Daily Mail, Friday, August 16, 2019City Editor: Alex Brummer http://www.thisismoney.co.uk Business Editor: Ruth SunderlandCity Finance
1.6 per cent
rise in department store sales
in July – their first monthly
increase this year
Legal firm wields knife after hedge fund’s attack
by Lucy White
EMBATTLED legal firm Bur-
ford Capital has bowed to inves-
tor pressure and announced a
sweeping boardroom shake-up.
The company, which came under
attack from short-selling hedge
fund Muddy Waters last week, will
remove its boss’s wife from the posi-
tion of chief financial officer.
Its City grandee chairman is also leav-
ing, along with another director, and it
has vowed to seek a listing on the more
tightly regulated New York Stock
Exchange alongside its spot on the
UK’s junior AIM market.
Governance at Burford, which helps
companies and individuals pay for legal
cases in return for a cut of the winnings,
was put under scrutiny after hedge fund
Muddy Waters accused it of manipulat-
ing accounts to mislead investors.
It questioned whether Elizabeth
O’Connell, who is married to Burford’s
chief executive Chris Bogart, had the
independence to run the finance depart-
ment. She has now moved to be chief
strategy officer. Former Morgan
Stanley investment banker Jim
Kilman will take her place.
Meanwhile, 85-year-old chair-
man Sir Peter Middleton – a
former Treasury mandarin and
ex-chairman of Barclays – is
standing down in 2021.
David Lowe, a non-executive
director who was an investment
banker and member of the judici-
ary in Guernsey where Burford is
incorporated, leaves in 2020.
Burford is also looking to hire
two new independent directors.
It said: ‘Concern has been raised
about the fact that Burford’s
chief executive and chief financial
officer are married. We believe
that concern is unjustified given
Burford’s control structure, and
ignores Burford’s finance and
accounting structure. It is clear
investors would prefer an alter-
native chief financial officer.’
The board consisted of just four
directors until last night’s shake-
up, all of whom had been there
since 2009 – including Middleton- despite UK governance guide-
lines recommending tenures of
chairmen are kept to a maximum
of nine years.
And in a highly unusual arrange-
ment, neither Bogart nor
O’Connell were board members,
limiting the amount of informa-
tion available on their pay. Bog-
art, 53, will now join the board.
But the changes failed to satisfy
Muddy Waters, which took aim at
Kilman because he had been
Burford’s leading investment
banker while at Morgan Stanley.
The hedge fund has accused the
firm of accounting similar to that
used by trading firm Enron before
it went bust in 2001, and claimed
Burford is ‘arguably insolvent’.
The hedge fund’s boss Carson
Block said: ‘The notion that
appointing Kilman as chief finan-
cial officer will substantively
improve governance is a farce. It
is clear from this that Burford is
more interested in imposing fig
leaves than real guard rails.
‘Investors would be much bet-
ter served by a CFO from the out-
side. Given the complexity of
Burford’s accounting, the chief
financial officer should be an
accountant who has demon-
strated a strong commitment toethics. Investment bankers don’t
often qualify on that front.’
Burford’s shareholders, who
until now had sat back and
enjoyed the firm’s meteoric rise,
seem to have found a voice.
Big names, such as troubled
fund manager Neil Woodford and
his former employer Invesco, are
among the investors who had
never raised any concerns.
They benefited as shares
climbed more than 1,000pc over
the last five years before tum-
bling more than 40pc last week.
Burford said it had already been
seeking a secondary listing.
Middleton said: ‘Shareholders
have clearly spoken and we have
listened.’ Shares climbed 13.3pc,
or 103.5p, to 880.5p.Web gamblers boost bookie Blackout could hike bills
LADBROKES Coral owner GVC upgraded
profit forecasts as strong online growth
helped it cope with losses from curbs on
‘crack cocaine’ betting machines.
It lost just £12m for the first half of this
year, compared to £113m in the same
period last year.
Earnings from its online business rose by
17pc, but its 3,500 shops took 10pc less.
The firm, Britain’s largest retail book-
maker, said it is pressing ahead with 900
store closures – 100 fewer than originally
planned – following a crackdown on fixed-
odds betting terminals due to fears they
can cause gambling addiction.
