The Financial Reporting Council (FRC) has imposed sanctions against two former Group Finance Directors of Carillion plc (Carillion). Both acted recklessly and failed to act with integrity in connection with the preparation of accounting information for Carillion’s financial statements, prior to the company’s collapse in 2018.
Former Group Finance Director, Mr Richard Adam, and his successor in that role (and previously Carillion’s Financial Controller), Mr Zafar Khan, have accepted their Misconduct in respect of several areas of Carillion’s business, including certain specific transactions, major UK construction contracts and a supply chain finance facility, that were each material to the company’s reported financial performance in one or more financial years between 2013 and 2016, inclusive and the half year to 2017.
Executive Counsel has also imposed sanctions on three other former Carillion senior accountants.
Sanctions in full
The following sanctions were imposed as part of the agreed settlements:
Richard Adam, has been excluded from the ICAEW for a recommended period of 15 years and issued with a severe reprimand. A financial sanction of £550,000 reduced to £222,019 was also imposed to take into account a fine of £232,830 imposed by the Financial Conduct Authority (FCA) in respect of related events, and a settlement discount.
Zafar Khan, has been excluded from the ICAEW for a recommended period of 10 years, and also issued with a severe reprimand. A financial sanction of £225,000 was reduced to £60,228 to take into account a fine of £138,960 imposed by the FCA in respect of related events, and a settlement discount.
The three unnamed accountants received exclusions from their Recognised Supervisory Bodies of eight, five and two years, along with fines of between £26,000 and $=£45,500 after settlement discounts, and severe reprimands.
The terms of the settlements agreed by the Executive Counsel were approved by a member of the independent Tribunal Panel.
Background
Prior to going into liquidation in January 2018, Carillion was a leading UK based multinational construction and facilities management services company. The company employed around 43,000 people globally, was listed on the main market of the London Stock Exchange and had multiple contracts with public authorities.
In July 2017, Carillion issued a profit warning and announced an expected provision against its construction contracts of approximately £845 million. In September 2017, Carillion announced a further provision of approximately £200 million and a first half loss of approximately £1.15 billion.
In November 2017, Carillion issued another profit warning and indicated that it would breach its banking covenants the following month. On 15 January 2018, Carillion was placed into compulsory liquidation. Carillion’s failure amounted to one of the biggest corporate failures in UK history.
