APR 23: WELLINGTON: The $9.1 million profit of meat company Fortex in 1992 would have been almost wiped out by an $8.7 million apparent income "overstatement" being investigated by the Serious Fraud Office, receiver Alan Isaac said last night.
The fraud office is investigating the collapsed South Island company because of the $8.7 million "irregularity" in its 1992 accounts.
Following a tip-off, receivers reviewed a transaction in the Fortex accounts and Mr Isaac said yesterday he called in the fraud office after finding the 1992 books increased income incorrectly by $8.7 million.
He would not comment on whether any other irregularities were discovered, but investigators visited the Fortex offices on Wednesday and were still there yesterday.
"We found that, in the 1992 year, income appeared to have been significantly overstated and liabilities had been understated," Mr Isaac said.
"In particular, we found one example where income for 1992 had been incorrectly increased by $8.7 million."
Mr Isaac confirmed yesterday that the $8.7 million overstatement would have gone straight to the bottom line and wiped out the stated profit that year.
The overstatement of income could have been corrected in the 1993 year when the company reported a $4.8 million loss or in the $45 million to $50 million loss for the latest half-year to the end of February.
"It could just be a timing thing," Mr Isaac said.
The $8.7 million was incorrectly coded in the Fortex books and, normally, that would have been picked up by ordinary accounting controls.
If the accounts were mis-stated, legal action could be launched by those who lost money, such as creditors or financiers or shareholders, but it was not immediately the receivers' responsibility, Mr Isaac said.
Accounting firm Price Waterhouse has been auditor for Fortex for several years, including 1992.
The Price Waterhouse Christchurch managing partner, Peter Steel, said yesterday it would be "totally inappropriate to make any comment" on the Serious Fraud Office investigation or any other matters raised.
"Where we are required to co-operate, we will certainly co-operate with any authorities," he said.
In 1993, Price Waterhouse was paid $94,000 in audit fees and $75,000 in fees the year before, according to the annual report.
The Securities Commission launched an investigation into whether there had been an "informed market" in Fortex share trading about five weeks ago.
Fortex managing director Graeme Thompson, who has been helping the receivers, was not in the Fortex office yesterday and could not be contacted.
It was understood directors would not produce a full interim report for the stock exchange as earlier suggested. Directors were obliged to present a statement of affairs to the receiver, but that was not yet complete.
The receivers yesterday advertised that tenders for the sale of the Fortex operations would close in three months on July 22.