When Carillion PLC collapsed in January 2018 it had 43,000 employees and owed more than £4.6 billion, including a pension liability of around £2.6 billion.
Carillion’s financial position was so dire that it went straight to liquidation. According to the 16 May report issued by the UK House of Commons Work and Pensions Committee, insolvency practitioners were unwilling to act as administrators because there was no ‘certainty that there was enough money left in the company to pay their costs.’
The report follows the collapse so quickly that it cannot reflect a full forensic analysis, and it is issued under Parliamentary privilege, but the criticisms are fierce. The report says:
- The was a ‘chronic lack of accountability and professionalism’ and the board was ‘either negligently ignorant of the rotten culture at Carillion or complicit in it.’
- The non-Executive directors were ‘unable to provide any remotely convincing evidence of their effective impact.’
- The resignation and sale of shares by a former finance director ‘were the actions of a man who knew exactly where the company was heading once it was no longer propped up by his accounting tricks.’
- The auditors ‘were complicit’ in the company’s aggressive accounting judgements through their failure ‘to exercise—and voice—professional scepticism.’
- The Pensions Regulator ‘failed in all its objectives.’
- The UK’s Financial Reporting Council was ‘too passive,’ and ‘wholly ineffective’ in taking the auditors to task.
- The committee had ‘no confidence’ in the FRC or the PR, who it said shared ‘a passive, reactive mindset and are too timid to make effective use of the powers they have.’
The full report is available here, together with video of some of the key evidence.