easyhome Ltd. Discovers Employee Fraud at an Easyfinancial Kiosk Company
Taking Action to Ensure No Consumers Are Affected and to Correct Procedures
TORONTO, ONTARIO, Oct 14, 2010 (MARKETWIRE via COMTEX) -- easyhome Ltd. /quotes/comstock/11t!e:eh (CA:EH 9.50, +0.12, +1.28%) , Canada's leading merchandise leasing company and a growing provider of financial services, today announced that it has discovered an employee fraud, in the amount of approximately $3.4 million before taxes, perpetrated against the Company's easyfinancial Services business.
The Company is taking immediate action to mitigate the financial damage of the fraud and to enhance easyhome's ability to prevent and detect such criminal activity in the future. While the fraud is significant, it is not expected to have a material adverse impact on the Company's future outlook.
The fraud, which occurred at an easyfinancial kiosk, was detected by the Company during a detailed review of its consumer loans receivable portfolio.
A prompt internal investigation indicates that the manager of an easyfinancial kiosk fraudulently withdrew Company funds by processing fictitious loan applications. Subsequent fictitious loans were later processed to maintain the required payments on the original fraudulent loans, exponentially increasing the size of the total fraudulent loan balance. Additionally, the Company's standard policies for oversight and internal audit were not adhered to for this location.
The preliminary results of the Company's internal investigation were provided to local police and the manager has been terminated with cause. Additionally, the more senior managers responsible for auditing this easyfinancial location have been suspended pending the full outcome of the investigation.
"Everyone at easyhome is profoundly disappointed by this event," said David Ingram, President and CEO of easyhome Ltd. "Our preliminary Company-wide review has not identified any similar incidents at our other easyfinancial locations. We are confident that this fraud was perpetrated against the Company only and had no negative effect on our customers."
To ensure that a similar incident does not occur in the future, the Company will be taking a number of steps to strengthen our internal control processes and, in particular, to speed up our detection of possible fraudulent activity. Most notably, in November we expect to implement an electronic identity verification tool that has been developed over the past several months with TransUnion Canada, a recognized global leader in credit and information management.
The Company estimates that it will take a total charge of approximately $3.4 million, before taxes, which will require restatement of prior period financial statements. The restatement by quarter and fiscal year has not yet been determined but will be disclosed in the Company's third quarter earnings release.
The Company will hold a conference call to discuss the fraud incident and easyhome's response to it with shareholders, analysts and portfolio managers on Friday, October 15, 2010 at 11:00 am EST.
Date: Friday, October 15, 2010
Time: 11am EST
Dial-in: 416-340-2217 or 866-696-5910
Passcode: 2336688 - please dial in the passcode, followed by # to enter the call.
Media are invited to listen to the call by telephone. For questions, media may contact David Ingram, President and CEO or Steve Goertz, CFO at 905-272-2788.
As at September 30, 2010, easyhome Ltd. had 248 stores, including 30 franchised/licensed locations. The Company also operated 58 easyfinancial kiosks within existing easyhome stores.
easyhome Ltd. is Canada's largest merchandise leasing company and the third largest in North America, offering top quality, brand-name household furnishings, appliances and home electronic products to consumers under weekly or monthly leasing agreements through both corporate and franchise stores. In addition, the Company offers a variety of financial services, including loans, prepaid credit cards and cheque cashing through its easyfinancial services business. Easyhome Ltd. is listed on the TSX under the symbol 'EH'.
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