes' is exerting immense pressure on small suppliers over rebate terms as it seeks to shore up its balance sheet ahead of an expected pounds 30m rights issue later this year.

Some, including Manchester-based Regency Kitchens, have refused to yield and have been dropped by the chain, leading to job losses in the sector.