BT faces court over £530m Italian fraud
Law firm in Enron victory targets telecoms giant
THE feared American law firm that won Enron investors a record £6bn is targeting BT over its Italian accounting scandal. Robbins Geller Rudman & Dowd is set to file a case against the telecoms giant within days on behalf of US shareholders, the Mail understands.
The defendants named in the lawsuit include BT as well as former chief executives Gavin Patterson
(pictured) and Lord Livingston. The law firm is seeking to recover damages shareholders suffered when BT disclosed a massive fraud at its Italian business.
The announcement two years ago – and an accompanying £530m writedown – sent the shares crashing by a fifth and wiped almost £8bn off its market value.
BT accused staff and bosses at the foreign division of cooking the books to artificially inflate earnings, behind the backs of UK bosses. But the lawsuit brought on behalf of US investors takes aim at BT executives in London as well.
It disputes claims they were ‘kept in the dark’ about problems in Italy and accuses them of withholding crucial information from the market. BT has tried to put the scandal behind it but Robbins Geller Rudman & Dowd is notorious in the US for its successful class action lawsuits after it most famously secured a £6bn settlement for Enron investors, whose holdings became worthless after the oil giant crumbled in a 2001 accounting scandal.
As well as Patterson and Livingston, the lawsuit names former finance chief Tony Chanmugam, current audit committee chairman Nick Rose and former BT Italy chief Luis Alvarez as defendants. BT says the claims are ‘unsubstantiated’ and is seeking to have them dismissed, after a previous attempt by Robbins Geller Rudman & Dowd was thrown out last year.
But lawyers at the US firm are expected to put forward a new version of the class action lawsuit on Friday, bolstered by recent revelations, including an explosive dossier prepared by Italian police. The 353-page report claimed BT executives in London were at the heart of the scandal and put pressure on Italian staff to hit tough targets using ‘aggressive, anomalous and knowingly wrong accounting practices’.
A secret review by auditor KPMG for BT also found finance bosses in Britain failed to challenge Italian accounts.
Patterson, Livingston and Chanmugam are accused of signing off misleading statements that claimed internal controls were operating effectively while, in fact, a massive financial fraud was on-going.
The law firm has also seized on comments by Alvarez that fraudulent dealings were signed off by former auditors PwC and the parent company in London. It alleges BT’s audit committee, chaired by Rose, ‘was aware of sustained problems in Italy throughout 2013, 2014, 2015, and 2016, and ‘cryptically reported questionable practices’.
Patterson was BT’s chief executive from September 2013 until January 2019. Livingston, handed a peerage and made a trade minister in David Cameron’s government, ran the group from 2008 to 2013.
He is chairman of electronics retailer Dixons Carphone and investment firm Man Group. The peer and both companies declined to comment.
BT said: ‘We maintain that these claims are unsubstantiated and will move to dismiss any further amended complaint.’