And it began in the final hours of 2014.

It was then that Slater & Gordon reached an agreement to buy some of the business of a company called Quindell.

Quindell was a hybrid legal, insurance and professional services business listed on London's AIM exchange – a sub-market of the London Stock Exchange specialising in alternative stocks. Originally the creation of businessman Rob Terry, Quindell was actually a country club which morphed into a tangled collection of legal and insurance operations. It capitalised on new legal ownership laws in a rapidly deregulating Britain, combined with eager investors and a rampant compensation culture.

In 2007, Slaters became the first law firm in the world to list and had ingeniously used its public market valuation to buy up smaller law firms and deliver spectacular earnings growth for investors.

Slater & Gordon chief executive Anbrew Grech. ASIC is believed to have left open the door to resuming its investigation into the firm if new information comes to light. Josh Robenstone

By 2012, it announced its arrival in Britain when it bought the law firm Russell Jones & Walker – taking advantage of a change in the ownership structure of legal firms and changes in the personal injury sector.

Britain beckons

Slater & Gordon saw opportunity in the British market which, at five times the size of Australia, was a source of the growth that its sharemarket investors craved.


"Firms which do not adapt will simply not be able to compete over the long run," Grech said of their British acquisitions.

In 2014, Slaters expanded even further with the purchase of Manchester-based Pannone to become one of the larger personal injury firms in Britain. The Slater & Gordon logo was now a fixture on the billboards of the London Underground as it ramped up its marketing spend to take advantage of its scale.

Slater & Gordon's share price fall.

Grech and Slaters management hired bankers Greenhill and Citi to explore even more British options. Over the horizon came Quindell, with a falling share price and business synergies with Slaters.

An agreement on New Year's Eve allowed Slaters exclusive access to Quindell's accounts and cases to conduct its own due diligence. Hence the phone call a few hours later on January 1.

By the end of March, Slaters and its team of corporate, legal and tax advisers had seen enough to convince them to get the chequebook out.

On Monday, March 30, Slater & Gordon unveiled an agreement to buy Quindell's professional services division for £637 million, funded by $375 million of new bank loans and an $890 million share issue that would double the size of the law firm. The total value of the deal, $1.3 billion, was about the size of Slater & Gordon's market capitalisation.

Slater & Gordon was the first law firm in the world to list. Its market capitalisation hit a peak in June of $2.7 billion. Jessica Shapiro


The two-for-three shares rights offer would catapult Slater & Gordon into the S & P/ASX 100, and herald the arrival of the law firm into the big league.

But the deal was not without its risks. Quindell's aggressive accounting policies, eccentric history of acquisitions and suggestions of widespread related-party transactions (such as transactions involving management or the board) had been publicly questioned by some investors.

From 2012, Quindell had been taking on tens of thousands of cases related to noise-induced hearing loss, a potential gold mine in the new health-and-safety-conscious workplace. Within two years, Quindell had taken on about 60,000 cases – but "work in progress" accounting allowed them to effectively book large profits before the cases had been won.

To sceptical short sellers, however, Quindell's impressive profit growth was an illusion, while its underlying operation was bleeding cash.

Although Quindell's misadventures weren't well known in Australia, Slaters knew it had to allay investor fears about the acquisition. So it reached a "carve-out" agreement to separate the dubious 60,000 hearing loss cases from the rest of the business, presenting it as a chance to earn bonus profits should the cases come good.

But the $1.3 billion price paid to Quindell for the professional services business was more than four times larger than the sum of all Slaters' deals since it went public in 2007.

Grech, however, had convinced the board to green-light the deal. Slaters chairman John Skippen told Company Director magazine this deal was the equivalent of doing 20 to 30 transactions in one hit.

Grech was a masterful communicator and had an almost cult-like following among small-cap fund managers, to whom he'd delivered spectacular earnings and share price growth.


On Monday, March 30, he began selling the deal to analysts and investors via conference calls and a luncheon hosted by the firm's brokers.

Spectacular success

Grech, as the brains behind the first law firm in the world to go public, had turned Slater & Gordon into a spectacular business success. A decade earlier, Slaters had been on its uppers. Now it was a top 100 company that had made its MD one of the richest lawyers in the country – with a personal fortune of $35 million.

Grech was something of a messiah at the firm, meticulously building the company up and then pursuing the unknown territory of a sharemarket listing.

The Quindell purchase was "transformational", Grech told investors. And his colleagues had done their homework with 70 Slater & Gordon lawyers going through thousands of case files.

