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Bogus invoices lead to Interserve suspensions

Six senior managers made 'accounting misstatements' as potential £25 million fraud investigated

INTERSERVE is investigating a potential £25 million fraud after suspending six senior managers from its industrial services division for 'accounting misstatements'.

The company told the Stock Exchange: 'Information suggests certain control processes within industrial services have been repeatedly circumvented over a per iod of f ive or more years.'

The irregularities came to light following a recent internal review of the division, which was due to be merged with Interserve's facilities services operation.

A company source said: 'What we believe happened was that invoices were issued to non-existent clients for a certain amount, and then shredded. These were then followed up with credit notes, which were also shredded.

'These same invoices were then issued to different clients.

'An internal audit also found that items which should have been booked into profit and loss accounts were put down as recoverable costs.'

Interserve has launched an independent forensic review by KPMG and law firm Linklaters, which will report to the company's audit committee.

It is understood that Interserve has informed the Financial Services Authority of the situation, but not yet called in the police.

But the sources said the police could yet launch a probe following the outcome of the review.

The firm's share price plummeted 25 per cent on Monday as Interserve said losses would hit its interim results next month. Chief executive Adrian Ringrose and finance director Tim Jones were in London on Monday morning attempting to ease the fears of banks and investors.

Bruce Melizan, the managing director of the enlarged facilities services division, has also put in place interim management arrangements following the suspension of the senior staff.

Stewart Hagerty had been managing director of the industrial services division since it was originally set up in 2000, and was appointed to the main board in 2002. But he was made redundant last month following the decision to merge it with facilities services.

The division, which operates in the process plant, industrial, maintenance and access sectors, turned over £164 million last year, making operating profits of £6.3 million.