Bloxham partner claimed KPMG was surprised by company audit
Stockbroking firm's €5.3m shortfall was not spotted by its long-time auditor
Published 20/12/2015 | 02:30
Senior KPMG executives were surprised that rival accounting firm Deloitte did not catch obviously-concerning behaviour at Bloxham Stockbrokers, an affidavit entered in court by a former Bloxham partner claims.
A recently issued High Court judgment by Judge Paul McDermott discusses the contents of the affidavit, which was submitted by Niall Tinney.
Tinney was once a partner at Bloxham Stockbrokers and today is head of distribution for Merrion Solutions. He was defending a case brought by Danske Bank, in an attempt to recoup a loan linked to the buyout of the firm.
The affidavit refers to KPMG managing partner Shaun Murphy and liquidation expert Kieran Wallace and their reaction to Deloitte's failure to discover concerning accounting practices by former Bloxham finance director Tadhg Gunnell when KPMG was initially appointed as liquidator to the firm.
The 150-year-old stockbroking house was ordered to cease trading in 2012 after the Central Bank found "financial irregularities" in its accounts.
For the previous five years, the brokerage had been trading with a €5.3m shortfall on its balance sheet, meaning it had been trading without the required regulatory reserve. The shortfall escaped its long-time auditor Deloitte.
Justice McDermott's judgment states that Tinney claimed: "When initially appointed as liquidator, Mr Wallace and a Mr Shaun Murphy were of the opinion that 'while the initial fraud of Mr Gunnell was well hidden in the accounts, subsequent acts of fraud by Mr Gunnell were quite obvious, and they were surprised Deloitte had not identified them'."
Justice McDermott ultimately ruled in favour of Danske Bank in the case, rejecting Tinney's assertion that the bank was negligent in giving him a loan to him to invest in the firm. Danske Bank was entitled to summary judgment for €3.47 million against Tinney, the court found.
The collapse of Bloxham stockbrokers, meanwhile, is still being investigated by the Central Bank three years later. The only party sanctioned so far has been Tadhg Gunnell, who was fined and disqualified for ten years.
The probe is not examining auditor Deloitte; the Central Bank said that would be the responsibility of the Chartered Accountants Regulatory Board. CARB, however, said it is waiting until the Central Bank's investigation is over before deciding whether to launch any investigation of its own.
Bloxham had 17,000 private clients when it was shut by regulators, most of whom were passed on to Davy stockbrokers. It owed millions to creditors when it went into liquidation, including the Revenue Commissioners.
Sunday Indo Business