|By Brian O'Connor, Daily Mail, London|
Knight Ridder/Tribune Business News
June 19, 2004 - The profits of hotels group Queens Moat Houses were wildly over-stated for 10 years before its near collapse with UKpound 1 billion write-offs in 1993, a DTI report says.
Unacceptable accounting went on for 20 years, with abuses escalating to "extreme accounting" in its last year.
Though it once owned 190 hotels and had a market value of UKpound 900 million, QMH's board did not have any idea how it was trading, the annual audit was largely a "ticking" exercise and merchant bank Charterhouse "did not do enough to fulfil their duties as advisers." QMH fabricated profits, deferred costs and overstated hotel valuations.
These are the findings of a DTI report, begun in 1995 and only now published. It lays much blame on founder and chairman John Bairstow, described as "capable of dominating those about him" and surrounding himself with "people of modest ability."
Bairstow chose a small local firm, Bird Luckin, as auditors. QMH's managing director Martin Marcus knew the difference between "real and created profits" but became "corrupted." Marcus sold half his shares late on in a "typically cynical and blatant move."
After the collapse, the DTI sought to disqualify four former bosses -- Bairstow, Marcus, finance director David Hersey ('lacked the qualities to be a director') and his deputy Allan Porter. Three have been banned for seven to 10 years. Judgment on Bairstow is pending.
The DTI inspectors savage non- executives who were easily "fobbed off." Maurice Hart of Bird Luckin "had been hopeless as an auditor. He fared no better as a director."
Charterhouse, which raised UKpound 900 million for QMH in share and debt issues, is roundly rebuked for failing to recognise the weaknesses. The affair has been so prolonged that both inspectors, Adrian Burn and Patrick Phillips, have now retired.
QMH was later refinanced and appeared to be recovering, but hit trouble again after the September 11 attacks. The shares were suspended last year at 8 1/2 pence.
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