Summary: Slater & Gordon is under investigation by ASIC, just like their recent purchase of Quindell is under investigation by the FCA.
Slater & Gordon, an Australian law firm, bought most of Quindell, a struggling insurance claims processor in June for over $1 million dollars. Now the law firm is under scrutiny from regulators due to spreadsheet and accounting errors. The Australian Securities and Investments Commission have started an inquiry into the firm and their auditors Pitcher Partners.
News of the inquiry on cash flow items sent their shares down 25 percent. Slater & Gordon bought Quindell after months of stock market chaos in an attempt to consolidate the United Kingdom’s legal market. Slater & Gordon has purchased around 50 other legal firms.
Just last week Quindell announced that they were under investigation by the Financial Conduct Authority for their financial statements in 2013 and 2014. The announcement came a little after a suspension on their shares. Due to the inquiry they will not be able to publish their accounts for 2014, making them miss the stock market deadline of reporting annual results within six months of the end of the year.
Quindell’s market capitalization was at over 3.9 billion dollars early last year. Despite this, the company’s profits have not meant a consistent cash flow. It was determined that when Quindell was under the direction of founder Robert Terry, it used aggressive and unacceptable accounting methods.
Slater & Gordon is cooperating with the investigation, announcing that they have discovered a “consolidation error” in the reports of their UK cash flows. Their restatements for the last financial year reduced their cash receipts by $25 million. They were including customer payments in the gross instead of net numbers.
Source: http://www.ft.com/intl/cms/s/0/c96218cc-1e2b-11e5-ab0f-6bb9974f25d0.html#axzz3eTwVzAf6
Photo: afr.com