Carillion condemned by MPs

Galtero Lara
May 16, 2018

KPMG, PwC, Deloitte and EY come in for severe criticism from MPs on the business and pensions committees, who conducted a joint inquiry into Carillion's demise.

"The sorry saga of Carillion is further evidence that the Big Four accountancy firms are prioritising their own profits ahead of good governance at the companies they are supposed to be putting under the microscope".

THE FORMER employer of hundreds of workers at Queen Alexandra Hospital has been attacked by government committees for lacking decisiveness and bravery to tackle failures in corporate regulation. The MPs asked that it should be considered if they should be disqualified from holding company directorships.

When the construction and outsourcing firm Carillion hurtled headlong into insolvency in January, it was one of the biggest corporate collapses ever seen in Britain. The construction company "employed 43,000 people, about 20,000 of them in the United Kingdom, thousands of whom have lost their jobs", says the BBC.

It also held numerous public contracts, such as the maintenance of schools and prisons, all of which had to be brought under government control, at a cost to the taxpayer.

Rachel Reeves, chair of the BEIS Committee, told BBC Radio 4's Today programme: "The directors are culpable for the mess that Carillion got into and drove the company off a cliff".

The report claims the firm's fall from grace was down to the board's "recklessness, hubris and greed", together with a business model which was nothing more than "a relentless dash for cash, driven by acquisitions, rising debt and exploitation of suppliers" and at best questionable accounting practices that "misrepresented the reality of the business".

I have objected to the committees about quotes that they have misattributed to me. "They seemed nearly surprised to be in front of us", she said.

Ex Carillion directors Richard Adam, Richard Howson and Philip Green were personally criticised.

They said the directors had presented themselves during parliamentary hearings as "self-pitying victims" of "unforeseeable mishaps".

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What are the auditors accused of?

The under-fire FRC is now investigating KPMG's handling of Carillion's accounts.

The lack of competition in the audit market creates conflicts of interest at every turn, says the report.

Deloitte said it was "disappointed with the conclusions of the committees" while PwC defended its role as official receiver.

It led to the work on the Vaux site in Sunderland halting and the loss of thousands of jobs across the country.

Very few of those involved in the scandal escape censure, from the highly paid and "delusional" directors to the even more highly paid "cosy club" of auditors, the timid and ineffective regulators - and the government.

"Yet we have a semi-professional part-time system that does not provide the necessary degree of insight for government to manage risks".

Frank Field, chairman of the Work and Pensions Committee, said: 'A board of directors too busy stuffing their mouths with gold to show any concern for the welfare of their workforce or their pensioners. "British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion".

That's why we have recently announced a number of measures to support government suppliers - strengthening our commitment to prompt payment; protecting staff, businesses and small suppliers from irresponsible directors.

'We welcome the report from the joint select committee and will respond fully in due course'.

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