Quindell investors fire starting gun on legal action over accounting irregularities
Quindell investors who lost out heavily after the company was forced into restating its profits, leading to a Serious Fraud Office investigation, have started legal proceedings against the business.
Law firm Harcus Parker has written a so-called “letter before action” to insurance group Watchstone, formerly Quindell, claiming shareholders lost out due to misleading statements to the stock exchange.
The letter is the first step towards a court hearing and lawyers are representing around a dozen institutional and individual investors.
Two of the company’s auditors – Arrandco Audit and KPMG – have already been sanctioned by the accountancy watchdog, the Financial Reporting Council, for failing to “exercise sufficient professional scepticism”.
Its shares surged between 2012 and early 2014 – valuing the group at around £2.7 billion – but the stock then plunged amid short-selling and after a US hedge fund publicly questioned the firm’s business model.
Trading was later suspended after the Financial Conduct Authority launched a probe into its accounts and founder Rob Terry.
Officers at the SFO have spent the last four years investigating the firm over allegations of wrongdoing between 2011 to 2015.
Jennifer Morrissey, a partner at Harcus Parker, said: “Between 2011 and mid-2015, Quindell regularly published upbeat market announcements about its financial good health, when it knew the truth was significantly different.
“We are rapidly building a cohort of shareholders who suffered significant losses when the share price collapsed when the truth started coming out, and we hope Watchstone will recognise the failures of its predecessor and compensate them without the need for a drawn-out legal fight.”
Issues at Quindell came to a head in 2015, when chief executive Mr Terry was pushed out, and accounts for 2012, 2013 and 2014 were restated, including 2014’s £83 million profit turning to a £68 million loss.
KPMG was fined £3.2 million and the company’s broker Cenkos was fined £531,000 for their roles at the business.