BAKER TILLY, the accountant, refused to sign off the accounts of Crown Corporation, the company now known as Langbar that is the subject of a £365m fraud investigation.

Baker Tilly resigned as auditor last year after becoming concerned at the wide-ranging role of Abraham “Avi” Arad, the Argentine-born Israeli who arranged the initial £150m backing for Crown in 2003 and set up its biggest deals.

Arad, a terrorism expert and former adviser to the Israeli government, invested in Crown via Lambert Financial, an investment vehicle that runs funds for 2,000 Jewish pensioners in Israel, Argentina and Germany.

Lambert initially held a 59% stake in Crown, which was reputed to be the largest cash shell on the Alternative Investment Market (AIM). However, nine days ago, an inquiry by Kroll, the corporate investigations firm, found the company appeared to have been the victim of a serious fraud.

Kroll could find no trace of the company’s £365m of cash deposits, nor evidence that it was ever entitled to such sums.

Stuart Pearson, Langbar’s chief executive, has asked the Serious Fraud Office to investigate.

Jean-Pierre Regli, Crown’s co-founder and treasurer, said Baker Tilly had refused to approve the firm’s accounts and had resigned. “They were a little bit concerned about the involvement of the major shareholder in the politics of the company because (Arad and Lambert) were advisers, they brought us the Argentinian contracts, they were bringing us to Russia. (Baker Tilly) did not feel comfortable with this relationship.”

The partner responsible for Crown at Baker Tilly was Chilton Taylor, a member of AIM’s advisory board. He could not be reached for comment.

Faced with the loss of its auditor, Crown turned to Arad for help. He suggested a small Spanish firm, Gironella Velasco, which has offices in Barcelona, where Arad has a home.

“I don’t know who told (Arad) to find an auditor,” said Regli. “We did some independent research on (Gironella Velasco). It was a very reputable firm.”

A former adviser to Crown said a dispute over the level of Baker Tilly’s fees also contributed to its resignation.

This weekend, Arad said he had asked Interpol to investigate. “We are very, very damaged,” he said. “I don’t understand how we arrived at this situation. Everything has been done (properly) from our side. We are not experts in financing, but we are correct people.”

Separately, it has emerged that shareholders are considering appointing David Buchler, the insolvency specialist who worked on the collapse of Robert Maxwell’s media empire.

Buchler’s appointment to replace Pearson has been proposed by Duncan Soukup of Acquisitor Holdings, a firm that invested about £350,000 in Langbar in the final weeks before trading in its shares was suspended in October.

Soukup, who took BaltimoreTechnologies private last year, wants an independent figure to examine what happened at Langbar. Buchler is also chairman of Baltimore. He told shareholders last week: “The directors don’t want to fight. They realise there’s a major problem here.”

Soukup said:“If someone's got a better idea, we'll support it but I haven't heard of any.”

However, some leading shareholders are sceptical about finding any substantial assets.

Floated in October 2003, Crown pursued a wide variety of possible investments in Argentina, Canada, Russia, eastern Europe, Spain and Portugal. However, little of substance emerged. Instead, this year it bought Langbar Capital, Pearson’s small corporate-finance boutique. Pearson took over as chief executive and renamed the company at the same time.

Pearson delayed joining Crown until June when he received assurances that it had substantial cash deposits. This came in the form of the accounts audited by Gironella Velasco.

However, the existence of Crown’s assets almost immediately became subject to doubt once again, ultimately leading to the appointment of Kroll.

Regli has refused to sign the most recent statements on Langbar’s finances. Regli, still a director, said Pearson had refused him access to information on the company’s bank accounts. He said he was planning to resign when the alleged fraud was uncovered.

“I could not subscribe to the fact that the money never was there because the money was there,” said Regli. “I was in Brazil with Keith Smith (of Nabarro Wells, Crown’s financial adviser). We met officers of Banco do Brasil. We saw the money was there.”

Regli was also unhappy about Langbar’s earlier statements about a supposed transfer of $294m (£169m) to ABN Amro in the Netherlands. “As chief financial officer, I never signed account-opening forms with ABN Amro. I don’t know who did, but I did not. Stuart Pearson went to Brazil with Avi Arad and he came back with these funny documents.”

ABN Amro has told Langbar that the documentation it relied on to make its reassuring statements in September is bogus.

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