He also had a well-oiled capital markets machine behind him to sell the deal, with advisers promoting the capital raising.

Almost every analyst on the street was a fervent supporter of the deal-hungry law firm. Fund managers of all sizes felt compelled to back the share raising via Macquarie and Citi, while sub-underwriters put their hands up for shares and what they hoped would be a quick profit.

Slaters senior management and staff doubled down, too, with many taking up the two shares for every three then owned. Grech tipped $11 million of his own fortune into the raising, an emphatic show of faith.


Within days of the announcement of the equity raising, the market had pushed up the price of Slater & Gordon to a new high of $8.07, eight times the $1 listing price in 2007, valuing the company at more than $2.75 billion.

For Grech, the son of Maltese immigrants who grew up in the aspirational Melbourne suburb of Broadmeadows, it was a triumphant moment.

Yet, ironically, the battlers' law firm, with strong ties to the labour movement and which had stood up to the big end of town, had now come to embody it. No longer "That Disreputable Firm", as it was described in a 1999 biography, Slaters became the subject of a Harvard Business School case study.

But then the tide began to turn. It was during the equity raising that talk first emerged among market players about an Australian Securities and Investments Commission (ASIC) interest in the Slater & Gordon situation.

There were several reasons why ASIC might have thought Slater & Gordon was worth a closer look.

In November 2014, The Australian Financial Review outlined some startling realities about the company. Since 2007, Slater & Gordon had accumulated more than $200 million of profits but almost $160 million of cash had cumulatively flowed out of the company over the same period. And as a result of an endless run of acquisitions, Slaters had paid just $20 million of tax since floating.

The concern was that Slaters was a large-scale "roll-up", in which a company buys one business after another, relying on the cash flow of the acquisitions to fund the ever increasing shopping list. The model works until its financing capacity is strained and the cash it generates can no longer sustain its existing funding. The size, scale and intricacy of the Quindell acquisition added to the complexity.

But now Slater & Gordon was going cap in hand to raise almost a billion dollars of new equity from share-market investors, many of them individuals, to buy a business with an unclear past in a foreign country.


Sceptics alerted

Slaters' remarkable rise and the Quindell deal had also attracted some unwelcome attention in the form of short sellers among global hedge funds.

Their interest was piqued by a controversial report by a lone researcher nicknamed "Gotham City", who openly questioned Quindell's accounting, its acquisitions and the aggressive take-up of hearing loss cases. Quindell took legal action against Gotham, the alias for the elusive New York analyst Daniel Yu, but his findings raised enough issues to attract the attention of hedge funds such as Tiger Global Management, which bet big on Quindell's demise.

The Slaters acquisition in effect rescued Quindell but it also meant the hedge funds could have another crack at shorting what they believed to be an accounting illusion.

Sydney- and New York-based hedge fund VGI Partners, the $600 million fund founded by Rob Luciano, had been sceptical of Slater & Gordon for months and already taken a short position in November, months before the Quindell deal had been conceived.

Doug Tynan, a partner at VGI and former auditor at Brisbane-based accounting firm BDO, had kept a close watch on the company since auditing the books of law firm Trilby Misso, which Slaters acquired in 2010.

He believed he had an understanding of how Slater & Gordon had effectively "bought earnings growth and accounted for 'work in progress' " – legal work the no-win/no-fee firm had conducted but not completed. Tynan and the VGI analysts spent hours unpicking the law firm's audited financial statements, which they summarised in a private report.

Among their findings was an unexplained "variance" in the cash flow reconciliation in the years 2013 and 2014 running into the tens of millions of dollars. The process of picking apart items presented in the income statement and balance sheet to recreate the numbers of the cash flow statement didn't seem to add up. Receipts and payments were out by about $80 million to $90 million.


VGI sought an explanation from broker analysts but none was forthcoming. Slaters' chief financial officer, Wayne Brown, appeared to dismiss the variances as tax quirks, telling the Financial Times that the mismatch was largely explained by a "gross up" of sales tax.

Lone voice of a dissenter

In the middle of the capital raising, on April 14 of 2015, a broker dissented. Bank of America Merrill (BAML) Lynch's young analyst Nadya Nilova published an explosive report that questioned the price agreed by Slaters for Quindell and its ability to generate growth in its existing businesses.

Nilova, in her mid-20s, was relatively new to the role but, with the apparent backing of her senior supervisors, showed courage and risked the ire of her larger clients to break with consensus, particularly part-way through a capital raising.

