Police have been called in following an allegation that an employee at a Norwich book wholesaler defrauded the company of �1.9m

Bertrams, which is based at the Broadland Business Park, in Thorpe St Andrew, contacted police after it believed an employee 'fraudulently controlled' a customer account earlier this year.

Details of the investigation emerged after Bertrams' parent company Smiths News plc released its latest financial results.

However, no details of the member of staff have been released.

Bertrams Managing director Graeme Underhill confirmed the allegations were against an employee based in Norwich, where more than 400 people are employed.

'There was a fraud case against us and that is now in the hands of the police,' Mr Underhill said. 'We were insured for that case. We received that money and I cannot say any more about it because we have handed the details to the police and it is a potential criminal investigation. We have given them a statement.

'It was a lot of money and it shocked everybody here in Norwich when we found out.'

In its preliminary results, Smiths PLC said it had confirmation from its insurers that the loss was fully recoverable, after a deduction of �65,000.

In an interim statement to the City, the company said: 'After the period end, we identified a customer account that had been fraudulently controlled by an employee, who has subsequently been dismissed. The total account balance is �1.9m and, after obtaining external advice, we expect the loss to be fully recoverable under our insurance policies.

'While investigations are on-going, at this stage we remain confident the fraud was contained to a single employee and that there is no further financial exposure in relation to this issue.'

A Norfolk Constabulary spokesman confirmed that it had received an allegation of fraud from a business based at Broadland Business Park.

Meanwhile, the results revealed that cuts to public library budgets have hit the company, which has seen a dip in sales and pre-tax profits in its latest results.

While its owner, Smiths News PLC, posted a 10.3pc jump in profits, Bertrams' sales dropped by 3.9pc from last year to �131.8m and it recorded an 11.8pc drop in pre-tax profits to �22.4m this year.

Bertrams was bought by newspaper and magazine distributor Smiths News in March 2009 after the collapse of its former owner Woolworths.

The results, which were announced to the city last week, also note that Bertrams has won contracts for online business with Tesco and Sainsbury's and international sales grew by 14pc, reflecting its strategy of expanding into international markets.

The firm trades with 86 countries and the announcement said there was particularly strong growth in the Far East and Australasia.

But its like-for-like library sales were down 21pc following spending cuts announced in autumn 2010.

The announcement said: 'We expect the public library market to remain challenging, but recent order levels suggest the position is now stabilising.'