Carillion case closes with fines for ex-directors – Daily Business

Carillion worked on the Aberdeen by-pass

Two former finance directors of failed contractor Carillion have been fined a second time in a ruling that closes one of the UKs’ most far-reaching regulatory investigations into a UK corporate failure.

The Financial Reporting Council found Richard Adam and his successor Zafar Kto have “acted recklessly” when preparing the group’s financial statements in the years leading up to its demise in 2018. Neither was found to have behaved dishonestly or deliberately.

The regulator excluded Adam from the Institute of Chartered Accountants in England and Wales (ICAEW) for 15 years and fined him £550,000. However, this was cut to £222,019, given the Financial Conduct Authority (FCA) had fined him £232,830 earlier this year.

Khan was banned for 10 years and fined £225,000, though this was also reduced to £60,228 to take into account the £138,960 penalty he had previously received from the FCA.

Three other unnamed “senior accountants”, who were also accused of acting recklessly and without integrity, were each fined £40,000 and excluded for between two and eight years.

Carillion was involved in major infrastructure projects, including the Aberdeen bypass. It was overseeing the building of three hospitals and the infrastructure in Doha for the 2022 Qatar World Cup.

It had a turnover of £5 billion but failed with £7bn of liabilities, causig 3,000 job losses and affecting 30,000 businesses in its supply chain.

It was the largest corporate failure dealt with by the Official Receiver and cost the taxpayer more than £150 million.

Carillion collapsed with huge debts

Penrose Foss, executive counsel and executive director of Investigations and Enforcement at the FRC, said: “It is critical that any individual who is responsible for preparing accurate financial information, whatever their level of seniority, undertakes their duties with integrity. This is a fundamental requirement for every organisation.

“For a large publicly listed company, the consequences of failing to meet this requirement can be wide-ranging, affecting investors suppliers, employees, and the many communities served by an organisation across the UK and beyond.

“In this case, there was a sustained failure by Mr Adam in his role as group finance director, and by his successor Mr Khan over a shorter period, to act with integrity and ensure the accuracy of financial information relating to several business areas significant in Carillion’s financial reporting. The FRC has also secured admissions from three further individuals.

“The substantial sanctions imposed on these five individuals reflect the gravity of their failure to discharge their respective obligations to act with integrity in preparing financial information in the context of a large, listed company.”

KPMG, which was Carillion’s auditor for almost two decades before it went bust, was fined a total of £35m by the FRC for an array of failures in its work and for misleading the regulator during its investigation. 

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