Thursday 19 September 2019

Directors of embattled Datalex at time of 'accounting irregularities' now face threat of prosecution

Datalex is a travel software company (Stock image)
Datalex is a travel software company (Stock image)
John Mulligan

John Mulligan

Directors of embattled Irish travel software firm Datalex at the time accounting irregularities occurred at the company last year now face the threat of prosecution.

The company's own auditor, Ernst & Young, said in a stock exchange filing this afternoon that it has notified the registrar of companies that it has formed the opinion that Datalex failed to comply with requirements to keep adequate accounting records in 2018.

The auditor said the failure fell under sections 281 and 282 of the Companies Act 2014.

Failure to maintain proper books is regarded as a Category 2 offence under the Companies Act - and is potentially a criminal offence.

In extreme cases offences can result in fines of up to €50,000 and up to five years in prison.

Datalex was rocked by the accounting issues that it revealed this year.

A subsequent review by PwC found that there had been "significant accounting irregularities" at the software firm, which has said its first half results for 2018 may have been misstated.

The scandal saw long-time chairman and shareholder Paschal Taggart, as well as chief executive Aidan Brogan resign.

Datalex shareholder Dermot Desmond was forced to inject €10m into the company to keep it afloat. The billionaire already owned more than 26pc of the firm. The €10m included a €6m loan and €4m in equity, lifting his stake to just under 30pc.

Datalex said in a statement to the stock exchange that it "takes its legal and corporate governance responsibilities very seriously and seeks to comply at all times with all relevant laws and regulations".

It added: "The company has expended significant effort over the course of 2019 in the taking of corrective actions to address the shortcomings identified by the independent review of accounting issues.

"The board is satisfied that, while it continues to assess the group’s material risks and effectiveness of its internal controls, it has taken all appropriate immediate action."

The company, headed now by interim chief executive and chairman Sean Corkery, warned last month that its 2018 losses will be between $4m and $6m - worse that previously anticipated.

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