The Serious Fraud Office has charged two men with conspiracy to defraud, false accounting and misleading an auditor in connection with the collapse at Torex Retail.
The regulator has charged Ed Dayan, 57, and Chris Ford, 46, formerly the chief executive and finance director respectively of XN Checkout, a subsidiary of Torex, on the third anniversary of a profit warning by Torex that brought to light financial problems at the retail software provider.
The warning, and suspension of the shares, exposed bitter divisions on Torex Retail’s board, most particularly between Neil Mitchell, the chief executive who had been at the company only five months, and Chris Moore, the chairman, who had overseen Torex’s growth. The SFO’s investigation was prompted by Mr Mitchell’s delivery of a dossier alleging fraud, including the 2005 deal for XN, to the regulator.
The alleged offences took place between March and July 2006. The period covered the group’s interim results, the first occasion that Torex’s then new auditor, BDO Stoy Hayward, had overseen the figures.
BDO had raised concerns about the software group’s accounting standards with its board of directors only a few days after Torex published its interim results to June 30.
XN came under the wing of Torex in June 2005 when it spent £72.4m ($116.9m) on the software company. XN’s last financial year to December 2004 reported net assets of £6.4m, revenue of £18.3m and pre-tax profits of £1.7m.
At the time Mr Moore was both chief executive of Torex and non-executive chairman of XN, and held a 9.4 per cent stake in XN.
Mr Dayan stepped down from Torex in December 2006 when he and fellow director Mark Pearman bought parts of XN in a management buy-out.
The Serious Fraud Office said investigations into the wider collapse of Torex were continuing.
“Mr Dayan has co-operated fully with the inquiry. He denies committing any offence and looks forward to mounting a vigorous defence in due course,” Mr Dayan’s lawyers said.
Mr Ford on Tuesday resigned his role after six months as chief financial officer at Clarity Commerce Solutions “to devote his energies into defending the allegations, which he has firmly stated to be without foundation,” Clarity said.
In 2008 Clarity sold a retail software company called Romulus to a management vehicle backed by Mr Moore. Last week Robbie Crawford, a former director of Romulus, alleged at an employment tribunal that Mr Moore had “conspired to defraud” him of his company.
The first hearing for Mr Dayan and Mr Ford is listed for February 12 at Banbury Magistrates Court.
The investigation is related to the historic business of Torex Retail and does not relate to the ongoing business of Torex Retail Holdings.