Directors of collapsed Carillion banned by accounting watchdog
A pair of Carillion finance directors in post shortly before its collapse have been fined and banned by the accounting industry watchdog, bringing the curtain down on eight years of regulatory probes into one of the most notorious corporate failures in British history.
Richard Adam – who served as the now-extinct contracting company’s finance director for nine years until 2016 – and his successor Zafar Khan were found by the Financial Reporting Council (FRC) to have “acted recklessly” and without integrity when preparing Carillion’s financial updates.
Carillion’s collapse eight years ago is still regarded as one of the UK’s most spectacular. The London-listed outsourcing firm was one of the UK government’s favourite contractors, overseeing the construction of major state-backed infrastructure like bridges and roads.
But drowning in nearly £7bn of arrears, it was forced into compulsory liquidation in 2018, leading to over 3,000 direct job losses and a wake of financial destruction for its suppliers and taxpayers.
The enormous ramifications spawned a wave of high-profile investigations and inquiries, which included a slew of fines and bans for its directors and raised the prospect of a break-up of the Big Four accountancy firms.
The FRC’s latest ruling concludes the last active probe into malpractice at the company.
The watchdog banned Adam from the audit industry for 15 years and fined him more than half a million pounds. Khan was handed a 10-year ban, and fined him £225,000. Both fines were commuted to £222,019 and £138,960 respectively, on the grounds that both directors had already received hefty reprimands from the Financial Conduct Authority (FCA).
Carillion accountants also fined
Earlier this year, the FCA ruled Khan and Adam were aware of the serious financial troubles their employer was in, and played a role in preparing “misleading” statements that manipulated the market.
The FRC said both directors had accepted the rulings, acknowledging the role they played in several areas of Carillion’s business that had affected the company’s performance in the years leading up to its collapse.
As part of the same FRC probe, three unnamed ‘senior accountants’ were also judged to have acted recklessly, and handed fines of £40,000 alongside bans of between two and eight years.
At the time of its collapse, Carillion was overseeing several key infrastructure projects and boasted an annual turnover north of £5bn. The thorny redevelopment of Royal Liverpool University Hospital and the major revamp of Battersea Power Station helped push the heavily indebted company over the edge. It was also contracted on several projects being built for the 2022 World Cup in Qatar.
The FRC judged Adam and Khan to have given “an unrealistic view of the financial position and performance” of its contracted projects, with the caveat that neither was found to have acted “dishonestly or deliberately”.
“It is critical that any individual who is responsible for preparing accurate financial information, whatever their level of seniority, undertakes their duties with integrity,” Penrose Foss, the executive director of enforcement at the FRC, said.
“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.”