CROSS POSTED ON BYLINE.COM
The scandal that led to the huge £3.7m fine ( reduced to £2.4m after co-operation) against accountants Grant Thornton and ex partner Robert Napper is revealed in a dry 56 page report by the Financial Reporting Council.
The biggest con by the privatised company Assetco responsible for owning and maintaining the capital and Lincolnshire’s fire engines was in faking additional cash payments from London’s fire brigade when it was asked to do more work.
Directors of the company took advantage of three extra requests that were approved by London fire brigade – involving new equipment for fire engines and emergency training for 700 of the capital’s firefighters.
In all three cases they fiddled the books to boost the value of the company to shareholders and lied about the cost of the contracts to gullible auditor Robert Napper and accountancy firm Grant Thornton.
The London fire brigade wanted its engines to be equipped with new foam pumps and thermal imaging cameras. Under the privatisation deal they could charge large sums of money per month under a leasing deal for fitting this equipment. But the greedy directors were not satisfied with this great deal. They decided they wanted icing on the cake and claimed even more to make their company look more profitable. And not just a few pence -literally millions of pounds.
The new foam pumps meant that Assetco could and did charge an additional £2.6m to London fire brigade. But the directors claimed that additionally they were charging London fire brigade another £46,975 a month from April 2009. This produced promised income of another £4.991 million over the next 14 years. But Assetco never even sent an invoice to the London fire brigade. for these sums. It was a complete fake – the money did not exist and the auditors didn’t spot it.
The same applied to the thermal imaging cameras. The 140 cameras were leased to London fire brigade at a cost of £331,443 a year or £27,620 a month. But then the directors told the auditors that it had cost over £1m to purchase and fit the cameras and that the London fire brigade was paying over £57,000 a month. This generated a total of over £5,875m over 13 years. Again this was a complete fake and it would have shown a profit margin of 80 per cent. This went unchallenged by Mr Napper despite queries by his team.
Finally they fiddled the emergency training programme for 700 firefighters. They claimed they were receiving another £71,000 a month for ladders and hoses and guards that they were already were being paid under an existing contract. They also fiddled the costs. They said it would only cost the company £2m to provide it over five years. In fact it was over £6m.
This catalogue of deceit was aimed at inflating the value of the company. It was particularly despicable because the directors were using the need to improve London’s fire fighting capability as a vehicle to fiddle the books. But that was not all they were doing and I will come back to it in another blog.