Sims caught in e-scrap inventory scandal
By Editorial Staff, Resource Recycling
Sims Metal Management has cautioned shareholders that the value of its inventory held in the U.K. has been materially overstated — possibly due to fraud.
On Jan. 20, the massive metal recycling company announced in a statement that its inventory associated with its U.K. e-scrap businesses in Long Marston, England, and Newport, Wales, was in question.
Preliminary findings, according to the company, suggest that the approximately $60 million inventory adjustment is the result of control failures and potential fraud by local and regional plant management responsible for technology and downstream processing systems in the U.K.
In response, SMM's board has set up a special committee to oversee an investigation into the matter that will be conducted by the company's internal audit team. The immediate priority of the oversight committee is to determine the exact amount of the adjustment and the impact it will have on the company's accounts. The committee is also charged with understanding what went wrong and what remedies need to be applied, as well as what action needs to be taken regarding any employees or third parties involved in the incident.
The company was contacted by E-Scrap News but declined comment.
Predictably, investors responded negatively to the news, sending Sims' stock price down 58 cents on the day of the announcement, to close at $9.88 per share.