FRC dishonesty decisions
Published 9 September 2015
The Financial Reporting Council is the independent disciplinary body for the accountancy and actuarial professions. In two recent decisions, the FRC has demonstrated what it will want to be viewed as an uncompromising approach that it will take to cases involving dishonesty.
Diane Jarvis was the CFO of Healthcare Locums Plc (HCL) . Between 2005 and 2011. She was suspended following an internal investigation in January 2011 and resigned in March 2011. In a recent settlement with the FRC, Ms Jarvis admitted that she had been responsible for a number of accounting irregularities which had the effect of overstating HCL's revenue by nearly £10m in its 2010 management accounts, which were then shown to third parties (including potential investors). Trading in HCL's shares was suspended in 2011 following the outcome of the internal investigation, the suspension of Ms Jarvis as well as HCL's Executive Vice Chairman.
Ms Jarvis was a member of the ICAEW. The Accountancy and Actuarial Disciplinary Board began an investigation which was referred to the FRC. This resulted in a settlement agreement recently being approved by the FRC in which Ms Jarvis admitted that her conduct was dishonest, and agreed that:
She would be excluded from the profession for ten years.
She would pay £25,000 toward the FRC's costs (payable personally rather than by her employers or insurers).
Relevant to the severity of the sanctions against Ms Jarvis was the fact that whilst the misconduct had occurred over a period of time, she recognised that it was misconduct, cooperated with the FRC's investigation and had apologised.
Another case was pursued to the FRC tribunal rather than reached by way of settlement. In 2013 Mark Woodbridge was convicted in proceedings brought by the SFO, relating to allegations of false accounting and conspiracy to defraud. It was found that Mr Woodbridge falsified the revenue and cash at bank figures in the interim financial statements of Torex Retail Plc (in one instance overstating them by £5.5m) and conspired to defraud investors by creating forged documents and falsely backdating documents. Mr Woodbridge was sentenced to nearly four years imprisonment. He did not cooperate with the FRC enquiry, denied he had committed any criminal offence and was not prepared to make any admission.
The tribunal excluded Mr Woodbridge from the profession for ten years, but imposed no costs award as Mr Woodbridge was bankrupt.
On the face of it these decisions appear, perhaps, a little inconsistent, coming as they did within a day of each other. Ms Jarvis cooperated with the investigation, was not prosecuted for fraud and reached a settlement with the FRC involving admissions of dishonesty. Mr Woodbridge was a convicted criminal, refused to cooperate, or to make any admissions, requiring the matter to proceed to a tribunal. Yet the sanctions against Ms Jarvis were more severe, albeit the period of exclusion was identical. In part this is undoubtedly due to differing financial positions. Perhaps also the fact that Mr Woodbridge's actions did not cause the loss of significant sums, and although he was convicted for fraud he made no personal financial gain, whereas the FRC determined that Ms Jarvis committed the misconduct with a view to a profit. Both cases however are intended to send the same messagel to the profession, and the wider public, namely: dishonesty will not be tolerated in the profession.