Sims Metal to take hit amid fraud probe RECYCLER Sims Metal Management will write down the value of inventory at its British operations by $78 million after uncovering a possible case of fraud. Sims today also revealed it would take a $354 million hit from impairment charges related to its UK and US operations. Of that, a $63 million impairment charge will be taken in relation to UK Metals and UK Sims Recycling Solutions, with the other $291 million for North America Metals. Sims last month warned of possible fraud at two of its British electronics recycling sites and launched an immediate investigation. The investigation, which is mostly complete, has uncovered allegations of potential fraud at its operations in the Welsh town of Newport and Long Marston, near Birmingham in England. Those claims are being further investigated. Sims had initially expected to write down the value of its inventory at Newport and Long Marston by $60 million, but the figure has blown out to $78 million following the investigations. Sims said $16 million of the inventory writedown would impact on its first half earnings results, due out next week. The balance would be restated in its previous accounts. The two UK businesses at the heart of Sims' investigation recycle electronics, including computers and televisions. Sims' biggest recycling business is in metals. Sims said investigations by a special internal committee had revealed that inventory had been overstated at Newport and Long Marston. "The committee's investigations have revealed that the primary root cause for breakdowns in the company's control environment can be attributed to the failure to adequately supervise operations (including inventories), responsibly safeguard assets, and failure to maintain adequate controls over financial reporting relating to inventory," Sims said. Internal audits and additional control measures put in place by the company also failed to identify problems including excessive levels of inventories and IT issues. Sims said it would immediately introduce its standard set of controls over inventories and integrate IT systems to improve its operations in the UK. The committee carrying out the investigation would also now turn its attention to decisions made by staff and management connected to the problems.