Banned: the bosses who hid £4m loan in their books

TWO top accountants have been struck off over mistakes concerning a £4m loan to collapsed social housing giant Connaught.

Former finance director Stephen Hill, 48, and deputy financial director David Wells, 49, were banned after a watchdog ruled they had not flagged the money as a loan.

Instead, it was included in operating cash flow in the company’s 2010 interim financial statement, meaning Connaught’s financial position appeared much stronger than it was.

The mistake skewed key information relied on by investors.

Connaught borrowed the money shortly before its halfyear ended on February 28 and repaid most of it between March 15 and April 29.

In breach of rules, the loan was not disclosed to the firm’s audit committee or external auditors.

Weighed down by its debts of £220m, Connaught was eventually forced to call in administrators in September of that year.

It followed the scrapping of a contract with Barnet council worth £7m annually and the resignation of two chief executives in less than a year. The company’s official broker withdrew from recommending it and Royal Bank of Scotland, Connaught’s primary lender, decided it would not provide more cash.

Despite banning Wells and Hill the Financial Reporting Council said neither acted dishonestly.

Both men accepted their conduct fell short of expectations.

Hill, banned for five years, admitted he acted with a recklessness that amounted to a lack of integrity and agreed to pay £133,397 in costs.

Wells, who was banned for three years and told to pay £125,198 in costs, admitted failing to act in accordance with industry principles of competence and integrity.

Enforcement director Gareth Rees said: ‘The outcome sends a clear message to accountants in business of their responsibility to carry out their work diligently and in accordance with professional standards.

‘By engaging in the FRC’s settlement process, Mr Hill and Mr Wells have accepted their misconduct and the imposition of sanctions. This has led to a considerable saving of time and cost.’