Azlan: case closed, no conclusion

Nine-month SFO inquiry provides no answer as to how #15 million profit forecast became #14.1 million loss.

The Serious Fraud Office's (SFO) case against Azlan was officiallyofit forecast became #14.1 million loss. closed last week, after it was revealed that no further investigation will be carried out.

After nine months of studying the accounts and inventory lists of the troubled distributor, as well as interviewing many of the individuals involved and apparently tracking down those that were no longer with the company, the Azlan file was declared closed (PC Dealer, 20 January). There was no conclusion and no explanation, except to say there was 'not sufficient evidence to prosecute'.

Was anyone in the industry surprised by this outcome? Not really, it seems. The general feeling was that the SFO's action was too little, too late. The intention to carry out an inquiry was only made known 12 months after the financial year ended 5 April 1997 - with which it was concerned - had closed.

Considering the amount of time that had lapsed between the actual events and the consequent investigation, and also the number of people involved who no longer worked at Azlan, it begs the question of whether the reasons why a #15 million profit forecast became a #14.1 million loss would ever become known.

As Steve Lockie, general manager of the networking division of Computer 2000, argued: 'Azlan policed itself very well and a lot of people left. Is it really in the public interest to pursue it at this point?'

Tony Wand, sales director of Datrontech, added: 'You never know with the SFO - it can be a funny old beast - but it does require pretty hard evidence to prosecute in these types of cases. It may well have been that the whole thing was down to genuine errors and no deliberate fraudulent activity ever took place.'

Others believe the evidence was all there, but just needed to be examined properly. Azlan had no choice but to fully co-operate with the investigation and would have had been forced to give the SFO unrestricted access to all the relevant information.

Commenting on the inquiry, Ross Jobber, analyst at Deutsche Morgan Grenfell, said: 'It is hard to bring cases against firms in this way. In the Microsoft case, for example, there was a lot of discussion about emails. I'm not sure electronic things are easy to retrieve.'

Azlan itself stated that it was 'never concerned' about the investigation.

This seemed to have been reflected by its investors, when its share price picked up only slightly by two pence following the SFO's announcement on 15 January.

Julian Morse, financial analyst at Beeson Gregory, said: 'I don't think the rise has much to do with the announcement because the charges were levelled against old management. That said, the fact that there will be no fines imposed on the company and the SFO will no longer be camped in Azlan's offices, will aid investor confidence.'

There is a lack of clarity as to whether this decision rules out any action against certain individuals involved in the investigation. The SFO refused to be drawn on the matter stating again that nothing would happen unless further evidence was made known.

Although it is not impossible that this could happen, it does seem to be highly unlikely, according to Wand.

So what can be learnt from the whole episode and did the SFO achieve anything by opening its case against Azlan?

It certainly looks as if nothing was gained in the nine months in which the investigation was carried out, except to spend a fair penny of the tax payers' money and then drop the case without drawing any conclusions.

Surely the industry deserves more than this?

Also, Azlan is still suffering the repercussions of that year, but had already steadied the ship by the time the SFO intervened. So the investigation really had little effect on the way the business was conducted.

David Parker, director of channels for Nortel, agreed: 'It's been business as usual with Azlan since the investigation began. There has been zero effect on our long-term relationship.'

However, when the Azlan case was opened, vendors speculated that it would make distributors look at themselves more closely to make sure the same thing did not happen to them. There are also those who believe the entire episode was simply a warning from the SFO to the publicly-quoted IT companies to keep their houses in order.

At the time, Jobber pointed out that: 'Networking distributors became a dirty word in the City when the trouble with Azlan first started.' (PC Dealer, 22 April 1998).

In light of the investigation's closure, the management at Azlan will be glad to draw a veil over the episode, put it behind the firm and get on with making money.

Of course, the other side of the coin is that prospective purchasers may come out and declare their interest in the distributor now the SFO investigation is not hanging over it.

Whatever happens in the long run, Azlan has a lot to prove to the IT industry.