Torex chief admits whistle blowing

Torex chief admits whistle blowing

By Philip Stafford, Pan Kwan Yuk, Peter Thal Larsen, Michael Peel and Jimmy Burns

FINANCIAL TIMES
Published: February 1 2007 22:02 | Last updated: February 1 2007 22:02

The suspended chief executive of Torex Retail on Thursday said he blew the whistle to the Serious Fraud Office on the accounts of the retail software group, as the controversy surrounding the company deepened.

In a statement issued to the Financial Times, Neil Mitchell said he was the “leader of the Torex whistleblowers” and would be seeking his immediate reinstatement under legal protection afforded to those who come with information to the authorities.

Torex Retail shares were suspended on the Aim junior market last Friday after a profits warning and ahead of this week’s SFO raids on three addresses of people linked to the company.

Mr Mitchell’s statement came as the FT established that the three houses in Oxfordshire and Warwickshire searched by the SFO belonged to Chris Moore, who stepped aside as Torex Retail chairman on Wednesday, Rob Loosemore, the company’s former executive chairman, and Mark Woodbridge, a close associate of Mr Moore.

Mr Mitchell was suspended as chief executive of the group this week. In his statement last night Mr Mitchell said that he led a group of four whisteblowers – which also included Marcus Leek, finance director – who took their concerns about the company to the SFO, the Financial Services Authority and the London Stock Exchange.

Mr Mitchell’s account of events suggests a rift between the company’s old guard and his new management – brought in in the latter half of last year.

Mr Loosemore and Mr Woodbridge refused to comment when contacted about the allegations. Mr Moore could not be reached for comment. The SFO and City of London police also both declined to comment on the raids.

Torex Retail was founded in March 2004 when it was spun out of the newly merged Isoft and Torex. Mr Moore, who was chief executive of the original Torex from the mid-1990s until it merged with Isoft, joined Torex Retail in November 2004.

Although Mr Loosemore was the driving force behind the listing of Torex Retail, he left the group in September 2005. He still holds a 4.6 per cent stake.

Mr Woodbridge was finance director at the original Torex from June 2000 to December 2003, before the group’s merger with Isoft, whereupon he became business development director for six months before resigning.

Torex Retail said in December it was looking for a new independent non-executive chairman to replace Chris Moore, who had become a full-time consultant to the company.

Separately, it has also emerged that the syndicate of banks, led by Royal Bank of Scotland, that support Torex Retail, wrote to the board last week – before the SFO’s interest in the company was known – warning it not to make any management changes.

Mr Mitchell, together with Mr Leek, told the banks on January 24 of the financial position of Torex Retail and said the company would shortly issue a profits warning. The bank was also told that the group “will be” in breach of at least one of its financial convenants.

Later that day, the banks wrote to Mr Moore and the board and recommended a review be undertaken by independent accountants. The bank said it took “comfort from the current executive and senior management team” and advised that it would not welcome any change to the team. RBS said it would not comment.

Bonds issued by Torex in July have slumped in the past week as traders expect the company to default. The bonds, which raised £65m, were trading at around 55 per cent of face value on Thursday.