Former management at troubled travel software developer Datalex misled the board, according to the group's acting chief executive, Sean Corkery.
Responding to questions from a shareholder at its annual general meeting (agm) in Dublin on Tuesday, Mr Corkery said: "That's basically what the PwC report said on financial accounting and on some reporting issues."
A board-commissioned review found significant accounting irregularities at Datalex last year, when it lost $47.25 million (€42.7 million), while its shares have been suspended from the Irish Stock Exchange since May.
The group’s annual report states that management identified that a $4 million dividend paid by subsidiary Datalex (Ireland) Ltd to the parent, Datalex plc, in May 2018, contravened company law, as the subsidiary did not have enough earnings to fund the payment.
The parent used the cash to fund a $3.8 million dividend paid to its shareholders in September last year. Datalex plc’s financial statements show that it must repay the $4 million to Datalex Ireland, and that the group no longer recognises the payment in its profit and loss account for 2018.
Datalex (Ireland) Ltd's directors at the time of the dividend payments were Aidan Brogan, former group chief executive, and David Kennedy, former chief financial officer. Mr Brogan stepped down in May, when he also resigned from the Irish subsidiary. Mr Kennedy left the group last year. Company returns show he resigned from Datalex (Ireland) Ltd in December 2018.
Chief financial officer Niall O’Sullivan noted that the review by PwC, which identified the accounting irregularities, had been referred to the Office of the Director of Corporate Enforcement, whose staff includes several gardaí.
Neither he nor Mr Corkery ruled Datalex out from taking legal action against former managers. However, the acting chief executive stressed that he was focused on taking the company forward.
Shareholders agreed to adjourn discussion of Datalex’s 2018 financial statements to October 3rd. Investors should have received the accounts at least 21 days before yesterday’s meeting, but instead received them with the last 10 days.
Revelations that it had overstated 2018 revenues rocked Datalex earlier this year. Its problems stemmed from a contract with Lufthansa, to provide a single payment system for its five airlines, which ran over time and budget.
Mr Corkery told the agm that Datalex was in talks on a possible alternative deal with Lufthansa but the company did not believe that continuing with the original agreement was a good use of shareholders’ money.
The German group has served notice on Datalex that it is terminating the contract. However, Mr O’Sullivan said lawyers had advised the company that Lufthansa was unlikely to seek repayment of money that it has already paid to Datalex.
Mr O’Sullivan also informed shareholders that Datalex was working with its advisers and the Irish Stock Exchange to get its shares re-listed by Christmas. The group is likely to seek extra funds from backers following this.
Businessman Dermot Desmond, one of its bigger shareholders, has agreed to continue funding the business in the short term.
Shareholders re-elected both John Bateson and Peter Lennon to the board on Tuesday. Advisers had called on investors to sack both as they were members of the audit committee when the financial irregularities occurred. The company's auditor, Ernst & Young, has resigned.
Mr Corkery said that he favoured staying with Datalex, either as chairman or chief executive, as he believed that good opportunities beckoned as it had stabilised its business.