Economy

MPs savage rotten state of Carillion

MPs savage rotten state of Carillion”

MPs investigating the collapse of Carillion have today published their final report into the company's demise with the 100-page report lambasting its board for a "rotten corporate culture" that led to the company's "devastating and hugely costly failure".

"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".

It concluded: "It can grasp the initiative with an ambitious and wide-ranging set of reforms that reset our systems of corporate accountability in the long-term public interest".

Former finance director Richard Adam, who was named in the MPs" report as the "architect of Carillion's aggressive accounting policies" said in a statement: "Despite retiring over a year before Carillion went into insolvency, I am deeply saddened by the events that have since overtaken the company.

Reeves said: "The collapse of Carillion exposed awful failures of regulation".

Carillion collapsed in January and employed 43,000 people, about 20,000 of them in the UK.

Following the collapse of the firm, £150m was made available by the government to support the insolvency in 2017-18, as well as an unquantified contingent liability to indemnify the Official Receiver, and public services have been largely unaffected by the firm's closure, with some provision, such as construction of the HS2 rail lines, moving to partner firms in joint ventures and other aspects, such as prison maintenance, being taken in house by government.

"The company's delusional directors drove Carillion off a cliff and then tried to blame everyone but themselves", said Rachel Reeves MP, chair of the BEIS Committee.

She accused the board of a "relentless dash for cash" by taking on low-margin contracts that didn't make money. They are guilty of failing to tackle the crisis at Carillion, failing to insist the company paint a true picture of its crippling financial problems.

The MPs say that "the mystery is not that it collapsed, but that it lasted so long", adding that "even as the company very publicly began to unravel, the board was concerned with increasing and protecting generous executive bonuses".

What are the auditors accused of?

Deloitte received £10mln to be Carillion's internal auditor but was either "unable or unwilling" to identify financial failings or "too readily ignored them", they said.

Its auditors and consultants also came under fire: Deloitte, KPMG, PWC and EY are described as a "cosy club incapable of providing the degree of independent challenge needed".

Ernst & Young said it was "extremely disappointed that despite all efforts the business was not rescued" and Deloitte said it was "disappointed with the conclusions of the committees".

ICAEW chief Izza told BBC's Today programme the parliamentary report provided an opportunity to "think again about what we do to fix this". "We sought stronger and clearer powers on scheme funding from DWP and we are working with the government on how to implement the changes in the white paper, alongside our wider changes to how we regulate".

Two major NHS hospitals halted halfway through building were a outcome of "rotten corporate culture" at the now-collapsed construction firm Carillion, a government-backed report has claimed.

The document said: "When swathes of public services are affected, close monitoring of exposure to risks would seem essential". Crown Representatives provide an interface and single point of focus between the government and key suppliers but the report slammed them as "semi-professional and part-time", and failing to provide sufficient warning of risks in a key strategic supplier. "British industry is too important to be left in the hands of the likes of the shysters at the top of Carillion", he added. Measures taken to improve the business environment, such as the code for prompt payment of suppliers, have proved "wholly ineffective".

Martin Hunter, principal at consultancy group Xafinity Punter Southall, said much of the activity reviewed in the select committees' report was from a few years ago, in particular the time of the 2008 and 2011 scheme valuations.



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