False data charges threaten Intertek flotation

Saeed Shah
Friday 22 September 2000 00:00

The forthcoming £600m flotation of Intertek Testing Services was put in jeopardy yesterday after it emerged that its US subsidiary was under suspicion of widespread fraud.

The forthcoming £600m flotation of Intertek Testing Services was put in jeopardy yesterday after it emerged that its US subsidiary was under suspicion of widespread fraud.

The US Department of Justice yesterday brought criminal charges against 13 former employees of the company, for falsifying data in testing work conducted for government agencies. The company carried out environmental tests for the government, on samples of air, liquids and soil. It investigated, for instance, for levels of toxicity.

Intertek, based in London, is a former unit of Inchcape that was bought out by management, backed by Charterhouse Development Capital, for £380m in 1996. The directors of the company, who hold 16 per cent of the equity, have been grooming the business for flotation.

Richard Nelson, Intertek's chairman and chief executive, said the labs that carried out the work had subsequently been closed down and that his company had reprocessed the data. He said its "sloppy" work had not posed a health or safety risk and the company's intention remained a listing in London.

Intertek has also been hit by a series of lawsuits filed against its US subsidiary by its clients, including BP, the oil giant, for work carried out for them.

A BP spokesman said: "This is the kind of situation that you never want to see happen because everyone relies on laboratories for accurate information."

A legal source said the liability on Intertek's US subsidiary for the BP case alone could be up to $30m (£21m). BP is retesting thousands of samples.

However, Intertek worked mostly for US government agencies, such as the army, the air force and the Environmental Protection Agency (EPA). It was unclear yesterday whether the US government will also seek damages against Intertek.

The charges laid by the US government yesterday note that its agencies paid Intertek $35.7m for work carried out between 1994 and 1997, which involved as many as 250,000 tests. These tests have been invalidated and have had to be carried out again.

The charges include "presenting false, fictitious and fraudulent claims against the United States". Among the employees hit by the indictment are Intertek's former regional director for North America, Martin Jeffus. If convicted on all counts, Mr Jeffus faces a prison term of up to 155 years and a $7.5m fine.

Intertek in London yesterday said the tests carried out by its labs in Texas, before 1998, were "irregular". Mr Nelson said work was "in contravention of EPA procedures, which is a breach of US law".

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