Eurofins Won't Use Auditor Who Also Worked for CEO's Firm
(Bloomberg) -- Eurofins Scientific SE, the laboratory-testing company facing criticism for its corporate governance, will no longer use an auditor for its Luxembourg subsidiaries who was contemporaneously signing off on the accounts of businesses controlled by the company’s largest shareholder.
The use of the same auditor, Erik Snauwaert, by both the company and its largest investor, Chief Executive Officer Gilles Martin and his family, raised questions because the Martin real estate companies were doing millions of euros of business with Eurofins each year. PwC, the auditor for the parent company’s accounts, now will audit the Luxembourg subsidiaries as well, Eurofins said.
“It was not an ideal setup to use the same audit firm for Eurofins holding companies and private companies,” Eurofins Senior Finance Director Hugues Vaussy said in an interview Tuesday. “Now they will be audited by PwC with immediate effect.’’
Private businesses of the Martin family received 26 million euros ($29.5 million) in rent from the company last year, according to the annual report published Tuesday. Eurofins has paid the founding family 141 million euros since 2009.
The subsidiaries audited by Snauwaert weren’t required by law to be audited, but Eurofins had their books reviewed anyway, Vaussy said. The units in question were mainly holding companies with no contribution to group revenue and earnings, he said.
Bearish speculators have been targeting Eurofins, with more than a third of the shares available for trading out on loan recently, a proxy for the amount of shares that have been sold short.
Accounting and valuation analysts at Exane BNP Paribas last month queried the use of smaller auditors for many of the company’s subsidiaries, while Thomas Burlton, a Berenberg analyst who recommends buying the stock, urged the company to hire top-tier auditors as a way to fend off short sellers. The company announced that move and others Tuesday.
Luxembourg-based auditor Snauwaert signed off in 2017 on accounts for Analytical Bioventures and International Assets Finance, two companies controlled by the Martin family, according to corporate filings in Luxembourg.
In the same year, his firm, Audit Conseil Services Sarl, audited more than 30 Eurofins subsidiaries, the filings show. Snauwaert himself signed off on the accounts for 25 Eurofins accounts, including Eurofins Forensics, on April 20, 2017.
Snauwaert signed off on the accounts of Eurofins Forensics at a time when he was banned by the Luxembourg regulator, the Commission de Surveillance du Secteur Financier, from doing statutory audits. According to a notice from the regulator in March 2017, he was banned for a period of 12 months. The notice doesn’t give a reason and the regulator declined to comment further, citing professional secrecy and data protection rules.
Snauwaert, in a telephone interview, confirmed the one-year ban but said it didn’t prevent him from undertaking client audit work that wasn’t governed by Luxembourg law. He declined to comment on the reason for the ban. Neither he nor his firm were the overall auditor of the company, he said, and the Eurofins entities reviewed by his firm were subholding companies, not operational ones.
In some property transactions, a Eurofins employee, North America finance chief Ralf Fassbender, signed legal documents on behalf of Gilles Martin’s real estate companies, public records in the U.S. show. That won’t happen any longer, said Vaussy, the finance director.
“Ralf Fassbender is indeed our finance director for North America and may have been signing historically some papers as well on the private side when those property companies were incorporated initially, which is, I fully agree, not ideal,” Vaussy said in an interview. “This is now fixed, in the meantime, that we have a clear cut between Eurofins companies and private companies.’’
Eurofins rose 2.6 percent to 367.80 euros at 9:35 a.m. in Paris, after slumping almost 10 percent Tuesday, when the company lowered its sales guidance for the year.
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