Storm over Imtech bankruptcy is far from going down


According to the former Imtech accountants, it is “a failed search by the receivers for nails at low tide”. On the contrary, the trustees state that the accountants were ‘hearing deaf and seeing blind’. While the House of Representatives debated on Monday about the solution to the ongoing quality problems in the accountants sector, 150 kilometers away in Zwolle, four (former) KPMG accountants stood before the disciplinary court due to their role in the fall of installation company Imtech.

The installation company from Gouda went under in 2015 and since then the bankruptcy has been recorded as one of the largest in Dutch history. KPMG was Imtech’s accountant and responsible for auditing the books and approving the annual accounts.

In a two-day marathon session, the Chamber of Accountants handles six disciplinary complaints against four (former) KPMG accountants. They are accused by the trustees who are winding up the Imtech bankruptcy that they have neglected their statutory audit task. They are said to have discovered fraud at Imtech too late and to have made errors in approving the annual accounts. Or as the attorney for bankruptcy trustees Jeroen Princen and Paul Peters puts it: they ‘did not perform their work carefully and not with a professional skepticism’.

Installation company Imtech from Gouda has long been considered a stock market favorite. From 2012, when the group had 29,000 employees and a turnover of about 5.4 billion euros, this changed. In Poland Imtech was to build Adventure World Warsaw amusement park for at least 500 million euros. Imtech jubilantly spoke of the ‘largest order ever’, but the only thing that was built were castles in the air.

One of the main complaints concerns an amusement park in Poland that Imtech was to build

One of the two main complaints at the Accountantskamer revolves around this amusement park and how Imtech wrongly pretended to have received a down payment of 150 million euros. As a result, Imtech was able to claim a ‘solid financial position’ in a press release in mid-2012 because the situation regarding its own working capital would have improved, while it had deteriorated sharply.

While the trustees in this matter accused three (former) KPMG employees of having discovered in mid-2012 that the down payment was wrong, the accountants patted themselves on the chest on Monday. After all, they had discovered the error with the down payment six months later. “Our role deserves applause and not disciplinary action,” said the only one of the three who still works at KPMG today. She described her audit work as “cold-blooded”.

Disciplinary cases are part of a battle on many fronts. The trustees Princen and Peters have been meticulously reconstructing (the run-up to) the bankruptcy for years and are after all those involved. They are seeking compensation for the creditors from the former directors and supervisory directors of Imtech, the former law firm De Brauw and therefore also accountant KPMG. Disciplinary convictions, which the Accountantskamer pronounces, can be used in civil damages proceedings against KPMG.

Read this too profile of the Imtech receivers

The trustees do not choose to put all the accusations against the accountants on the table at once, but submit disciplinary complaints per part and period. The complaints against KPMG’s audit work for the 2011 annual accounts resulted in suspensions of 1 to 3 months for the three accountants involved last year. The appeal lodged by the accountants against this is still pending.

KPMG believes that the bankruptcy trustees are wandering with their complaints that refer to events in 2012. The accounting giant states that it is “unclear” what they “have to do with Imtech’s bankruptcy in 2015”. According to KPMG, it is all the more difficult because the accountants have just discovered the fraud in Poland and then in Germany.

Complaint stacked on complaint

KPMG argues that the trustees are piling disciplinary complaint on disciplinary complaint against which a “costly and time-consuming” defense must be submitted. This demands a lot from the former Imtech accountants. “Their lives have been dominated for years by putting up a defense against very extensive and difficult to fathom complaints.”

Imtech’s chief accountant, now retired, criticized the trustees for having the ‘luxury’ of ‘burying the former Imtech accountants’ with as many complaints as possible ‘at the expense of the estate’ (the Imtech money that is left). According to him, the trustees have only one objective: ‘to put pressure on KPMG to withdraw its wallet’.

However, the fact that KPMG fell through with Imtech is not only the opinion of the trustees. In addition to the aforementioned suspensions of the audit work for 2011 by the Accountantskamer, KPMG was fined 1.25 million euros in 2016 by the Dutch Authority for the Financial Markets, because Imtech in the period 2011-2013 “applied the fundamental principles of expertise and due care, as well as of professional conduct ”. According to the regulator, KPMG had done too little to determine whether the annual accounts it provided with an unqualified opinion were free of errors. In 2014, KPMG already contributed millions in compensation for investors through a settlement with investor association VEB.

Also read: ‘Politics must intervene with accountants’

“Increased dike monitoring”

In the Zwolle courtroom – equipped with mudguards and with one of the judges via the webcam because of quarantine – the bankruptcy trustees’ lawyer argued that the KPMG accountants had also made ‘gross mistakes’ in the 2012 annual accounts. Those financial statements were made in 2013 after frauds in Poland and problems in Germany were discovered. Against this background, one might expect ‘increased dike monitoring’ from KPMG, but the accountants would not have looked critically enough at, among other things, the write-offs on private projects and goodwill. (And that while at 12 million euros this was the most expensive annual account ever.)

KPMG thought that the high price actually spoke for the quality. In a normal year, Imtech spent about 2,500 hours on the annual accounts, in this case it was 14,553 hours. The audit team had just been expanded to include “the best specialists from KPMG”. “Rarely,” argued the KPMG lawyer, “has an audit been carried out involving so much knowledge and expertise”. The disciplinary complaints of the trustees basically boil down to the fact that all those KPMG employees “did not or incorrectly” performed their work. “That is really nonsense.”

Tuesday is the final day during which mainly the judges will ask questions about the 2012 annual accounts. The verdict will then follow within fifteen weeks.

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