Elders alleges $24m fraud in live cattle division
Troubled rural services group Elders is threatening to call in the police over an alleged $24 million fraud by a "handful of individuals" in its live cattle exports division.
Elders has revealed the findings of a forensic investigation that began in October over discrepancies in the accounting and valuations of its live cattle business.
It comes amid a period of turmoil for the Adelaide-based company that included the sudden exit of chief executive Malcolm Jackman.
Elders hired PPB Advisory and lawyers Herbert Smith Freehills to complete the investigation into overstatements in the 2012 financial year and first half of 2013.
"PPB Advisory found that the discrepancies were supported by falsified documentation and journal entries and misleading management representations made to senior management and external auditors," Elders company secretary Peter Hastings said in a statement.
"PPB Advisory has identified evidence that attributes responsibility for the overstatements to a handful of individuals who were then employees of the trading business unit."
The investigation was launched the same day Elders announced that seven senior employees from its live cattle business had resigned. Ruralco, which has twice tried to merge with or take over Elders, poached the traders on October 1 to set up its own live cattle division.
This has put pressure on Elders' live export business.
Elders has launched legal proceedings against four of the rebel traders to protect itself against "irreparable harm". It has asked the court to stop them from poaching clients and demand they return confidential information.
But the lawsuit does not mention alleged accounting irregularities.
Mr Hastings said: "In respect of the individuals identified by PPB Advisory ... Elders will consider its position after receipt of the final reports," adding "Elders will not hesitate to refer matters to the relevant authorities where applicable."
Elders initially said the discrepancies would not affect its financial outlook. But three days later the company said it expected its net profit to take a hit, valuing the discrepancies at $18 million.
The situation worsened two weeks later when Elders posted a $505 million loss.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free