Law Soc sues KPMG for £8.5m

THE LAW Society is suing accountants KPMG for more than £8.5 million over a catalogue of alleged breaches of duty and negligence in its auditing of law firm Durnford Ford's accounts.

The society alleges the accountants failed to spot hundreds of anomalous financial transactions resulting from the theft of money from clients.

KPMG rejects the claim. A spokesman said: "We don't believe there is any merit in this action and we will be contesting it vigorously."

The closure of Durnford Ford in 1992 by the Solicitors Complaints Bureau led to a welter of compensation claims from former clients, criminal investigations by the police and Serious Fraud Office, and the trial in October of former senior partner Graham Ford.

The writ is issued by the society in its capacity as trustee of the compensation fund, and relates to accounts filed to it by KPMG's Brighton office for years between 1985 to 1990.

The society alleges that none of the reports comply with the duty of care owed under the Solicitors Act and that two partners, Stephen Cawley and Neil Chapman, were allegedly careless, negligent, and made false statements.

The bulk of client cash disappeared in 1989 and 1990, estimated at more than £1.7 million and £5.6 million respectively. Some transactions purported to be for work for which no bills exist, claims the society.

The writ details discrepancies in two-way cash transfers between office and client accounts, unusual client loan accounts and client ledger data which the society alleges the accountants should have observed and incorporated in their reports.

Had the accountants picked up on the anomalies, the society could have quickly stopped Ford's "defalcations", the society alleges.

Ford was struck off by the Solicitors Disciplinary Tribunal in July 1993 for "dishonesty involving fictitious billing and improper transfers involving probate clients to provide working capital for the firm". William Digby Bew, another ex-partner, is also named on the indictment and expected for trial. Tribunal proceedings against three other ex-partners will be heard after the trial.