Financial irregularities concerning the Bermuda Bakery Ltd. have been the subject of a fraud investigation for weeks, Police confirmed yesterday.

And Police officials said an employee of the company was arrested December 1 upon arrival at the airport in connection with the matter, and subsequently released on Police bail, pending further investigation.

Police would not identify the man, but The Royal Gazette understands it was long-time financial controller Mr. Earl Fithian.

He is believed to have since left the country and Bakery chairman Mr. James Pearman said yesterday he did not expect Mr. Fithian to return.

One of the outstanding issues is nearly $35,000 overcharged to the company's tenants in the Belvedere Building that the bakery will now have to pay back.

The bakery Tuesday had trading of its shares suspended on the Bermuda Stock Exchange after launching an auditor's investigation into financial irregularities, and sacking Mr. Fithian.

The share register, according to Mr. Pearman, does not match the share register stubs. The actual numbers on share certificates appear to be at odds with the register's record.

There was also a question as to whether or not dividends had been paid out correctly.

Mr. Pearman said, "The register has been handled by the bakery, I guess since 1923, when the company was first started. I don't think it's ever been done professionally. You better believe it will be in future.'' The whole matter came to light after complaints from at least one of the company's tenants in the Belvedere Building with regard to the amount of rent, land tax and utility bills they were paying.

It turned out to be the tip of an iceberg, with wider enquiries leading to the suspension of trading.

Mr. Pearman said there had been a row between Mr. Fithian and the tenant over bill payments. The tenant wrote a letter of complaint to the directors of the bakery, and followed it up by calling in the Police and the Department of Immigration.

Mr. Fithian is believed to be American.

"The Police went to investigate this question of the land tax and took the opportunity to check with some other tenants and discovered that indeed they had received bills from Earl Fithian which were more than they should have been.

"At that stage the police went to our auditors. The preliminary report from the auditors indicates that the tenants have paid to the bakery an aggregate of just under $35,000 more than they should have.

"And we obviously are going to have to pay that back.'' With regard to Mr. Fithian, Mr. Pearman said that Immigration authorities were refusing to renew Mr. Fithian's work permit, and the company would not appeal the decision.

Mr. Pearman said Mr. Fithian had been with the company for at least 14 years and may have been in Bermuda for some 18 years.

He said, "He was a good business accountant.'' As to whether or not Mr. Fithian would be available to assist the company and authorities with the discrepancies, Mr. Pearman agreed it was his understanding his former employee had left the country.

When asked if he expected Mr. Fithian to return and help resolve the issues, Mr. Pearman said, "No, I don't for the following reasons. I am told by the Police that his car, with the keys in it, was parked at the airport by the dump. And, more particularly, his dog, which I think was an Alsatian type dog, was shipped out of the country last Thursday.

"If Earl was intending to return, he would not have shipped his dog out of Bermuda. It was his faithful companion.''