By Alistair Blair, 04 August 2010
At the age of 69 and 17 years after fleeing to non-extraditable Turkish Cyprus, Asil Nadir - whose £2bn FTSE-100 business,
Back in 1996, during the dying days of the last Conservative government, Mr Nadir claimed that he would return to fight his case "if the Conservatives are voted out of office". This undertaking stood in abeyance during 13 years of Labour government.
There was another undertaking that failed to happen. The event which precipitated Polly Peck's collapse was the extraordinary announcement Mr Nadir made to startled colleagues at a hastily called board meeting 20 years ago next Sunday: that, at a cost of £1.5bn and using a firm of solicitors to which he had been introduced precisely 24 hours earlier, he was going to take Polly Peck private. Five days later, without ever announcing any terms, Mr Nadir withdrew his proposal.
Four weeks after that the shares were suspended. Another four weeks on, Polly Peck stopped paying its bills. And about five months later, a huge deficiency in its balance sheet began to emerge which was later estimated by an Accountants' Disciplinary Tribunal at £900m. The administrators eventually recovered just £40m of the £1.3bn owed to Polly Peck's lenders and other creditors. This for a company whose accounts released immediately prior to its share suspension, had shown cash of £400m. Shareholders of course - including no doubt many readers, because Polly Peck was a favourite of small investors - got nothing.
How did all this happen? According to the Disciplinary Tribunal report into the auditing of Polly Peck by Stoy Hayward (which is the best official record of how Polly Peck blew up, and is available at castigator.org.uk) a "key contributory factor" was that Mr Nadir, who had the unconstrained authority to write cheques of any value against Polly Peck's bank accounts, transferred hundreds of millions of pounds from its central bank accounts to those of its operating companies in Cyprus. Only a tiny fraction of this money was ever recovered.
Against these legendary figures, the charges which Mr Nadir says he will answer refer to the theft of £34m. When the case was was in its preparatory stage back in 1993, Serious Fraud Office did try to nail him for a further £100m, but those charges were disallowed by the court on technical grounds. The SFO was trying to reinstate them when Mr Nadir scarpered.
If Mr Nadir does step into the witness box, he may have something meaningful to say, although we should not count on it. He is a will o'the wisp, a character-type well known to stock market investors. His impenetrable combination of charm, deceit (there is absolutely no question but that Mr Nadir deceived; this may not yet have been legally proven via the theft charges, but no reading of the wider events can come to any other conclusion), ambition and innocence, combined with some passing measure of commercial talent led investors a merry dance for ten years, allowing Polly Peck's market capitalisation to touch £2bn. We will probably never know for sure how much hot air was swirling around his company, but the notion that it was by 1989 earning over £100m a year from three supposedly large but in fact modest subsidiaries in Turkish Cyprus has been shown beyond doubt as a considerable fiction. Perhaps the best judgement on this came from an anonymous Cypriot who told the Financial Times, "We thought he was making money in London; London thought he was making it here."
If the best that company law can throw at a Mr Nadir is the charge of thieving £34m, company law needs a kick up the pants. The precise fate of £34m, or even £134m is incidental to what went on at Polly Peck. Mr Nadir was lord and master of a black hole down through which over £1bn disappeared. We need more than the theft charges to guard against this kind of thing.
We need a law which allows that if a substantial company - let's start with say profitable companies having tangible assets of £500m or more - collapses within 12 months of receiving an unqualified audit report, then any directors of more than a year's standing may be charged with running a corporate collapse. And the auditors should be charged with guiding and abetting. That would weigh down a few will-o'the-wisps. And put some iron in the souls of those close to them. Have you got time for that one, Vince?
ABOUT ALISTAIR BLAIR...
Alistair Blair is a past winner of the Business Writer of the Year Award, and has worked in investment banking and fund management.
You can leave comments or questions for Alistair below, or read more of his comment columns at his IC home page.
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