Saturday , August 18 2018
Home / Breaking News / Carillion: Bosses too busy ‘stuffing their mouths with gold’ – report | UK | News

Carillion: Bosses too busy ‘stuffing their mouths with gold’ – report | UK | News

A picture of the Carillion logo on a craneGETTY

MPs warn that Carillion could happen again and soon.

Accountancy giants who pocketed millions for advice but failed to spot or highlight it was “an unsustainable corporate time bomb” were also criticised.

City watchdogs and the Government were carpeted for being too weak to change the company’s ways or overhaul regulations, as the MPs warned: “Carillion could happen again, and soon.”

But the joint report by the House of Commons’ Business, and Work and Pensions committees focused its harshest words on board members who they accused of trying to shift blame onto “anyone or anything else they could find”.

The report insisted: “Corporate culture does not emerge overnight. The board was either negligently ignorant of the rotten culture at Carillion or complicit in it.”

The company was involved in some 450 UK public sector projects, from building hospitals and roads to providing school meals and armed forces accommodation when it went into liquidation in January.

The MPs summarised: “Carillion’s rise and spectacular fall was a story of recklessness, hubris and greed.”

“Its business model was a relentless dash for cash, driven by acquisitions, rising debt, expansion into new markets and exploitation of suppliers.”

“It presented accounts that misrepresented the reality, and increased its dividend every year, come what may.”

The Carillion logo spalttered with mudGETTY

The company was involved in some 450 UK public sector projects when it went into liquidation.

“Long-term obligations, such as adequately funding its pension schemes, were treated with contempt.”

“Even as the company very publicly began to unravel, the board was concerned with increasing and protecting generous executive bonuses.

“Carillion was unsustainable. The mystery is not that it collapsed, but that it lasted so long.”

Work and Pensions Committee chairman Frank Field added: “Same old story, same old greed: a board of directors too busy stuffing their mouths with gold to show any concern for the welfare of their workforce or their pensioners.”


Same old story, same old greed: a board of directors too busy stuffing their mouths with gold to show any concern for the welfare of their workforce

Work and Pensions Committee chairman Frank Field

“They rightly face investigation of their fitness to run a company again.”

“This is a disgraceful example of how much of our capitalism is allowed to operate, waved through by a cosy club of auditors.”

Carillion was the UK’s second largest construction company, with some 43,000 employees, including 19,000 in Britain.

More than 2,000 British staff have lost their jobs so far, and there are also consequences for some 30,000 suppliers and subcontractors who are owed some £2billion.

The pension fund has a black hole of around £2.6billion after long-term refusal by its “myopic” board to invest, said the MPs, and its 27,000 final salary scheme members will get reduced pensions.

Some projects were delayed and the Government has already allocated £150million of taxpayers’ money to keep essential services going.

Carillion went under with liabilities of nearly £7billion and just £29million in cash.

Yet it had only last year paid a record £79million dividend to shareholders, and undeserved large performance bonuses to highly paid executives, after 2016 accounts painted “a rosy picture” thanks to “aggressive accounting policies”, said the report.

Last July it issued the first of two profit warnings, prompting investors to start deserting, before it finally collapsed.

The Carillion logo on the side of a craneGETTY

Last year Carillion paid a £79million dividend to shareholders, and undeserved performance bonuses.

The MPs said board members “presented to us as self-pitying victims of a maelstrom of coincidental and unforeseeable mishaps”.

But in fact: “Carillion’s board are both responsible and culpable for the company’s failure.”

Non-executive directors had failed to challenge executives, while the firm’s policy of paying suppliers in less than 120 days only if they paid a fee had effectively allowed it to borrow yet more, “under the radar”.

The Financial Reporting Council and the Pensions Regulator watchdogs displayed “feebleness and timidity”, having identified concerns as long ago as 2015 and threatened action but never followed through.

The Deloitte logo on the building of the Toronto headquartersGETTY

Deloitte, EY and PwC make up the UK’s

Accountants KMPG received £29million to audit Carillion accounts over its 19-year lifetime but always “complacently signed off the directors’ increasingly fantastical figures”, the report continued.

Deloitte, EY and PwC which make up the UK’s “Big Four” audit and professional services firms also advised Carillion over the years.

The MPs want competition authorities to consider breaking up the quartet, saying KPMG’s failures on Carillion were symptomatic “of a market which works for the Big Four firms but fails the wider economy”.

Business committee chairman Rachel Reeves accused Carillion’s directors of “effectively pressing the self-destruct button on the company.

“However, the auditors should also be in the dock for this catastrophic crash.”

KPMG said it believed it had done its audit “appropriately” and that checking large and complex businesses “involves many judgments”, but it would continue to cooperate with inquiries.

Carillion’s former finance director Richard Adam rejected MPs’ criticism.

They said he designed Carillion’s “aggressive accounting policies”, and that when he quit down in December 2016 after nine years and then last year sold all his shares for £776,000 just before values plunged, it was “the actions of a man who knew exactly where the company was heading once it was no longer propped up by his accounting tricks”.

Mr Adam 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 compan

“The reasons for the collapse are clearly complex; however, I reject the unwarranted conclusions the committees have reached concerning my role at the company

“I have objected to the committees about quotes that they have misattributed to me. I look forward to contributing to the due process and conclusion of the various investigations that are still ongoing.”


Source link

Check Also

£3bn ship will show Russians our might | UK | News

HMS Elizabeth will fly the flag for the UK by visiting New York (Image: ANDREW …

Leave a Reply

Your email address will not be published. Required fields are marked *