Fraud probe sees Sims write down UK stock by 50m

Sims Metal Management has been forced to write down the value of its UK stock by $78 million (50m), after investigating suspected fraud at two WEEE recycling sites.

Last month, the company said that alleged control failures at its facilities in Newport, South Wales and Long Marston, Warwickshire were being investigated, after it emerged that potential fraudulent activity had seen the companys inventory overstated (see letsrecycle.com story).

Sims had originally believed the overstatement to be around $60 million (37m) but the investigation revealed that the overall amount of stock written down was $18 million (12m) more than expected.

In a statement released today (February 15) the company said: The Committee, with the assistance of the Group CEO and CFO, internal audit, PricewaterhouseCoopers, and Baker & McKenzie, oversaw a thorough investigation at the company’s Newport and Long Marston facilities in the UK.

A full physical count of inventory was performed at the Newport facility of which 85% of all the inventory was re-weighed and evaluated. At Long Marston, a physical count was completed which was supplemented by comparing production results with yield recovery assumptions.

Based on these procedures, the Committee has concluded that a write-down of inventory of $78 million will be required, versus a preliminary assessment of circa $60 million. The write-down adjustment has been independently verified by the Company’s external auditor PricewaterhouseCoopers.

Controls

The company attributed the write down to the failure to adequately supervise operations and failure to maintain controls over financial reporting relating to its inventory.

Sims processes over 150,000 tonnes of WEEE at 12 sites across the UK, including household and non-household WEEE. Its UK headquarters is based close to the Long Marston facility.

The Newport WEEE reprocessing facility, opened in February 2009, was built at a cost of 12 million. The plant uses technology to separate materials including copper, aluminium and plastics from waste electrical which are sold for manufacture into new products.

The company also has facilities in Austria, Belgium, the Czech Republic, Hungary, Poland, Sweden, the Netherlands and Germany, recycling around 300,000 tonnes of electronic waste each year.