Accounting irregularities at Bloxham Stockbrokers have meant that the firm has overstated its capital position by more than €5 million, the High Court was told today.
A provisional liquidator, Kieran Wallace of KPMG, was appointed to the firm, the country’s oldest and third largest stockbroker, by the court at a special hearing today on foot of a petition brought by the firm's partners.
The irregularities relate to the failure to accurately record trading losses of €2.6 million, a pre-payment of €1 million in income tax to cover the obligations of the firm’s partners and a payment of €1.7 million in total to the partners to reduce their debts to National Irish Bank. All three had been incorrectly recorded as assets on Bloxham’s balance sheet.
In an affidavit to the court, Bloxham partner Paddy Dempsey said that he and the partners of the firm were informed of the accounting irregularities late in the afternoon of Wednesday last, May 23rd by the firm’s financial partner, Tadhg Gunnell, a 36-year-old accountant who has worked at the firm since 2000. He became a partner in 2005.
The company faces a capital shortfall of €5.3 million, Bloxham’s lawyer Bernard Dunleavy told the court. The company’s liabilities exceed assets by €13.9 million, he said.
The stockbroking firm has said that Mr Gunnell was immediately suspended after informing the other partners of the irregularities which showed that the income at the firm had been overstated for several years, dating back to 2007. Calls to Mr Gunnell’s home earlier this week seeking comment were not returned.
The firm ceased operations at the direction of the Central Bank after the irregularities were uncovered and the regulator was informed. Forensic accountants from KPMG and Central Bank officials are carrying out an investigation into the firm. No clients funds are involved or at risk, the stockbroker said.
Davy has taken over the firm’s private clients and asset management businesses.
Mr Dempsey said that Davy’s acquisition of the private client business was expected to realise €2.2 million in addition to future earnings over a three-year period projected to be worth between €3 million and €5 million. Davy has purchased the asset management business for €3.6 million, he told the court.
Mr Dempsey valued Bloxham’s investment in the Irish Stock Exchange, of which it is one of the seven owners, at €6.25 million in his affidavit. Insurer FBD is a limited partner in Bloxham, holding 11.6 per cent of the firm.
In a statement today, the Central Bank said it had been advised that the appointment of the provisional liquidator would not affect the transfer of client assets as announced on Monday, and former private clients of the stockbroker should continue to contact Davy with queries.
