Touche Ross's managing partner and another senior member of the accountancy firm have been fined a total of pounds 115,000 and reprimanded by regulators for their part in the Barlow Clowes fraud scandal.
Touche, one of the UK's Big Six audit firms, reacted furiously to the action by the country's senior accountancy regulator. It branded the report from the Joint Disciplinary Scheme (JDS) and the fines "totally unjust" and said it was standing by the partners involved.
One Touche source said the firm was "incandescent" at the treatment of the partners, who were being used as "scapegoats."
The JDS investigation was initiated by the Institute of Chartered Accountants in 1989, a year after the investment firm Barlow Clowes went bust. Liquidators discovered frauds by Barlow Clowes totalling pounds 100m at the expense of 18,500 investors, mostly pensioners.
John Connolly, currently Touche's managing partner, was yesterday reprimanded by the JDS and ordered to pay costs of pounds 40,000. He was partner in charge of Touche's northern region in the late 1980s when the firm acted as reporting accountants for Ferguson, a company entwined with Barlow Clowes.
The JDS found that "the professional efficiency, conduct and competence of Mr Connolly fell below the standard which should be displayed by, and may be properly expected of, a chartered accountant who is the second partner on work done and services provided as reporting accountants."
Stuart Counsell, partner in charge of the North of England, was censured and ordered to pay costs of pounds 75,000. Mr Counsell worked on Ferguson's acquisition of Barlow Clowes.
A third, Martin Pullon, a manager with Touche Ross Leeds at the time, was admonished and ordered to pay costs of pounds 15,000. Mr Pullon has since left the firm.
David Courtman, a chartered accountant who was at that time a director of the merchant bank Singer & Friedlander, in charge of its Leeds office, was also censured by the JDS and ordered to pay costs of pounds 75,000. Singer & Friedlander said yesterday they would be unavailable for comment until Monday.
The JDS's action comes a day after the Department of Trade and Industry published its own report into the Barlow Clowes scandal. The DTI report, 1,650 pages long and six years in the making, criticised Touche Ross.
But as Touche pointed out yesterday, the DTI inspectors also accepted that Peter Clowes and his associates had repeatedly lied to and misled their professional advisers, including Touche. Touche said: "Unlike the DTI inspectors' report, which took pains to emphasise the scale of fraud and deception perpetrated by Peter Clowes and his associates and the acquiescence of many others, the JDS report reflects a complete lack of balance."
A Touche spokesman denied that the firm's clients might be put off by this action against the partners, two of the most senior figures in the whole organisation.
"We wish to stress that we continue to have complete confidence in the professional competence of our partners involved. As the (DTI) inspector stated, 'they were deliberately misled' and 'in many ways victims of the fraud.'
"In the light of that and bearing in mind that the Barlow Clowes affair took place over eight years ago and the strain that has been imposed on the individuals involved over this period in assisting this and the numerous other enquiries into Barlow Clowes, we see no purpose in prolonging the situation at further great expense by making any appeal. In fairness to those involved, it is time for the matter to be brought to a close."
The probe into the Barlow Clowes affair was the last to be conducted in an "inquisitorial" manner. In 1991 the scheme was changed so that the subjects of the reports could see evidence, present their own case and cross-examine witnesses.
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