£19 million shortfall in fraud investigation uncovered
Lookers (a car dealership chain) has uncovered a £19m shortfall in its accounts over several years as part of a fraud investigation that led to last week’s clear-out of the UK car dealer’s board.
Overstated bonuses and “fraudulent expense claims” were discovered, and a draft report from Grant Thornton identified areas requiring “behavioural and cultural” change in the business, the dealer group said. Lookers brought in the accountants to investigate after discovering “potentially fraudulent transactions” in March.
On Monday, 29.06.2020, the group said it had uncovered a £4m shortfall related to the overstatement of bonuses from manufacturers, which pay commissions to dealers based on the number of cars they sell, as well as “a number of fraudulent expense claims”.
An additional £ 15millions were discovered missing due to “incorrect or inconsistent application of policies, processes and accounting standards”, which is believed to involve stock valuations and was not part of a deliberate attempt to mislead.
About half the total amount affects 2019 results, with the rest spread across several previous years.
The investigation is not yet closed, with the potential for further findings.
The findings put into perspective the scale of the wrongdoing, which has caused company shares to tumble more than 50 per cent since the start of the year. Shares in the business will almost certainly be suspended on Wednesday 01.07.2020, because of the delay to publishing full-year accounts for 2019. They have been delayed several times due to the probe.
The company previously said the accounts would be released before the end of August. Its auditor Deloitte will resign once the accounts are published.
As well as the fraud probe, the group is battling to recoup sales, like other car dealers, after showrooms reopened this month following the lockdown. UK car sales fell close to zero in April and May, with industry warnings about depressed demand for the rest of the year.
Lookers has already announced 1,500 job losses, and a dozen site closures, with the car retail sector, braced for much more stinging cuts in the coming months. It confirmed that the business expected to report a pre-tax profit for last year, despite the fraud investigation.
The probe also led to last week’s board clear-out. Five directors, including its long-serving chairman, will leave the company over the next year. The scandal comes months after the company disclosed a separate, unrelated investigation into the group by the Financial Conduct Authority over alleged historic mis-selling practices.
29 June 2020 - fraud investigation-