A formal investigation was begun yesterday by accountants Price Waterhouse and law firm Linklaters & Paines into the serious accounting problems unearthed at Wickes, the troubled do-it-yourself retailer whose pounds 1m-a- year boss resigned abruptly earlier this week.
Wickes said it had traced the accountancy errors to a small group of employees who had "elaborately disguised" their actions over a number of years.
Legal action against them was one option being considered, but a preliminary investigation had found no evidence to link former Wickes' chairman and chief executive Henry Sweetbaum to the problems, said a source close to the company.
Many staff will be interviewed by the investigators, including Mr Sweetbaum and former finance director Trevor Llewellyn, now at building materials group Caradon.
The cost of the errors, described by Wickes' finance director Stuart Stradling as "deliberately misleading" and going back at least three years, is likely to wipe more than pounds 10m from last year's profits.The developments mean investors will not get their 1.5p final dividend due next week.
Mr Stradling also revealed that the accounting problems relate to payments made by suppliers to Wickes linked to support for advertising, store openings and payments from a new supplier replacing another. "It all relates to the timing of these payments. There is no evidence that they will not eventually be recovered," he said.
Wickes hopes to quantify the losses by the end of next week when trading in the shares, which were suspended on Tuesday, may also be resumed.
The Serious Fraud Office has not yet been asked to investigate, and the Department of Trade and Industry declined to comment on the case.
Wickes has also begun the hunt for a new chief executive and a new finance director as Mr Stradling intends to resign once the internal inquiry is completed. Meanwhile, Michael von Brentano becomes the new non-executive chairman, with Robert Burrow taking on the deputy chairman's role.
Mr Sweetbaum succumbed to intense pressure from institutional shareholders by resigning late Wednesday as chairman and chief executive of Wickes.