Todays Sunday Mirror is on about Patrick Cryne and Isoft being not all it seems

If you want a proper read of the story - Here is the Telegraph version

Which is a bit more informative.

Basically though iSofts problems started AFTER Cryne had left. I suppose there are 2 possibilities - he saw it coming and jumped ship, or his successor screwed it up. There is at present no suggestion that he has done anything wrong.

Telegraph

What a carry on!
By Josephine Moulds

(Filed: 25/08/2006)



Troubled software company iSoft, which has a key role in the future of the NHS, has admitted it is under investigation by the Financial Services Authority. But analysts say this is the least of its worries after a dire six months in which the company announced a complete overhaul of its accounting policy, lost its chief executive and suspended another director.

advertisementInvestors seem unmoved by yet more bad news and the share price edged up ¾p to 42½p ahead of the company reporting its much-delayed full-year results today. These shares were changing hands for almost 400p at the start of the year, so what went wrong?

The company was bought by Roger Dickens, Patrick Cryne and Steve Graham from their then employer, KPMG, in 1998 and floated in July 2000 at 110p. Subsequent accounts showed iSoft going from strength to strength and the directors made tidy profits from performance-related bonuses and share sales. Directors were paid performance-related bonuses of £6.3m since 2001. The three founders sold shares worth a total of £81m since 2001.

The appearance of success disintegrated this year, however, as the company sank into accounting difficulties.

Most of iSoft's problems can be traced back to its involvement in the Government's ambitious programme to digitise the entire NHS patient records system. The National Programme for IT aims to create a new electronic system, with access to appointment booking and prescription services, to support an estimated 7.5m people and to be used by 170,000 NHS staff.

All the IT heavyweights, from Bill Gates to Oracle's Larry Ellison, have been involved at some stage of the programme but it has been beset with problems. It is now two years behind schedule and could end up £14bn over budget Kevin Ashton, analyst at iSoft's broker Bridgewell, explained: "On the one hand, this is a politically driven programme with political deadlines. On the other you have a group of hungry suppliers who allowed themselves to put in very aggressive bids for a very risky project.

"This is the one of the most complex IT projects ever undertaken. EDS and Lockheed Martin both pulled out of the bidding early on, probably daunted by the scale of the project and extent to which the risk was being transferred to suppliers."

ISoft, however, stuck in there and by the beginning of 2006 the flow of damning news stories surrounding the project started to chip away at the share price. In January, the company publicly acknowledged there was a problem and announced that full-year revenues from the National Programme would be around £55m below expectations. The share price plummeted 45pc.

A profit warning followed but this only highlighted deeper rooted problems at iSoft. It was soon clear that the delays were quite so damaging because iSoft had been booking large portions of revenues in the first few years of long-term projects. Paul Morland, analyst at Arbuthnot Securities, said: "They were pulling forward revenues that perhaps they shouldn't have been. They were within the rules before but if you look at the spectrum of prudence they were right at one end."

Analysts had been worrying about this for some time and the company eventually capitulated in June, announcing a change to its accounting policy that effectively wiped out any profits it had made. ISoft explained that it previously recognised the value of software licences at the start of a project, while the value of support and services was recognised as they were performed.

It said in a statement: "More recently, the group's business has evolved and iSoft is now engaged with large, more complex and long-term product supply projects, in which it is increasingly difficult to distinguish between the supply of the product licence and its implementation and, in the case of managed services, additional support services."

The company cut its profit forecasts yet again. It also said it was negotiating new terms for its debt as it would breach certain banking covenants under the new rules. While management stressed iSoft was solvent, new auditor Deloitte had yet to sign off the accounts which were delayed until July 11. The shares fell 39pc to a new low of 51p and house broker Morgan Stanley cut its target share price to a range of "zero to 60p", officially accepting the stock could ultimately be worthless.

Chief executive and former chief financial officer Tim Whiston stepped down two weeks later and the results were delayed further because iSoft had failed to conclude negotiations with its partner on the National Programme. But when it looked like things could not get any worse, in July iSoft announced it had initiated an internal investigation into possible accounting irregularities. The investigation uncovered evidence of breaches of the previous accounting rules in the financial years ending April 2004 and 2005.

The company said: "The principal effects of this would appear to have been to recognise revenues earlier than they should have been. They do not have any effect on the cash position of the group."

The board suspended Mr Graham, who was commercial director at the time, and another unnamed employee. It also said: "The other employees that appear to be involved have since left the group." ISoft launched a formal investigation and yesterday announced the FSA had launched its own external investigation.

Mr Ashton said: "Normally you would get very excited about irregularities. In the context of the accounting restatement it is the lesser of their problems." He was similarly sanguine about the possible impact on the accounts. "The only guidance is that although they are irregularities they are not material. Although it could be material for any individuals involved in falsification of accounts," he added. ISoft's woes are extensive but its involvement in such a high-profile project has made them 10 times worse. It was recently named in a question put to the prime minister, and Labour MP Paul Farrelly has called for the Department of Trade and Industry to investigate it.

The accounts that come out today are not expected to hold any surprises. It is the result of iSoft's negotiations over its position on the National Programme and the various investigations it is undergoing that will hold investors in thrall