The shambles at MFS continues with MFS Investment Management sending a letter to unit-holders in the company’s Premium Income Fund informing them that they will no longer receive interest payments.

The fund had already frozen redemptions, meaning that not only can unit-holders not access their funds, they also won’t receive any income. Meanwhile, MFS has also sent shareholders a letter imploring them to take no action in relation to rebel shareholder Chris Scott’s extraordinary general meeting.

MFS also noted that a need had arisen for a redundancy program. MFS told shareholders that “the company must keep costs to a minimum by maintaining only those employees who are necessary to manage the businesses it will retain”. One would have thought that was fairly obvious – usually businesses don’t pay for people who no longer work for them.

Meanwhile, Crikey has been trying over the past month to determine whether MFS’s auditor, KPMG, is continuing to provide “non-audit” services to the company. As Crikey noted last month:

KPMG were paid $483,600 for audit services. However, the audit fees pale in comparison to the non-audit related services performed by KPMG. The firm was paid $771,098 for assurance, taxation and diligence services in 2007. KPMG also provided $665,600 in non-audit services to MFS satellite, MFS Diversified.

Shortly after that article appeared, The Age reported that inexperienced MFS CEO, Craig White:

Denied a report that appeared in internet bulletin Crikey that the company engaged KPMG for auditing and non-auditing purposes, describing the situation as a “legacy from previous years”.

White’s comments seemed puzzling. How can a non-audit engagement be a “legacy from previous years” when the non-audit fees reached a crescendo in 2007?

Despite repeated calls, MFS refused to provide a direct answer as to whether conflicted auditor, KPMG, had provided any non-audit services in FY2008. Last week, MFS claimed that they were unable to confirm whether KPMG had provided non-audit services since 2007, with an MFS spokesperson stating that any information regarding audit and non-audit related services will be disclosed in MFS’s 2008 Annual Report.

This comment seemed wholly inconsistent with Craig White’s statement that KPMG’s non-audit services were a “legacy from the past”. Presumably if KPMG were no longer providing non-audit services, MFS would be able to easily confirm that. Craig White told journalists as much last month.

It would be good to know whether the CEO of MFS misled media (and effectively shareholders) when he denied that KPMG continue to provide non-audit services.

Peter Fray

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