British chiefs in firing line over BT fraud

BT bosses in london embroiled in a £500m accounting fraud scandal failed to challenge the accounts, an internal probe found.

There was a ‘ serious breakdown of accounting processes and controls’ at the company’s Italian arm and a ‘loss of balance sheet integrity’, the review seen by the Mail found.

It raises serious questions about how thoroughly bosses in london scrutinised figures from BT Italia before the fraud was uncovered.

last night an accounting expert said the UK authorities needed to launch fresh investigations into the scandal.

It comes just days after police in Italy released an explosive report suggesting bosses in london urged staff in Italy to use ‘aggressive, anomalous and knowingly wrong accounting practices’.

The company has consistently maintained that the accounting scandal was a local matter – despite the internal report being published in January 2017. The 2017 annual report, published four months later, said the fraud ‘was not identified by our monitoring controls’ and went ‘undetected for a number of years’.

prem Sikka, a professor of accounting who has advised the labour party, said: ‘BT’s Italian subsidiary was submitting numbers to someone in london that whole time. The review raises questions which now need to be investigated by UK authorities.’

BT’s internal review of the Italian fraud scandal was produced by KpMG in January 2017 but was never published.

The findings resulted in a £530m write-down and a share slump that wiped £8bn off the company’s market value. The report said staff at BT Italia sought to artificially inflate the subsidiary’s earnings with a complex web of fraudulent transactions. Italian staff made ‘misrepresentations’ to BT Group and its auditors at the time, pwC, it added.

But it also revealed executives at BT global services did not sufficiently challenge numbers submitted by Italian staff. Initial inquiries from london were ignored or met by responses that were ‘not satisfactory’ or lacking in detail, it said, but global services staff often failed to ‘follow through’ to get answers.

prosecutors in Italy have brought charges against 23 individuals but reportedly will not bring charges of market manipulation against BT because it comes under UK jurisdiction. No British criminal probe has taken place.

a BT spokesman said: ‘Based on KpMG’s recommendations, and our own observations, we have taken steps to improve our controls both within Italy, and at group level.’