Builder cleans out board after probe

WAINHOMES, the Cheshire-based house builder, has cleaned out the executive suite of its troubled subsidiary at the centre of a pounds 2m police fraud probe - most of its six directors are leaving, as are two managers below board level.

At least two of the departing executives have not been implicated in the alleged crime, but left after failing to spot the problem earlier.

Gary Hardy, managing director, Maureen McGowan, sales director, and Robert Wilcox, production director, have all left Wainhomes (Northern), which is based in Standish, Lancashire. According to reports in the trade magazine Contract Journal, the chief quantity surveyor, John McCann, was dismissed and the chief technical officer, Gary Graves, resigned.

The group chief executive, Ronald Smith, who was also a director of the subsidiary, was forced out because the main board had lost confidence in him, although it stressed that he was not involved in the alleged fraud.

The company discovered the problems last September but did not announce them until January, when it said that, in addition to Mr Smith, two employees had been dismissed and two others suspended.

The Merseyside Police fraud squad is investigating the disappearance of up to pounds 200,000, thought to be connected with the theft of granite paving blocks at the firm's Brunswick Quay site in Liverpool.

Another pounds 1.8m appears to have been accounted for improperly, but it is not clear whether those irregularities were fraudulent.

The company believes that one of its sub-contractors was over budget on sites nearing completion. However, rather than admit to the problems, it charged the work to accounts for other Wainhomes (Northern) sites that were in the early stages of construction.

"It was the sort of thing that could not have been done without collusion," said Steve Owen, the finance director on the main Wainhomes board, who originally called in the police.

Wainhomes (Northern) is the group's largest operating subsidiary, accounting for half its turnover. More than a dozen large developments around Liverpool are thought to have been involved.

The announcement of the fraud investigation in a profits warning issued by Wainhomes on 17 January sent the shares plunging 39 per cent to 66p, compared with their 1994 float price of 170p.

Over the last month, the shares have recovered. They closed last week at 87p on the back of bid speculation following the purchase of 4.8 per cent of the stock by a rival, Bellway Homes, on 24 January.