Boss Kenny Alexander said the closures
would be a serious disruption, but tried to
focus attention on the success online.
GVC’s shares rose 5.8pc to 581.2p in early
trading, but finished 0.3pc down on the
day at 545.2p.
It was keen to publicise responsible
gambling measures it has taken after it
was fined £6m last month for systemic fail-
ings in protecting vulnerable customers.
GVC has increased its contributions
towards treatment and research and has
stopped sponsoring football teams.
Last week William Hill fell to a £63.5m
half-year loss as it suffered a dispropor-
tionately large hit from the curbs on bet-
ting machines. Flutter, which owns Paddy
Power, fared better – its revenue fell just
4pc in the first half.NATIONAL Grid could face a £170m bill to
prevent power cuts like those which swept
the country last week.
The firm may have to double what it pays
contractors who provide rapid back-up
power during blackouts, consultant Aurora
Energy Research said.
It comes after nearly 1m people across
England and Wales lost electricity last Fri-
day when two stations failed.
At present, the Grid pays £170m a year to
contractors who operate battery plants and
emergency generators, which can be used
at a moment’s notice to keep the lights on.
If this was hiked to £340m, Aurora said, it
would help prevent future meltdowns.
The worst-hit areas last Friday were in the
South East, where the blackouts caused
widespread disruption to rail services. Inthe immediate aftermath, the Government
ordered an investigation into the cause of
the power cuts and told National Grid to
report back by today.
John Pettigrew, the company’s boss, has
claimed more money could be spent on
back-up power technology but that this
would have to be paid for through house-
holds energy bills.
He said ‘Customers would pay for that.’
According to Aurora, if spending on rapid
response back-up power were doubled, it
would cost Britain’s 27m households about
£2.10 each a year, on top of the average
£1,200 energy bill.
This is because they currently represent
about one third of total power usage –
meaning their share of the extra cost would
be roughly £57m.Page 71Elizabeth O’Connell
Finance chief
Jim Kilman
New finance boss
Sir Peter Middleton
Chairman
OUT MOVED
David Lowe
Director
OUT IN
BOARDROOM
CLEAR- OUT
AT BURFORD
CAPITAL
Ashley audit
crisis deepens
TROUBLED bean counter Grant
Thornton refused to say last night
whether it will still be the auditor of
Mike Ashley’s personal company.
Accounts for Mash Holdings,
which is solely owned by Ashley
and looks after his stakes in Sports
Direct and Newcastle United Foot-
ball Club, are three weeks
overdue.
Neither Grant Thornton nor Ash-
ley would comment on what was
causing the delay.
Last year the accounts were filed
six months late.
It comes as Ashley’s business
empire faces increasing scrutiny,
after Grant Thornton quit as Sports
Direct’s auditor this week, saying it
had reviewed its customer portfo-
lio. Sources suggest it may soon fol-
low suit at Mash.
Experts said the resignation is a
red flag to future auditors, and
raises questions over what risks it
had spotted.
In the last accounts filed by Mash
Holdings, for the year to April 30,
2017, Ashley’s company said Grant
Thornton had expressed willing-
ness to continue in office.
Accounts for Sports Direct were
released more than a week late last
month, and included an unex-
pected £623m tax bill in Belgium.General Electric
‘hid £31bn loss’
SHARES in General Electric fell 11pc
after the US giant was accused of
a massive fraud.
Harry Markopolos, the investi-
gator who blew the whistle on
Bernard Madoff’s Ponzi scheme,
accused it of hiding £31bn in
potential losses.
In a 175-page report, he said the
state of its balance sheet is so bad
that it could be ‘far more serious
than either the Enron or World-
Com accounting frauds’.
GE rejected the allegations and
insisted it ‘stands behind its finan-
cials’. It accused Markopolos of
working for hedge funds that ben-
efit from short-selling stock.
Markopolos echoed assertions
of some of Wall Street’s more
sceptical analysts, who have com-
plained about frequent account-
ing charges. GE has announced
more than £33bn in such charges
in two years and has admitted its
accounting is being probed by the
US financial watchdog and the
Department of Justice.