Regulator: On Censoring Carillion Slowly! *

by Brian Bamford

YESTERDAY the Financial Conduct Authority (FCA) announced that it intends to take further action against the failed outsourcer Carillion for 'misleading' shareholders with false information.

In a warning notice published the watchdog said that a number of senior executives were 'knowingly concerned' in numerous breaches of market rules, and had acted 'recklessly'

The FCA, had in fact issued warning notices to the company that 'certain previous executive directors' over a series of breaches of the financial rules before the business collapsed into administration in 2018 with liabilities of almost £7bn after a series of financial troubles caught up with the outsourcing giant.

This included giving 'false or misleading signals as to the value of its shares'; 'failing to take reasonable care to ensure that its announcements were not misleading, false or deceptive' and 'failing to take reasonable steps to establish and maintain adequate procedures, systems and controls'.

Yet the FCA has so far failed to as yet issue 'a financial penalty' or comment on possible sanctions against the guilty men et al or to even name the directors involved, because the case is ongoing. The FCA insisted that the warning notices were not final decisions and individuals might appeal against any decisions to its upper tribunal.

Meanwhile, Pro. Prem Sikka from Sheffield university and a member of the House of Lords, told the Financial Times: 'There are 30,000 small and medium-sized enterprises who have lost money, thousands of employees who have lost jobs and pension rights, and the regulator has taken two years to do little or virtually nothing.'

Carillion, which had 43,00 employees including 19,000 in the UK, was liquidated in January 2018 with £29m in cash and £7bn in liabilities, leaving the goverment to step in and pick up the pieces to ensure delivery of vital services including school meals and cleaning hospitals and prisons.

An inquiry into the collapse carried out by MPs described the collapse as 'a story of recklessness, hubris and greed', and said that the firm’s business model was 'a relentless dash for cash'.

For the individuals in question, the FCA has recourse to a number of additional penalties.

Carillion and the individuals in question will have 14 days to make representations to the Regulatory Decision Committee (RDC).

At the same time we can name some of the culprits because MPs haave demanded that Richard Adam, a former finance director, Richard Howson, a former chief executive, and Philip Green, a former chairman be held to account for their role in the biggest UK corporate failure in recent years. It is also the case that the Financial Reporting Council is investigating the conduct of Mr. Adams as well as another former Carillion finance director, Zafar Khan.

During their tenure, the company ran up debts and sold assets so that it could continue paying dividends to shareholders. It also paid 'performance-related bonusess to executives just months before its collapse' according the today's Financial Times.

**********************************************************************

* SOME HISTORY OF THE CARILLION COLLAPSE

ON Tuesday 15 January 2019, Northern Voices reported: All Carillion's victims.

AFTER a year the fall of Carillion is still having consequences with many sub-contractors having lost huge amounts. Today in Construction News Rob Davies spoke with some of those affected to find out why:

In the aftermath of Carillion’s failure, there were concerns that its liquidation would lead to multiple collapses in the contractor’s supply chain.

Unite union criticises lack of action

Unite, Britain’s largest trade union, bemoaned a lack of action taken against former Carillion directors, who were accused by a committee of MPs of “recklessness, hubris and greed”, reiterating calls for a criminal investigation.

The Unite assistant general secretary, Gail Cartmail, said: 'It is staggering that a year after the biggest corporate failure in modern UK history the government has carried on as though it is business as normal.

'The fact that no one involved in Carillion has yet had any form of action taken against them, demonstrates either that the regulators are failing to do their jobs or that existing laws are too weak. If it is the latter then we need better, stronger laws.

'A year on from Carillion’s collapse the government needs to stop prevaricating and start taking effective action to drive bandit capitalism out of the UK.'

The government has introduced measures to make companies in charge of major public sector contracts draw up “living wills” to ensure the smooth operation of the services they provide in the event of financial failure.

But Unite said the measures did not go far enough to reform the system of public procurement. A spokeswoman for the Cabinet Office, which manages the outsourcing of public sector contracts and faced criticism over its role in the administration of the bust of Carillion, said the government had put in place measures to prevent a repeat.

She said: 'This government has taken great strides to improve how we work with the private sector, including requiring companies to demonstrate prompt payment to suppliers and piloting "living wills" for critical contracts, allowing contingency plans to be quickly put into place if needed.'

The accounting watchdog Financial Reporting Council (FRC), which was criticised by MPs for being 'chronically passive' over the audits of Carillion by firms including KPMG, is still investigating the circumstances of its failure.