Quindell had put its professional services division together through 20 acquisitions over a three-year period from 2011 for an outlay of £265 million – but Slaters forked out £637 million. Nilova also questioned the extent to which Slaters had generated organic growth in earnings compared with profits that had effectively been bought through deals.

Grech and his finance team had long since counted on the support of the sell-side analysts such as Nilova at BAML.

Slaters had been among the best-performing shares in the ASX 200 and become a favourite among small-cap fund managers such as Colonial First State and Wilson Asset Management. It was a high-growth emerging company generating high returns for buy-side clients (fund mangers) and feeding the street with potentially lucrative investment banking work.

As Slaters had grown in size, it had attracted the attention of the big brokers such as BAML, Deutsche and UBS, which began to follow and rate the stock, naturally assigning "buy" ratings.


The BAML April 14 report was unusually blunt in an analyst community that has few reasons to question company management. Rival brokers dismissed Nadya Nilova's work as that of an inexperienced analyst possibly out to sabotage a capital raising.

The reaction among the big buy-side clients was ferocious, and expensive for BAML. The biggest buy-side funds write the biggest orders and sources said they were openly hostile towards BAML, threatening to boycott the bank over its research.

Nilova resigned from BAML in July to join market trading firm Optiver.

As the capital raising spluttered along, the share price lost momentum which became a source of angst for retail shareholders.

The share price fall from $7.85 to $6.41 meant institutions were able to sell their rights for $1.13, compared with 1¢ for retail investors. The deal was done and the funds were in the door but there was a sense of dissatisfaction among retail clients. But the real drama hadn't even begun.

Scent of an ASIC investigation

Slater & Gordon invited its large and extended family of institutional investors for a briefing on June 24 to explain its transformational British deal in greater detail.

Investors who had tipped into the Slater & Gordon raising hadn't yet made money but they were hopeful the briefing would bring good news and perhaps an earnings upgrade. The share register was in a state of flux; many loyal small-cap funds were obliged to sell what had officially become a large-cap stock, while larger funds still had to get their heads around a relatively small but complex firm.


But on the morning of June 24 Andrew Grech had an unwelcome distraction. The Australian Financial Review reported that ASIC had taken an interest in events at Slater & Gordon and begun investigating the firm and its auditor, Pitcher Partners.

Slaters and Pitcher Partners denied the report emphatically. An ASX statement was prepared and published before market open to formally dismiss reports of an ASIC probe.

At 11am a larger than usual group of investors and analysts gathered at Citigroup's plush offices on Park Street for the briefing.

Ken Fowlie, the long-term Slater & Gordon litigator who had taken down giant corporates such as James Hardie and British American Tobacco in class actions, was suffering from the flu – a result of the constant commute between Britain and Australia. (Fowlie, who at one stage had a bigger stake in Slater & Gordon than Grech and a $36 million fortune from its sharemarket rise, had been dispatched to Britain to oversee the Quindell acquisition.)

But he painstakingly walked investors through the new businesses that Slater had bought and explained how they would eventually make money.

Slaters was well advanced in "industrialising" the personal injury claims process and was not made up of "rock star partners", he said.

Grech, meanwhile, talked up the merits of the "once in a generation opportunity" to grow its British market share, and upgraded its full-year revenue target from $500 million to $520 million.

"Maybe this sounds like hubris, but those that know us well, know us not to be arrogant but to take a detailed, studied view," Grech said in defiance of the doubters.


After the break, Slaters screened a brief video of the faces and places that constitute Quindell before turning off the internet video stream to take questions from the audience.

Questions were tough and showed a divergence in views. The analysts and long-only investors had their eyes on reported pro-forma numbers but the short sellers and sceptics were focused on the cash flows. The metrics told divergent stories. Tension in the room was rising and, for the first time in seven years, Slaters was on the defensive.

The final question was asked by Totus Capital's Ben McGarry – a former UBS analyst – who wanted to understand how Slaters had calculated the 30 per cent earnings increase to the 2016 accounts which, it was said, the deal would deliver. This had been a selling point that won over analysts.

But neither Grech, Fowlie nor CFO Wayne Brown could answer it. So they called on an in-house guru seated at the back of the room to speak up. This was Matt Jackson, Slater & Gordon's numbers man and the apparent mastermind behind its financial successes.

It was a comical moment and one that McGarry believed was proof that something was amiss. Slaters' senior executives appeared to not have a grasp of the numbers.

