Exclusive: BT and ex-directors to face new action on BT Italia scandal
A US law firm is to file a new class-action complaint against BT tomorrow, naming past senior directors in the scandal at BT Italia, which caused the group to write off £530 million.
Law firm Robbins Geller Rudman & Dowd has already filed three versions of the complaint, which name BT Group as a defendant plus two previous CEOs, Ian Livingston and Gavin Patterson (pictured), previous CFO Tony Chanmugam, as well as former BT Global Services CEO Luis Alvarez, and Nick Rose, who chaired the group’s audit and risk committee.
BT told Capacity yesterday: “These claims were brought over two-and-a-half years ago and dismissed by the US Federal Court on 1 August 2018. The plaintiffs filed an amended complaint after the claim was dismissed, and all defendants re-applied to dismiss the amended complaint. We maintain that these claims are unsubstantiated and will move to dismiss any further amended complaint.”
The law firm filed that third version of the complaint in the US District Court, in the District of New Jersey, in December 2018 (PDF here), but Capacity learned today that a new, fourth amended complaint will be filed on Friday, to include new information the law firm has learned since then. Capacity has not yet seen the latest version.
The court has already granted permission to Robbins Geller Rudman & Dowd to file an amended complaint. It never considered or ruled on the third version.
After the BT Italia scandal was uncovered, the group’s senior management were unable to sign off the previous year’s accounts under the US Sarbanes-Oxley Act. In 2017 group CEO Patterson and previous group CFO Chanmugam lost bonuses as a result.
The president of BT’s European operations and the CEO and CFO of BT Italy all left. Alvarez his role as CEO of BT Global Services, to be replaced by Bas Burger, previously president of BT in the Americas.
The class action suit –in its third version – says that “improper accounting practices and a complex set of improper sales, purchase, factoring, and leasing transactions caused the company’s financial statements to be materially misstated for nearly a decade”.
It adds: “Internal controls over financial reporting … were falsely certified as effective and containing no material weaknesses.”