Metal recycler Sims Metal Management Limited’s share prices fell by five per cent yesterday as an internal investigation into ‘control failures and potential fraudulent conduct’ began.
The Australian metal recycling company, which also operates in the US and UK, closed trading on Monday (21 January), with shares selling for $AUS 50 cents less than they had earlier in the day, after the metal recycler announced that there would be ‘recognition of goodwill impairment in the first half results’.
The suspected fraudulent activity centres on an overvaluation of the company’s Long Marston and Newport waste electronic and electrical equipment (WEEE) recycling business in the UK.
In a statement, Sims Metal Management Limited said that the inventory of the UK business at Long Marston and Newport had been overstated by ‘circa $60 million’ (£39.7m) and relates to ‘both changes in the assessment of the net realizable value of certain stock and to book to physical adjustments’.
According to the company, ‘preliminary findings’ indicate that the situation arose due to ‘control failures and potential fraudulent conduct by local and regional plant management responsible for technology and downstream processing systems in the UK’.
The UK business largely recycles WEEE, including computers and televisions.
A Special Committee of the Board, headed by Chairman Geoff Brunsdon, has now been formed to ‘take responsibility for the investigation that is in progress’ and includes Gerald Morris, Jim Thompson, Heather Ridout and John DiLacqua.
The committee is said to be working with Group Chief Executive Daniel Dienst, Group Chief Finance Officer Rob Larry, external auditor PricewaterhouseCoopers and the company’s legal counsel Baker & McKenzie to help identify ‘where the breakdowns in the company’s control environment occurred, what initiatives will need to be taken to improve those controls, as well as overseeing the implementation of the recommendations it makes’.
The committee will also determine what action will be taken in relation to any employees or third parties that are ‘determined to be responsible’.
Further information in relation to the inventory adjustment and potential goodwill impairment is expected to be released with the company’s half-year results.
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