Britain's Financial Services Authority (FSA) has commenced criminal proceedings against four former directors of a software company that won a contract to develop a €56m computerised patient record system for Irish hospitals from the HSE.

The four former directors of iSOFT Group Plc are charged with the offence "of conspiracy to make misleading statements". "The individuals Patrick Cryne, Stephen Graham, Timothy Whiston and John Whelan have been summonsed to appear at City of Westminster Magistrates Court on January 29", according to a statement by the FSA last week. The FSA began an investigation into "possible accounting irregularities" at the group in August 2006.

Whiston resigned as a director of iSOFT's Irish subsidiary in 2006, while Graham stepped down as a director in April of 2007. The directors' report in the accounts for the year ended 30 April 2006 states that Graham had been suspended "pending the outcome of the more formal investigation" by iSOFT Group into "evidence of irregularities in respect of subsidiaries", the principle effects of which "would appear to have been to recognise revenues earlier than they should have been".

Accounts for iSOFT's Irish company for the financial year ended 30 June 2008 state that its contract with the HSE was signed in 2005 and runs until 2015. "The estimated value of the HSE contract until completion is €56m" and operational progress has been good.

"However, a number of the originally planned implementations have been deferred due to the HSE not being able to provide the requisite resources and based upon the HSE's priority for systems upgrades and replacement at specific sites," a note to the accounts states.

It said that in December of 2007 a notice was signed with the HSE which, amongst other measures, changed the payment structure of the contract from being time-based to delivery-based. "This change of approach removes the potential for financial penalties whilst protecting the overall
value of the contract," it said.

iSOFT could have faced penalties because within the original contract it had contracted to provide a letter of credit if the net assets in the consolidated accounts of the group fell to less than €75m and to maintain professional indemnity insurance cover "at levels not currently available to the company in the insurance markets" according to the 2006 accounts.