Nadir accountants warned off tax office: Tim Kelsey reports on allegations of 'irregularities' in inquiry

ONE of Britain's largest firms of accountants was so concerned by apparent 'irregularities' during the investigation into Asil Nadir's tax affairs that it threatened to suspend co-operation with the Inland Revenue.

Speculation that the fugitive Turkish Cypriot tycoon may be forced to return to Britain, which he fled in May facing charges of theft and false accounting involving more than pounds 30m, grew yesterday with confirmation that officials from the Serious Fraud Office are in northern Cyprus.

In an unprecedented move, Coopers & Lybrand made the threat after allegations of inappropriate conduct were made by partners in the firm against Michael Allcock, a tax investigator. Sources close to the Inland Revenue accuse Coopers of failing to fully co-operate with its inquiry and making the threat in an attempt to dissuade the Inland Revenue from mounting raids to recover documents from the accountants and Nadir, which Coopers deny.

The extraordinary warning was made in a letter written in 1990 by Peter Allen, a managing partner at Coopers, to Sir Anthony Battishill, chairman of the board of the Inland Revenue. Mr Allen wrote following complaints by two partners who worked on Nadir's tax affairs. Coopers was not prepared to discuss the circumstances because that would breach client confidentiality.

Michael Allcock, head of SO-2, the Revenue's investigations unit, is alleged by Nadir supporters to have first blown the whistle on Nadir by breaching professional guidelines and reporting him to the Stock Exchange.

Mr Allcock has been suspended from his post while police investigate an alleged bribery unconnected with Nadir. Mr Allcock was investigating Nadir's tax affairs and was interested, according to sources, in offshore companies which held shares in Polly Peck and with which Nadir was personally associated. The investigation was started in mid-1988 and, sources state, was floundering on the refusal of Nadir's advisers, including Coopers & Lybrand, to fully co-operate.

By 1990, he was apparently pressing the Inland Revenue to exert its statutory powers and mount a number of raids to recover relevant documents.

Anthony Scrivener QC, Nadir's counsel, in a letter to the Attorney General last year, claimed that as early as 1990, Coopers & Lybrand on behalf of Mr Nadir wrote to the Inland Revenue in the clearest possible terms complaining about Mr Allcock's conduct.

The fact Coopers made the threat at all is remarkable. The withdrawal of co-operation would, one accountant said, have caused 'outright warfare' with the Inland Revenue and probably have ended its investigation. Under these circumstances, documents held by Coopers would only be made available to the authorities after a court had ordered their release. Proceedings could have taken years.