Answerthink Finds External Fund Misuse

A payroll agent misappropriated about $2 million.
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Answerthink (ANSR) expects to delay its third-quarter filing -- and take a fourth-quarter charge -- as it investigates the external misappropriation of funds in the U.K.

The technology consulting firm said a former U.K. agent admitted to misusing about $2 million in funds earmarked for payroll taxes due to United Kingdom Inland Revenue.

The disbursement agent had been used from early 2003 to January 2006 to make payroll, payroll tax and vendor disbursements in the U.K.

Answerthink filed a lawsuit in the U.K. against the agent, and certain assets of the agents have been frozen. The former disbursement agent has offered to pledge, as security, assets equal to a significant portion of the company's claim. Answerthink said it can't predict the outcome of this suit or whether our efforts to recover the misappropriated funds will be successful, notwithstanding the pledge.

The company said it couldn't be certain that its actual exposure is limited to these matters or the actual exposure for these tax matters will not increase materially from the estimate provided above or that these amounts will not need to be recorded in prior periods, namely 2003, 2004 and 2005.

Answerthink will likely delay filing its third-quarter Form 10 to allow for a proper review of the issues, after which it will decide if a restatement is necessary.

The company said it expects to incur expenses in the fourth quarter as a result of these matters, including increased legal and accounting costs in the quarter and the fees and expenses in connection with the reviews referenced above. But it can't predict the amount of such expenses.

"The actual amount of these expenses will have an impact on the company's actual fourth quarter results," Answerthink said in a press release.

The company's announcement came as part of its third-quarter earnings report. Answerthink said earnings fell to a penny a share from 5 cents a share a year earlier.

Revenue rose 9% to $43.6 million.

Answerthink said it expects fourth-quarter revenue of $39 million to $41 million and earnings before items of break-even to 2 cents a share.

Shares of Answerthink fell 3 cents in extended trading to $2.91.