An Upright Company such as Grant Thornton Would Never Do that in Ireland?

Grant Thornton accused of wrongdoing in Tchenguiz case

By Ed Hammond and Caroline Binham in London

Grant Thornton has been accused of maliciously misleading the UK’s anti-fraud prosecutor and potentially perverting the course of justice in explosive court documents filed as part of a high-profile damages claim brought by Vincent Tchenguiz against the Serious Fraud Office.

In a series of letters, seen by the Financial Times, lawyers for Mr Tchenguiz catalogue extensive allegations against the accountancy firm, including possible “criminal wrongdoing” and providing “misleading information” that triggered the arrests of the property tycoon and his brother Robert in March 2011 at their Mayfair homes.

The accusations are the latest twist in a two-and-a-half year legal drama that has left the SFO nursing its already battered reputation as it tries to defend a £300m damages claim – the largest in its 26-year history – and which now looks certain to embroil Grant Thornton in a separate action that Mr Tchenguiz is planning to file.

In the first of four letters, dated March 2012, Mr Tchenguiz’s lawyers state that “many of the factually inaccurate criminal allegations made against Vincent Tchenguiz by the SFO . . . must have emanated from GT”. The 28-page epistle goes on to accuse the accountant of “operating with a clear conflict of interest”.

The issue of Grant Thornton’s potential conflicts of interest has come under sustained inquiry by the Tchenguizs’ lawyers, both in court hearings during the past two years and in the letters.

The investigation into the brothers centred on their role in the 2008 collapse of Kaupthing, the Icelandic bank at the heart of the country’s financial crisis. However, as the case against them foundered last year, it emerged that Grant Thornton, upon whose information the SFO had relied heavily, was not only the receiver of Kaupthing, but was simultaneously locked in a £2bn civil litigation against the brothers.

The most recent letter accuses Grant Thornton of putting “its interests in earning fees and generating profits above all other professional, ethical and legal considerations”, before adding: “[Grant Thornton’s] conduct has repeatedly crossed the line from proper ethical practice into areas of ethical, civil and potentially criminal wrongdoing”.

Grant Thornton said it was restricted in its response to the FT owing to confidentiality obligations, but that it was not an adviser to the SFO and had “acted appropriately, and in accordance with its professional responsibilities and legal obligations throughout”. It added: “The fact that we are unable to provide any comment, or respond to any specifics, should not be taken to mean that we accept any allegations that may have been made.”

Questions also arise on the SFO’s seeming over-reliance on Grant Thornton, not only in the Tchenguiz matter but also in other flawed investigations. The letters point out that Grant Thornton assisted the agency in its inquiries into the UK operations of Bernard Madoff, the convicted Ponzi scammer; Dynamic Decisions ; and Weavering Capital. The SFO initially dropped all of these investigations.

David Green, the new director of the agency, reopened its examination of Weavering last year and has charged Magnus Peterson, the collapsed hedge fund’s founder, with fraud. Mr Peterson denies wrongdoing and awaits trial.

The SFO declined to comment, citing current legal proceedings. Mr Green has, however, previously stated his intention to sharpen up the agency’s processes, including the review of third-party reports.

Last Friday, the court demanded that senior Grant Thornton employees hand over internal company reports that the SFO used as the basis for its investigation into the Tchenguizs.

The SFO has always maintained that Grant Thornton provided correct information in reports it made about the relationship between Kaupthing and the Tchenguizs, but that the agency’s staff repeatedly misinterpreted it. However, relations between the two parties have become frayed, and this month Grant Thornton employees threatened legal action against the SFO if it used copies it had made of the reports.