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This article was first published in April 1998 'What experience and history teach is this: people and government never have learned anything from history, or acted on principles deduced from it.'Hegel, The Philosophy of History. I knew that philosophy degree would come in handy one day. According to Henry Ford, history is bunk. According to Azlan, history is what the previous management team did with the company's accounting procedures and controls. Now the Serious Fraud Office is researching Azlan's history. Even more serious, the Fraud Squad of the North Yorkshire police is poring over the Azlan story. (I assume North Yorkshire is involved because its beat covers Azlan's eccentrically sited European distribution facility.) The two organisations are checking out the 'events leading to the suspension of the shares of Azlan by the stock exchange in June 1997'. In a terse press statement, Azlan says the present management team 'will give its full co-operation' - as if it had any choice in the matter. Citing an earlier shareholder circular, Azlan refers to the 'overstatement of profits and the failure of management and internal controls' which led to the share suspension in June 1997. This failure caused a £28 million hole in the accounts. In the year to 5 April 1997, the distributor lost £14.1 million on sales up from #196.5 million to £293 million, compared with the £14.8 million profit forecast in April. Peter Bertram, Azlan finance director, is more expansive in The Financial Times. 'The company has already had its own forensic review into what went on, so that gives them a good start. This is a historic investigation into what happened over a year ago.' Market makers are not buying the history story. In the quaint phrase of The Financial Times, Azlan Group shares 'gave up 7.5p to 50p' when the company announced the SFO investigation into 'suspected offences of false accounting'. Let us recall the results of the KPMG forensic review, announced last year by chairman Barrie Morgans. He said the nine staff who were disciplined and three who resigned in connection with the KPMG findings were 'silly, but not fraudulent'. In an interview with the Daily Telegraph, Morgans said at the time: 'No instances of fraud have come to light, but obviously there has been neglect on the part of some individuals.' The SFO and the North Yorkshire Fraud Squad clearly think that more than neglect may be involved. The company's current story is getting interesting - for the right reasons. SBC Warburg Dillon Read, Azlan broker, forecasts a break even at year end, and pre-tax profits for the full year to March 1999 of #8 million. At the current share price, Azlan is woefully undervalued. And there is plenty of upside to come. In this context, any legal action against former employees is an irrelevancy. But until the SFO completes its investigation, it will be impossible to treat Azlan as a 'normal' company.®

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