'£11m was kept secret by fearful directors'

An £11 million black hole in the accounts of a company set up by Midland MP Geoffrey Robinson was kept "secret" by two directors because of fears that it could undermine future expansion plans, a court heard.

Richard Carr and Bill Jeffrey, senior directors at Birmingham-based TransTec, covered up a massive compensation deal with US car giant Ford because the "adverse financial position" would alarm the firm's board of directors, Birmingham Crown Court was told.

Carr, who was the company's chief executive before it collapsed in 1999, faces seven counts of fraud relating to a failure to declare the settlement deal to the company board, auditors, shareholders or the Stock Exchange.

Jeffrey, the company's finance director, has already pleaded guilty to seven similar counts.

Mr Robinson, MP for Coventry North West, left the company in May 1997 and is not implicated in the alleged fraud.

The prosecution claims that the payments were compensation for a "past default" relating to TransTec's failure to meet a contract to supply single overhead cam shaft cylinder heads for the engines of the Ford Explorer in the mid 1990s.

Carr, of Snitterfield Road, Bearley, Warwickshire, and Jeffrey kept the payments secret from the board because it "would call into question the plan Mr Carr had for expansion by acquiring new companies," the prosecution claimed.

However, Judge Derek Stanley, who continued his summing up yesterday, said the defence had claimed that the payments represented a "cost down payment" for future trade between the two companies.

The defence claimed that Ford was "exerting its commercial muscle to extract payments" from TransTec.

However, as a result of "skilful manipulation, commercial and honest manipulation" by Carr, the payment did not constitute a liability and was not required to be declared to the board.

"The defence claimed that the commercial substance of the agreement has been misconstrued by the prosecution," Judge Stanley told the jury.

"The defence said there was no deceit because Mr Carr was acting honestly.

"The decision you have to make is what was the true commercial substance to the agreement that was reached," he added.

The hearing continues.