Another tiddler, page-16

Macmahon aren't getting sued because of the involvement in Mongolia. It was their involvement in RGP5 and then their rio rail job. To summarise the story, macmahon management went to rgp5 and saw a half complete job only weeks before they released their annual report. They then released an annual report stating the job was complete and took huge bonuses. Four weeks after releasing the results they released a statement saying they had the progress wrong and their results were out by millions and millions. It's a guaranteed cracker of a lawsuit if the old managers go on the witness stand, a story I'll leave for the newspaper. Anywho, the share price tanked from $1- to $0.20 after they told "the truth". This wasn't the end of it as for reasons that can only be speculated there were more bad news items from these jobs that took years to come out and almost 5 years later the company is still worse than it was when the initial bad news was announced. Perhaps it wasn't managements fault, I don't know or care. What is important is the hard lesson investors learnt.

I don't think brierty is different. The story is nonsense. If we assume (rather logically) that any experienced contractor knows the odds of winning a claim then these guys gave some fairly suspect opinions in their previous reports. Sackable offence? What's more, they are actually losing money if you use accounting methods from last year instead of this way. They changed the way they count depreciation to improve profit. The other trick to creating a paper profit from a physical loss is slowly releasing the bad news over multiple years as people are less likely to sack management if they can produce minuscule profits instead of a loss.

I'm not saying brierty management are lying thieves or incompetents. They might be honest. They might be getting lied to by their staff. The reasons are endless. It doesn't matter. What is important is that similar events in the past have left investors worse for wear and caution should be applied. Even if they don't mean to, humans have a tendency to place overly positive spins on issues like this(more so investors like us than management). It is like asking an alcoholic of they have a drinking problem. Most are in denial because it is easier to deny the issue than deal with it. I recommend you take the maximum dose of caution available with a situation like this