S & G drops a bombshell

Shares in Slater & Gordon fell 5 per cent on the day but the week was to get much worse. The headlines and denials about an ASIC probe had created mild concern among investors. But news out of Britain that ASIC's equivalent, the Financial Conduct Authority, had launched a probe into Quindell unsettled the market, sending Slaters stock down 17 per cent. For the first time, the broader sharemarket had grasped the potential severity of Slaters' problems.

The following Monday morning – June 29 – Slater & Gordon dropped a bombshell.


In a carefully worded statement to the stock exchange, Slater & Gordon admitted that it was indeed the subject of a probe by the ASIC. It would co-operate fully and had hired big-four auditor Ernst & Young to assist with ASIC's queries. And there was more.

In its initial preparations, EY had already found something. Slaters had uncovered an accounting error relating to its cash flows which overstated both cash receipts and payments and tallied $90 million over three years. It was a result, the company said, of tax miscalculations relating to its first British acquisition in 2013.

The shares tanked, plunging a neat 25 per cent.

The embarrassing accounting error and the shock market reaction meant that Grech went into full crisis mode.

The board, led by Skippen, formed a subcommittee to report to the audit and tax committees, as he sought to ensure management stayed focused. More external advisers were brought in, including long-term legal ally Leon Zwier of Arnold Bloch Lebler.

This crisis had more than a touch of irony. Slater & Gordon had a reputation for tenaciously pursuing the heads of large companies for sharemarket misdemeanours. They were the masters of pursuing management on the basis of public comments. Now that Grech and his executives were potential targets of a class action, they had to watch every word carefully, yet still attempt to fight and win the communications war.

In the following days, Grech and Skippen hit the phones to explain to shareholders and analysts that the ASIC review was unlikely to find anything more – they'd had their processes reviewed twice by the corporate watchdog already. The law firm's banks were not concerned and there were no covenants tied to the sharemarket value of the company, they said.

But the sell-off had resulted in large losses for shareholders, who began to re-evaluate their faith in Grech.


With ASIC looking into the company's accounts, investors couldn't be sure if this was a one-off error or something more systemic.

Grech v the short sellers

Later on June 29, VGI Partners went public with its "concerns" about Slater & Gordon.

The hedge fund's partner, Doug Tynan, told the Financial Review the mistakes were "highly unusual" and paraphrased a Warren Buffett quote, warning of "more cockroaches in the kitchen" of Slater & Gordon. The VGI report prepared in April said there were several "red flags" that could be found in its books as it questioned the accounting and the acquisition-led strategy that had resulted in the firm's spectacular rise in earnings.

This was now a very public battle between Grech and the short sellers.

Two large investors that had had their end-of-year numbers hurt by the plunging share price blamed the hedge funds – which, they said, were guilty of market manipulation – and called on ASIC to investigate VGI.

Fidelity, the enormous US funds management giant, had been buying Slaters stock aggressively after the investor day share price fall and had gone "substantial", that is, acquired a holding above 5 per cent. The June 30 share price crash meant they had dusted tens of millions in three brutal trading sessions.

The fund's Sydney-based analyst, Emma Goodsell, commissioned New York forensic accountant CFRA for a second opinion on Slaters' accounting.


On July 11, CFRA delivered its report to Fidelity detailing concerns about "elevated work in progress and accelerated acquisitions". The acquired "work in progress", it theorised, may have served to boost its cash receipts from customers.

Fidelity cut its stake in the company with London-based Asian-opportunities funds manager Nitin Bajaj telling investors he had acted in "the interest of prudence".

The Slaters mishap had wrecked the performance numbers of portfolio managers and led to some uncomfortable conversations among analysts and their bosses over why they should keep faith with the law firm.

Others remained defiant. Wilson HTM analyst George Gabriel emerged as a champion of Slaters' cause, urging clients to load up on shares as he set about dismantling the "short case" for Slaters.

Andrew Grech and Slaters management faced one of their trickiest episodes ever. First, they had to contend with a corporate watchdog trawling through their books. Second, they had to deliver a clean set of full year financial results with the added scrutiny of their accountants and long-standing auditor Pitcher Partners by regulators and investors. And third, they had to convince investors the $1.3 billion paid to Quindell was money well spent.

But if anyone had the discipline and determination to see Slaters through extreme adversity it was Andrew Grech. He'd rescued the firm before and would be asked to roll up his sleeves to do so again. This time, however, he had to win over an unruly sharemarket to save his firm and his fortune.

Nasty numbers

After the shock of a by now near 40 per cent share price fall, Andrew Grech had to repair the damaged relationship with investors and allay the mounting concerns of the regulator.


