With pre-tax profits of £161.4 million, net assets of £845 million and 17,227 employees, the Polly Peck group was one of Britain's top one hundred quoted companies. In October 1990, it collapsed. Accountants from Coopers & Lybrand (now part of PriceWaterhouseCoopers) together with Touche Ross (now part of Deloitte & Touche) were appointed joint administrators of the company. By June 1991, the firms had received £2.56 and £5.8 million respectively in fees. Before accepting the position of administrator, Coopers did not reveal its extensive links with Polly Peck and its chairman Asil Nadir. Its links were as follows:

Coopers & Lybrand acted as joint reporting accountants when Polly Peck originally went public (Accountancy Age, 23rd April 1992, page 11).

Cooper's Channel Islands practice had acted as auditor of Restro Investments through which Asil Nadir held his (at one time majority) stake in Polly Peck.

Coopers had also been involved with the Polly Peck group through consultancy assignments (Accountancy Age, 20th June 1991, page 1).

Three of the firm's partners were reported to be shareholders and acted as directors of Vemak (Jersey), a company that ran Asil Nadir's (stately) home and other property investments. Coopers also acted as personal tax adviser to Asil Nadir (Accountancy Age, 6th December 1990, page 1).

A recommendation from Coopers led to the appointment of Polly Peck's finance director (Accountancy Age, 19th March 1992, page 3).Coopers' special work income from the Polly Peck group is estimated to have been £1.5 million from 1985 to 1989. The firm received £262,000 from auditing Polly Peck's far East operations (Accountancy Age, 27th February 1992, page 1).

It should be recalled that the ethical guidelines issued by the ICAEW urge its members to avoid conflicts of interest and to make full and frank disclosures. Yet in the absence of such disclosures by Coopers & Lybrand, the ICAEW did nothing. The matter was raised with the DTI which has the ultimate responsibility for regulating the accountancy business. The DTI's routine line of action is to refer anything to do with accountancy firms to the ICAEW, but in this case the ICAEW's inaction was the issue. The DTI has two potentially conflicting functions. It has to regulate the conduct of business and has to promote the British business interests. These functions can conflict when the businesses it is encouraging are the ones that have to be constrained. In this case the DTI was trapped by this conflict of roles. Wishing to better understand the dynamics of the regulation process, we sought to investigate the system.

Our correspondence with the Minister for Corporate Affairs began on 22nd March 1991. His attention was drawn to ostensible conflicts of interest and also to the ICAEW's failure to secure disclosures even though the matter had received prominent news coverage in the trade press since October/November of the previous year. The Minister replied stating that

"An insolvency practitioner should be satisfied before accepting an appointment as an office holder that there is no conflict of interest and if there is doubt as to whether he can act he should seek clarification from the parent body which authorises him to act as an insolvency practitioner".

Source: Letter from the Minister for Corporate affairs, 12 April 1991.

On the matter of investigation and enforcement of the ethical guidelines, the Minister argued that the matter was for the ICAEW to consider. We replied on 22nd April by suggesting that "The ICAEW and DTI have to be deaf and blind, not to realise that there is an apparent conflict of interest. ..... if the ICAEW had any intention of doing anything, it would already have done so". Meanwhile, the correspondence was passed by the DTI to the ICAEW who wrote on 26th April, promising to give a fuller reply, soon. But a letter dated 25th April was also received which noted that "The position is that the Institute has sought and obtained the comments of Mr. Jordan and his co-administrator, Mr. R.A. Stone. These are now being studied and a report will be made to the Institute's Investigations Committee at its next meeting on 7th May".

Nothing further was heard, so a letter was sent on 19th June to enquire about the matter and at the same time the Minister was informed of the ICAEW's lack of response. A letter from the ICAEW dated 3rd July stated that "The Institute is still considering the appointment as administrators of Polly Peck plc of Messrs Michael Jordan and Richard Stone. I will let you know when it has arrived at a decision". The Minister (letter dated 11th July) added that "The ICAEW assures me that the matter is still very much under active consideration; it is hoping to conclude its examination shortly". Once again, the ICAEW fell silent. Therefore, on 30th August a reminder was sent. It added, "Would you please inform me why the wheels of an organisation which can move with lightning speed to lobby government departments, move so slowly when the major firms are the subject. Can you give me a date by which you will be able to pronounce on the matter?". In a letter dated 6th September, more than four months after the promise of a fuller reply, the ICAEW replied, "..... the matter is still under consideration and until a decision is arrived there is no information I can properly give you. I am unable to give any firm date when a decision will be reached or any announcement made concerning it ....".

