The pharmaceutical company Grifols, protagonist of a serious stock market crisis these days after the devastating report of the controversial Gotham speculative fund, hired as a director a former partner of its auditor, KPMG, who was in charge of supervising the annual accounts of the Catalan multinational for six years. .
This is David Ghosh, former partner of the auditing firm KPMG, the firm that has audited Grifols for more than three decades, a period that today is totally unusual on the Ibex. Ghosh signed KPMG’s audit reports on Grifols’ accounts for the years 2005-2010, both included, all of them without qualifications. The latest report, available on the website of the National Securities Market Commission (CNMV), was signed in February 2011.
Subsequently, and on a date that the company does not specify, Grifols hired Ghosh for a management position, that of Global Chief Compliance Officer. In an email, a company spokesperson indicates that “there is currently no David Ghosh on Grifols’ staff and we are not aware of it after 2017, which is what we have been able to confirm for the moment.” The company does not provide any information about what positions Ghosh held. KPMG does not comment on this matter.
When Ghosh stopped signing his audit reports for Grifols, the law in force at that time prohibited those responsible for the audit of a company from signing it as directors or executives “during the year following the completion of the corresponding account audit work.” ”.
This incompatibility period was reduced to one year with the law approved in 2015. Sources in the sector explain that Ghosh left KPMG at the age of 62 and that when he joined Grifols he had already passed the two-year incompatibility period.
Ghosh’s move to Grifols was, therefore, legal, although quite unusual on the Ibex. A case that occurred around the same time was that of Manuel Valls, a former partner at PWC until 2013 who audited the accounts of Banco Sabadell between 2006 and 2012. Since 2016 Valls has been a director of the entity, with the qualification of independent. .
The transfer of professionals from large audit firms to private companies is a common practice, especially to become Ibex directors already in the final stretch of their professional careers, in a sector in which it is common to retire at the age of 55. A classic example is that of Manuel Soto, a history of the sector who was hired by Banco Santander in 1999, a year after leaving Arthur Andersen, the current Deloitte, historical auditor of the bank for decades (until 2015). Germán de la Fuente is currently a director of Santander, who was CEO of Deloitte in Spain until 2021 and who in the past audited entities such as Bankinter.
Alfredo Arroyo himself, current financial director of Grifols, appointed in 2007 as vice president of Administration and Finance, also worked many years ago at KPMG. Arroyo was one of those in charge of giving explanations this Thursday to broker and bank analysts in a conference without questions from the press to clarify the doubts generated with the company’s accounting by the Gotham report.
The operations that Gotham has questioned in its report are concentrated mainly in 2018. Ghosh would have left the pharmaceutical company just before that year. The period in which he audited his accounts is also prior to these alleged irregularities, which continue to cause doubts in the market. Grifols fell another 16.17% this Thursday after that conference with analysts, called to try to clear up doubts about its relationship with its shareholder, the Dutch holding company Scranton. Grifols has acknowledged that the CNMV has asked it for information on this matter and has given it a period of ten days to respond.
Ghosh’s case raises ethical questions about Grifols’ relationship with KPMG, at a time when the company is in the spotlight due to the report by Gotham, the speculative firm that sank Gowex, against which Grifols has announced legal action. KPMG has audited the Catalan multinational continuously for 33 years. Only starting this year will this work be entrusted, by legal obligation, to another firm, Deloitte. 33 years is a very unusual period since the entry into force of the Audit Law of 2015 established the obligation to rotate auditors periodically.
Now, the average uninterrupted tenure of the same audit firm in Ibex companies is just over 6 years in a row. In no other selective firm did this term exceed 10 years in 2022, according to the latest data from the CNMV.
During the years in which Ghosh audited Grifols, the company achieved important milestones, such as starting to be listed on the Spanish continuous market (in 2006) and landing on the Ibex 35 (in 2008). In 2011, it acquired the American company Talecris Biotherapeutics, which allowed it to make a big leap in the global plasma industry, becoming the third largest manufacturer in the world and starting its listing on the American NASDAQ.
Ghosh’s name appears in a report on the operation of Grifols’ audit committee for the 2015 financial year, which is no longer available on the pharmaceutical company’s website. Specifically, among the “most relevant actions” of the year was a “presentation by Mr. David Ghosh, Chief Compliance Officer to the members of the Committee on the most relevant events in relation to the Grifols Ethics and Compliance Program.” The position of Global Chief Compliance Officer at Grifols was created in 2011, according to Expansión in July 2016.
At that time, the position of Compliance Director had gained weight in companies, after the reform of the Penal Code that came into force in 2015 and introduced the criminal liability of legal entities into Spanish legislation.
A former KPMG partner who worked with Ghosh in those years defines him as “serious and good professional” and highlights that his position at Grifols must not have been comfortable: the chief compliance officer is a kind of police within the organization, a kind of “pepito cricket” who must sound the alarm if any irregularity is detected. “It is not an executive position, it would be more shocking if he had become CFO, says this former KPMG man.
