ABB staff 'covered up $65m loss'

ABB, the Swiss-Swedish engineering giant, suffered a $65m (£42m) loss after a group of employees in a London office entered into loss-making contracts with clients, which they then tried to cover up.

It emerged yesterday that the London employees appeared to "miscalculate" prices on some business and then, realising their mistake, tried to hide the contracts by booking fraudulent numbers on trade.

Analysts said the revelation was not helpful for a company trying to restore investor confidence after suffering a financial crisis and a scandal over enormous pension payments secretly granted to two former chief executives. The market is also going through a crisis of confidence over companies' reported accounts after a series of large-scale corporate frauds have come to light, led by Enron and WorldCom.

A spokesman for ABB said the company's problems in London were limited to the actions of a few employees. "It looks like a case of poor judgement in setting prices. The prices did not cover our costs."

The scam came to light in 2000, resulting in about five employees being fired and a number of other staff were "disciplined" over the affair. ABB's internal audit team picked up the discrepancies during a routine inspection of the books and the false numbers never entered into the group's official accounts. The ABB products involved were not disclosed.

Because the contracts in question did not cover ABB's costs, the company had to take a loss of $30m in the 1999 accounts over this business, a $10m loss in 2000 and a further $25m hit last year. The employees involved worked in ABB's manufacturing and consumer industries division in London. The company has 8,500 workers in the UK.

The actions of the five London employees emerged in the Swedish press yesterday, which had picked up the news from a filing that ABB made last month to the Securities and Exchange Commission in New York.