Burn the book

Burn the book

By Frank Noakes

LONDON — The scent of a scandal is wafting from the walnut-walled boardrooms of the British financial centre, known as the City. Some big companies have had their books in the oven, and Terry Smith has revealed what's cooking.

Smith, who until recently worked as the head researcher in Britain for the investment bank and financial services company UBS Phillips and Drew, has written a book: Accounting for Growth: Stripping the camouflage from company accounts. In it, Smith describes accounting practices that allow companies to deceptively (and legally) show profits that they have not made in cash terms, and to hide the level of debt that they are exposed to. This is an advantage when seeking investors.

Smith reveals that food and drink giant, Grand Metropolitan, was particularly good at engineering — its books. It transpires that Grand Met, which is somewhat miffed at being exposed, does a lot of business with Smith's bosses.

A couple of cellular phone calls later and UBS P&D wanted to "creatively account" for Smith's book before it was published. In fact, they offered him and the publishers financial incentives to burn the book. This having failed, they have now suspended Smith and guaranteed the book will be on the best-seller list.

From GLW issue 69