A former president of the Law Society of Ireland and a prominent Scottish accountant will conduct the Institute of Chartered Accountants' (ICAI) investigation into the debacle at Powerscreen International.
The engineering group based in Dungannon, Co Tyrone, almost collapsed two years ago after accounting irregularities were discovered at its Matbro subsidiary.
The inquiry team - lawyer Mr Laurence Shields and accountant Mr Jim Gemmell - will specifically investigate the role of accountants KPMG and two former Powerscreen executives, chief executive Mr Shay McKeown and finance director Mr Barry Cosgrove. Mr McKeown and Mr Cosgrove are both members of the ICAI.
Although the ICAI has already voted in favour of hearings of public concern being held in public, the investigation into Powerscreen will take place in private as the Government's approval for the required rule changes has not yet been obtained. The Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, will, however, be able to appoint an observer to attend the hearings.
The ICAI inquiry is the third investigation into the Powerscreen affair and will focus specifically on the auditing issues that are not being examined in other investigations by the Serious Fraud Office in Britain and the Irish Stock Exchange. Neither of these investigations has been completed nor has any interim report been published.
The Powerscreen debacle began in January last year when it was disclosed that accounting irregularities at Matbro would result in massive write-offs and losses for the year. This disclosure came a matter of weeks after Powerscreen raised £18 million sterling (€28.3 million) in a share issue. It subsequently emerged that some of Powerscreen's senior management were aware of the Matbro situation before Powerscreen sold the new shares to Irish institutions.
Two months later, Mr McKeown and Mr Cosgrove resigned their positions.
A report by KPMG concluded that serious mismanagement had taken place at Matbro and that Powerscreen management had been aware of the situation in late 1997, months before the share issue.
Another accountancy firm was engaged by London solicitors Herbert Smith on behalf of the board of Powerscreen to review KPMG's findings. The ICAI committee will now focus its attentions on the audit that KPMG carried out on Powerscreen prior to the Matbro crisis.
The ICAI investigation will publish its findings and any sanctions that are imposed. If the investigation is not completed within three months, an interim report will be provided to the ICAI council with further interim reports every two months if the investigation is prolonged. Since the Matbro crisis became public, there has been a clear-out of former Powerscreen management and a series of asset sales to reduce the £53 million sterling debt.
Last June, the US engineering group Terex paid £181 million for the slimmed-down Powerscreen, a take-over that has recently been completed.