Wayne Brown, the CFO who'd been part of the senior management team for more than 12 years, set about responding to ASIC's questions about its accounting procedures.

The ASIC review was being led by its head of audit, Doug Niven, a former Deloitte partner with decades of experience, and appeared determined to turn over every stone before closing the file on Slater & Gordon.

On Thursday, August 6, Quindell released its long overdue assessment of the performance of the businesses it sold to Slater & Gordon earlier in the year. It showed a horrific set of numbers: Quindell's professional services division had lost £60 million in 2013 and £83 million in 2014.

While Slaters was quick to point out that the "cash accounting" method may have exaggerated the weak state of Quindell's operation, the numbers did demonstrate the full spectrum of accounting possibilities for the same business during the same period and flagged the challenges of Quindell to generate cash.

Slaters had to focus on presenting their own financial results, on which Pitcher Partners would need to rule off. They took as much time as possible, switching the filing date to the final Friday of August.

When the numbers came, the sharemarket initially welcomed the $622 million full-year revenue, pushing the share price up by 20 per cent.

A defiant Grech thanked the shareholders and staff who kept faith with the company through a difficult time while lamenting all the "ink spilt" in commentating on the merits of the Quindell deal.

ASIC's scrutiny seemed to encourage three new accounting policies and the introduction of a new profit measure – EBITDAW (earnings before interest, tax, depreciation and changes in "work in progress") to provide a cleaner gauge of earnings.


A rally in Slaters shares was quickly overwhelmed with more selling.

Over the weekend, analysts poured over the numbers and found several aspects difficult to reconcile. CLSA analyst Oscar Oberg openly raised questions about the calculations of net debt. The numbers presented were also "unaudited", which was in keeping with previous years but, given the heightened concerns, meant they weren't taken on face value.

Meanwhile, the ASIC probe continued with little by way of detail from either the company or the regulator despite constant rumblings that the review was close to completion.

With some breathing space before the next major date in the corporate calendar, the October annual general meeting, Slaters' investor relations team could devote more time to winning back the trust of investors.

Testy annual meeting

The week of the Rugby World Cup Final it invited some analysts and investors to Britain to see its operations first hand. A few weeks prior, CLSA had taken a smaller group to the UK but had been denied management face-time.

Among the issues to come out of that trip was the scent of sweeping reform. Slaters competitors had grown increasingly concerned about major changes to the regulatory environment that would transform a personal injury claims industry that was costing insurers billons and appeared out of control compared with other countries.

Slaters management repeatedly downplayed the risks of further imminent changes (to personal injury law), telling shareholders just a few days before that its 2016 earnings were unlikely to be affected.


The remaining bullish analysts banged the drum. Wilson's George Gabriel published a series of upbeat notes telling investors that at the current depressed price, the new Quindell business (rebranded Slater & Gordon Solutions) was a "free option". Macquarie, which had co-underwritten the capital raising, published detailed explanations showing the bearish case against Slaters could be dismissed.

In the lead-up to the AGM, it seemed like Slaters was winning back investor confidence. Shares in the stock gained almost 20 per cent before it announced CFO Brown was leaving the company. But they fell 3.8 per cent when it was revealed Bryce Houghton, the former Navitas CFO, had taken the role.

With six weeks remaining of the annus horribilis for Slater & Gordon, the board made the final preparations for the law firm's annual general meeting.

On November 30, a scorching Friday in Sydney, shareholders – some in thongs and singlets – packed into the conference room on the fourth floor of The Hilton.

As Skippen went through the formalities of the meeting, Slaters shares were falling again. An ASX statement from the company said it would hit its full-year earnings target but cash flows would be negative in the first half of the year.

Questions from the floor ran well over an hour as investors urged the company to do something about the short sellers decimating their investment. It's a view shared by Skippen, who blamed "mischievous actions, innuendo and inaccurate information in the market place" for the share price plunge, urging shareholders to take up the issue with regulators.

That morning Grech had lamented in the media the role short sellers had played, regretting that VGI didn't say anything that would allow him to sue them for a new house. His luxurious Kew mansion had been put up for sale in August.

But at the AGM he called for calm, suggesting the best way to beat short sellers was to deliver performance. Another individual shareholder pinned the blame on the large institutional shareholders of Slater & Gordon which lent out their shares for a small fee, allowing short sellers to borrow stock.


But at the meeting it was apparent the problems at Slaters extended well beyond short sellers.

