Auditors claim Harvie firms overstated property values

AUDITORS have accused the directors of companies owned by former Tory donor Sir Jack Harvie of over-valuing their property portfolio.

The auditors claim that the directors of both CBC Group and its subsidiary City Link Developments – both of which have Harvie as director – refused to accept a lower valuation on properties.

As a result, the auditors claim in both sets of accounts that the companies’ valuations “can’t be substantiated”.

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Peter Gallanagh, of Campbell Dallas, wrote in the accounts for CBC that Harvie and his fellow directors thought the valuations they were given by professional advisers were “understated”.

The auditor said the directors had attempted to apply a “true and fair view override” in their financial statements, a process through which companies are allowed to depart from international accounting standards but only in certain circumstances. Gallanagh said: “We do not agree all of the conditions necessary to apply the true and fair view override have been met.”

In City Link’s accounts, the same auditor repeats similar claims.

The accounts reveal that both 
Harvie’s firms are troubled. City Link made a pre-tax loss of £746,776 on turnover of £1.3 million while pre-tax profits on the larger group fell to just £8,000 on turnover of £55.7m.

In the accounts pre-amble for CBC, Harvie wrote that the directors were “pleased, given the extremely difficult market conditions, to report an operating profit of £940,000” adding that “the group is well placed to take advantage of any improvements in market conditions and already has a reasonable level of confirmed orders in place for the forthcoming year”.

The directors of City Link wrote that they were similarly “pleased” to report an operating profit of £157,007 and that they were “satisfied with the performance of the company”. It added that “we continue to develop the business by building strategic partnerships with our clients”.

CBC’s accounts revealed that it sold its joint venture share in another linked company, the Silverbank Development Company, for £1. The other 50 per cent owner in the firm was Uberior Investment, formerly part of failed lender HBOS. Accounts for that company report “material uncertainty over the company’s ability to continue as a going concern”. Losses at the developer – which owns Glasgow Business Park on the M8 that features a large sculpture of a horse – soared to £17.9m in the year to the end of March, mainly on a £16.9m write down on the value of its assets. The company’s accounts also show outstanding bank loans of £25.5m.

Accounts for both CBC and City Link cover the 17 month period to the end of March 2012 after the group successfully applied to delay filings.

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City Link is currently embroiled in a potential law suit over homes sold in Motherwell alleged to have been built on contaminated land. A spokesman for the law firm leading the action confirmed that there are 43 cases pending against City Link which built homes on the Watling Street Estate in the 1990s and 2000s which are claimed to be causing illness among residents due to high levels of toxic solvents.

The first case in the suit against Lanarkshire Housing Association is due to be heard in court in coming weeks on the 21 of January. Subsequent to the initial test case involving two residents, Angela McManus and Robert McManus, solicitors Collins have vowed to use it as a basis to press its suit against City Link.

Harvie was unavailable for comment.