Deloitte: We quit London listed miner Ferrexpo over delay to probe

Accounting giant Deloitte today revealed that it had resigned as auditor to Ferrexpo because the London-listed miner delayed an investigation into the propriety of its charitable donations.

Ferrexpo is embroiled in a row over allegedly improper links between its chief executive and a charity, Blooming Land, being probed over potential misappropriation of funds.

Deloitte — which resigned last Friday, sending shares spinning 28% lower — said it had called for an independent review back in October after it found discrepancies in Blooming Land’s bank statements. The company failed to comply until February.

Deloitte said in its resignation letter published by Ferrexpo today that “we consider that the company’s response to the situation, including its delay in conducting an independent forensic investigation” meant it could not continue as auditor.

Ferrexpo countered that it initially decided against a formal review as the board felt a softer, more “cooperative approach” would yield more information from the charity. However in December the Ferrexpo board found Blooming Land’s explanations “incomplete, unsatisfactory and could not be independently verified”.

Deloitte and Ferrexpo have also clashed over what influence Ferrexpo’s chief executive and majority owner, Ukrainian billionaire Kostyantin Zhevago, has over the charity. Ferrexpo claims neither Zhevago nor the company’s management controls it, but Deloitte has said it has been “unable to conclude” the same.

Funding for Blooming Land is provided by one of Ferrexpo’s units in Ukraine and Khimreaktiv, an entity ultimately controlled by Zhevago.

Today Ferrexpo chairman Steve Lucas stood by Zhevago and said: “There are no direct connections with the charity. He does not exercise control or influence over Blooming Land. This is not a charity out of control.”

Ferrexpo is also seeking two new directors after Mary Reilly, chair of the audit committee, and Bert Nacken, chair of the renumeration committee, quit on the day that Deloitte stepped down.