The Serious Fraud Office (SFO) has ended its investigation into what happened before the sale of Quindell’s legal arm to Slater & Gordon and is taking no action, the prosecutor has confirmed.
The SFO launched the investigation in August 2015, little more than two months after the deal completed and last year announced that the company itself – now known as the Watchstone Group – was no longer under investigation.
An SFO spokesman said: “The SFO is no longer investigating the business and accounting practices at Quindell PLC. Following our investigation, we concluded that the evidence did not meet the necessary tests as defined in the Code for Crown Prosecutors.
“There is a high bar for the SFO to charge individuals or companies with a criminal offence. Where the evidence does not support a potential conviction, it would not be in the public interest for us to continue with our investigation.
“The SFO has informed all those connected to the investigation.”
A series of investigations began after Quindell’s 2014 accounts were published with substantial restatements of prior year revenues, profits and net assets.
Its 2013 profit after tax of £83m should have been a loss of £68m, and net assets at 31 December 2013 should have been £446m, rather than £668m.
The Financial Conduct Authority dropped its investigation after the SFO became involved.
In 2018, the Financial Reporting Council reprimanded and fined two firms of auditors – Arrandco Audit (formerly RSM Tenon Audit) and KPMG – over their conduct in relation to Quindell’s accounts, including failing to “exercise sufficient professional scepticism”.
A threatened group action brought by Your Legal Friend and first announced in September 2015 was abandoned, while in November 2019, London litigation firm Harcus Parker sent a letter before action on behalf of shareholders, claiming that they lost money because of misleading statements made by the company. There has been no update on this.
In 2019, Slater & Gordon settled its £637m claim in deceit and breach of warranty against Watchstone for just £11m.
Watchstone is also bringing a £63m claim against accountancy firm PwC for allegedly using confidential information to reduce the amount Slater & Gordon paid to buy its professional services division. It is seeking exemplary damages too.
PwC, which was Quindell’s restructuring and technical accounting adviser at the time, denies the claim.
Watchstone alleges that Greenhill & Co, S&G’s corporate finance adviser, established a “back channel” with PwC during the period of due diligence and negotiation relating to the £637m disposal of the PSD in 2015.
It claims that, during secret meetings, PwC unlawfully disclosed confidential information which was factored into S&G’s tactics and strategy and allowed it to pay less than it would otherwise have had to pay.
In August, Watchstone said PwC had filed its defence and the matter was not expected to go to trial before 2023, with the first case management conference due last month.