The finance director of Alfred McAlpine resigned this week after the announcement of a three-year fraud in the slate division, which cost the group £56m before tax.

Ian Grice, the chief executive, said Dominic Lavalle, the finance director, was not directly implicated but recognised the fraud had happened “on his watch”.

Chris Law, the slate managing director, has been dismissed, and five other senior executives have left the business.

McAlpine called in the North Wales police to investigate the issue, which Grice described as “systematic fraud by senior managers”. The company is also closing a quarry, which will lead to the loss of 166 jobs.

One company insider said: “The internal and external audit function report to the financial director, so while he was not directly implicated, he has to carry the can. The fraud and cover up were incredibly complex. The managing director of the business was an accountant by background.”

Alfred McAlpine’s share price fell 2% after the announcement on Monday and a further 4.1% to 473.25 on Tuesday, even though its three core businesses performed broadly in line with expectations of analysts.

The company’s pre-tax profit for 2006 dropped 24% to £18.7m after the fraud, which cost the company £22.9m in profit and sales, £27.1m in asset impairment and write-offs and £6m in professional fees.

Shareholders may put pressure on the company to sell the slate business, which is not expected to break even until 2008. City sources also suggested that McAlpine itself could become the target of a private equity bidder now its stock has been hit.