Thumbs-up for Coopers' action against Barings
Coopers & Lybrand’s legal action to enjoin nine former executives of Barings as third parties has been widely applauded as a move to show that auditors are not prepared to be the ‘fall guys’ in corporate failures.
Chris Nunn, risk management partner in charge of the professional standards group at Arthur Andersen, said: ‘The real moral responsibility must be with those who were responsible first-hand for things.’
The London firm audited Barings in 1993, but Nick Leeson’s unit was audited in that year by Deloitte & Touche’s Singapore office. Coopers’ Singapore branch took over that part of the audit for the 1994 accounts. The bank failed in February 1995.
A spokesman for Coopers said: ‘The auditors are perceived to have deep pockets so everybody has a go at them. The ones who are really responsible usually escape.’ It is not yet known what insurance cover the Barings executives may have.
The firm has not ruled out the possibility of taking action against other executives, including former chairman Peter Baring.
The London Evening Standard’s Anthony Hilton criticised the action against Ian Hopkins, Barings’ former head of treasury and risk, saying that he had been the ‘whistle-blower’. But a Coopers spokesman said: ‘Our claim against Mr Hopkins alleges he withheld important information from us.’
Tony Cabourn-Smith, head of audit at Ernst & Young, which, as Barings’ administrators, is suing the three audit firms, said that Coopers’ action was rare but not unique. E&Y sued directors of Soundiffusion in the early 1990s, he explained. Coopers has also joined directors at least once before.
‘As to whether it’s likely to happen more in the future, I think it might,’ Cabourn-Smith said. But because of the practical difficulties, such as whether directors are financially worth suing and the problems of fighting a case on two fronts, he added: ‘I don’t see it being commonplace, all cases are different.’