The unsatisfactory nature of this letter was communicated to the ICAEW on 16th September. Based upon information received from an 'insider', the ICAEW's and the Ministers attention was drawn (9th October 1991) to the possibility that some cosmetic gestures, such as setting-up further working parties, were being considered as a way of dealing with the problems. The ICAEW Director of Professional Conduct responded (15th October) by stating that the "...... Investigation Committee is still considering the matter ..... I regret that I cannot disclose the content of our enquiries".

On 21st October, the Minister asked us to give the ICAEW more time. On 11th November, we reminded the Minister that still no announcement has been made by the ICAEW. In his reply of 25th November, the Minister defended the ICAEW's procedures. On 18th December, the Minister was asked to make a statement stating what he and the ICAEW already knew. On 19th December, the ICAEW was also asked to make a statement. The Minister replied (12th January 1992) by referring the matter back to the ICAEW but added that "since Christmas, [the ICAEW] has received a substantial quantity of fresh evidence". But the ICAEW (19th December 1991) stated that the information was confidential and could not be disclosed.

Meanwhile creditors of Polly Peck were also getting worried that any public revelations might jeopardise a fairly well advanced administration of the companies, and Coopers were concerned that they might have to forgo their fees. An emergency meeting between Coopers and Polly Peck creditors took place where "conflict" was the only listed topic for discussion (Daily Telegraph, 18th December 1991, page 20). Subsequently, in the interest of creditors, the High Court ratified Coopers appointment as administrators (Accountancy Age, 19th March 1992, page 17). It has also been reported that the firm has admitted its oversights in a forty page dossier sent to the ICAEW and that the courts had not been informed of some of the work the firm did for Polly Peck in the three years prior to the administration (The Mail on Sunday, 22nd March 1992, page 74).

After further correspondence, the ICAEW finally held disciplinary hearings. These were to be on May 21st and 22nd (Accountancy Age 23rd April 1992, page 1).  But the planned hearing was adjourned even before it began (Accountancy Age, 21st May 1992, pages 10). A letter of protest was sent to the Minister on 27th May. One reported reason for the postponement was that the partners involved argued that they did not have sufficient time to prepare their defence even though the matter had been in the news since October 1990. As part of their defence, the partners wanted to argue that they should be exonerated as the courts in re-confirming their appointment as administrators, had effectively cleared them of unethical behaviour. But Mr. Justice Millet in a written statement stated that  he "did not form any view whether there was a breach of professional ethics" (Accountancy Age, 23rd April 1992, page 1).

The hearings finally opened on 27th July (Financial Times, 28th July 1992, page 7). We had urged the ICAEW to hold its hearing in the 'open' (letter dated 28th April 1992). But this was not accepted. In accordance with the ICAEW rules, not only the press and the general public but even members of its Council and Disciplinary Committee were  prevented from observing the disciplinary hearings (Financial Times, 2nd July 1992, page 9). But after four days, the matter was once again deferred (Financial Times, 31st July 1992, page 5). A press release by the ICAEW (dated 31 July 1992) simply stated that "No further information will be released until the conclusion of the case."

The hearings finally began on 12th October and concluded on 15th October. Coopers & Lybrand partners were found guilty of breaching the ethical guidelines (Financial Times, 16th October 1992, page 10) but the ICAEW did not issue a statement until 30th November as it wished to negotiate the wording with Coopers even though its own Council members were unhappy about such unprecedented arrangements (Accountancy Age, 26th November 1992, page 1; Financial Times 1st December 1992, page 6). The eventual statement noted that

"in seeking or accepting appointment as administrator(s) to Polly Peck International [the partners] failed without good reason to follow the guidance in Statement 20 of the Guide to Professional Ethics". ...... There has, in our opinion, been no satisfactory explanation for the information which you put before the court on 25th October [1990] being so inadequate.....  conflicts ..... would have been apparent to you at an early stage had you taken proper steps to consider the position".

Michael Jordan and Richard Stone were fined £1,000 each (maximum possible) and ordered to pay costs of £1,000 each. No report on the affair, which might have explained the delay, was published. No one explained why the maximum fine was set at £1,000 and more importantly, why the DTI, which has the final responsibility for the oversight of  the insolvency industry, accepted such a low figure. None of the fines were used to compensate any injured stakeholder. Instead, the fines merely provided more resources for the ICAEW to undertake its propaganda wars. No other penalties were imposed on the partners or the firm as the ICAEW argued that its rules do not enable it to take any action against the firm. There was no investigation of the overall standards of the firm. The firm probably made more than £25 million from the Polly Peck receivership.