One institutional analyst representing New Zealand-based fund manager Milford had a simple explanation for why the shares were falling: the cash flows were disturbingly weak.

Cash flows were the subject of the analyst reports that questioned how Slaters would turn a $40 million cash flow hole into a $205 million profit in six months and whether the firm's banks would tighten the screws. The law firm's net debt of $600 million was now looking dangerously high and, if the cash didn't start to flow, it could threaten their debt covenants.

CLSA calculated that Slaters would need to generate more cash from January to June then it had in the previous six years combined.

The day of the AGM was another brutal one for Slaters stock, with the share price falling 12 per cent as shareholders began to seriously question the firm's long-term solvency. The selling accelerated on Tuesday as shares declined by a further 20 per cent to $2.15.

Compensation shock

With the weight of the world against him, Grech could have done with some good news. But he was about to get the nastiest of surprises at the worst possible time.

On the evening of Wednesday, November 25, British chancellor George Osborne delivered his Autumn Statement to the House of Commons, in which he included a series of reforms aimed at combating what the insurers had told him was a rampant compensation culture.


The industrialisation of personal injury claims had gone a little too far in his mind, Motor vehicle accidents had fallen by 30 per cent in 10 years, yet injury claims continued to rise as the industry aggressively sought out potential claimants through every possible channel.

Osborne intended to remove the right to obtain general damages for minor injuries, such as bruising, and increase the threshold for small claims to cover a greater volume of injuries in the small-claims court. The winners would be motorists, whose insurance premiums, Osborne said, would fall. Lawyers, however, said the rights of injured parties would be compromised.

The reforms had the potential to adversely change the game for what had become Slaters' biggest line of business – fast-track accident claims.

That the insurers had the ear of the Conservative government was well known but few believed reforms would come so soon. This was a major problem for Grech.

Just before midday, Slaters published an announcement. It triggered a harrowing 50 per cent fall in the share price. The volume of stock traded accelerated to almost 20 times the average daily turnover. By Friday, the company was under siege. Analysts cut their price targets dramatically, pushing the stock below 60¢ and below the $1.00 float of price of 2007 for the first time.

Ironically, short sellers began buying shares, but not out of choice. The prime brokers that had produced shares for them to borrow were recalling stock en masse to deliver to institutions and margin lenders which were themselves dumping stock.

Anxious staff – some who had taken out loans to buy shares – were seeing the fortunes and their futures being savaged by the market which was meant to make them rich.

Later in the day, Grech hastily called senior staff to allay the panic that had gripped the upper echelons of his company.


His measured message was that Slaters was not new to adversity nor was it new to swift regulatory reform. They would not only survive but thrive in the new British market they had entered.

Slaters' near 90 per cent share price collapse became national news. The plunge in value of a firm that fought for injured workers and took on the big end of town was met with a mixture of concern and delight.

On Monday, December 7, Slaters released another statement to the ASX, restating its confidence that it would hit its full-year guidance target – a strong message that, despite doubts from outside, there was confidence from within. Grech had long since given up trying to convince shareholders to trust him. Now his message was to look at the history of his firm in surviving and thriving in adversity. What was bad for the hurt, injured and hard-done-by wasn't always bad for business.

It was a defiant statement from the company in the face of overwhelming doubt and it seemed to work, sparking a 30 per cent share price rally.

But Slaters would shock the market again. On Thursday, December 17, the company dumped its earnings guidance, citing "lower than expected trading results" in Britain. With its new CFO, Bryce Houghton, Slaters would review its forecasting methods.

It was a statement that left investors flabbergasted, the corporate watchdog seething and Slaters' long-time class-action rivals reviewing the outlook.

ACA Lawyers principal Bruce Clarke​ said he was investigating a shareholder class action against Slater & Gordon for potentially misleading investors over the Quindell capital raising and the cancelled profit forecast.

The credibility of the company appeared to be in tatters and its nervous bankers were no doubt on high alert. Its board, which had displayed infinite faith in Grech, was on notice to act as Slaters' share price collapsed again to 83¢, a 90 per cent decline from its all-time peak in April.

How a listed company and law firm could collapse in value so spectacularly would itself make for a Harvard Business School case study. It's an extraordinary set of events playing out between bankers, analysts and fund managers in board rooms, conference halls and meeting rooms. And it raises the spectre of the short seller – scourge of nascent public companies.

But ultimately, the story of Slater & Gordon is a story of trust. Whether it's placed in lawyers, accountants, analysts or investors, too much of it can be fatal. January will be interesting.