A plot by former senior executives of iSoft to make millions by misleading the stock market was uncovered when an employee blew the whistle, a court has been told.
Ian Storey, the former financial controller of iSoft Group PLC, sounded the alarm after discovering the company had published a string of false accounts.
He alerted auditors Deloitte after he realised he had been duped by bosses at the IT firm, Southwark Crown Court heard on Friday.
Stephen Graham, Timothy Whiston, and John Whelan are on trial accused of trying to deceive investors by creating "huge discrepancies" in the published accounts of the company in the middle of the last decade.
The three men – plus founder and then-chief executive Patrick Cryne, who is not in court because of health issues – allegedly used a forged contract to book projected revenues from a £54.3m contract with the Irish Health Executive as early as October 2003, even though the contract was not signed until April 2005.
It is alleged that all four were motivated by “personal financial gain”. The prosecution says that Cryne and Graham, the company’s co-founder, chief operating officer and commercial director, become multi-millionaires off the back of the deception.
It also says that Whiston and Whelan, who were trained accountants and in charge of finance at the company, stood to gain from high pay and bonuses, based on the company’s apparent success.
Storey told the court he blew the whistle after he realised the firm’s apparent financial position was “not strictly correct” in the wake of Deloitte’s requests to see the Irish contract said to have been signed in 2003.
Deloitte had been called in by the Irish Health Service Executive in early 2005 to carry out due diligence on iSoft ahead of signing the official contract in April.
The court heard that Storey emailed Deloitte saying he was ‘”able to confirm” the report had been reviewed and that iSoft was “happy” with the report.
He was then asked to “specifically confirm the facts of the report are materially correct” in a second email, which he said he passed on to Whiston. He also said he understood Whiston had sent an email saying iSoft was happy with the report.
After that confirmation was sent, jurors heard that Storey had a telephone conversation with Deloitte in which he had been forced to “dance around” certain issues.
Later that year, after Deloitte took over as iSoft’s auditors, the firm began a review of old contracts, the court heard.
Storey received an email asking to see a copy of the contract the company claimed to have signed in October 2003. He told jurors he was unable to find one.
He said that he asked Graham’s PA for a copy of the contract and was instead handed a ‘heads of agreement’ document that iSoft had secured from the Irish Health Executive.
The following week, Storey contacted Deloitte to raise his concerns and an investigation was launched. Storey resigned from his role later that year.
The defendants each deny conspiracy to make misleading statements promises or forecasts, contrary to the Financial Services and Markets Act 2000 and section 1 of the Criminal Law Act.
None of the men have any connection with iSoft today. The company has been sold twice – to IBA Health and then to CSC – since the events in the trial, which is expected to last three months.
Comments on this story have been suspended to comply with the law on contempt of court. Comment will be re-enabled when the trial has concluded.