Former Carillion executives fined over ‘misleadingly positive’ statements

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The UK’s financial watchdog has fined three former Carillion executives for “recklessly” publishing misleading statements about the outsourcing group’s finances before it collapsed in 2018.

The Financial Conduct Authority on Thursday said it had provisionally fined former Carillion chief executive Richard Howson and former finance directors Richard Adam and Zafar Khan a total of £870,200 over three “misleadingly positive statements” between December 2016 and May 2017.

The watchdog said it would have fined Carillion almost £38mn, but instead chose a public censure “given the firm is insolvent and in liquidation”.

“Carillion’s systems, procedures and controls were not sufficiently robust to ensure that contract accounting judgments made in its UK construction business were appropriately made, recorded and reported internally to the board and the audit committee,” the FCA added.

The watchdog said it considered that Howson, Adam and Khan “acted recklessly and were knowingly concerned in Carillion’s contraventions”.

The three are among eight former Carillion directors who are the subject of legal action launched by the government last year seeking to disqualify them from running UK companies.

The FCA said the three executives “were each aware of the deteriorating expected financial performance within Carillion’s UK construction business and the increasing financial risks associated with it. They failed to ensure that those Carillion announcements for which they were responsible accurately and fully reflected these matters.”

Howson was provisionally fined £397,800, Adam £318,000 and Khan £154,400. The watchdog said the three were appealing against the decision in the Upper Tribunal, an administrative court equivalent to the High Court. The three former executives could not be reached for comment.

Carillion, once the UK’s second-largest construction company, had liabilities of £7bn and £29mn in cash when it collapsed in January 2018.

Its liquidation was one of the country’s biggest corporate failures for decades and fuelled calls for an overhaul of UK audit and corporate governance rules.

This week, KPMG was handed its largest UK fine of £14.4mn for deliberately misleading the accounting regulator during inspections of its audits of Carillion and another UK company, Regenersis.

The fine was imposed by an industry tribunal that found the Big Four firm provided false and misleading documents and information to the Financial Reporting Council.

The quality of KPMG’s auditing at Carillion is the subject of a separate ongoing FRC investigation. Carillion’s liquidators have also launched a £1.3bn legal claim against KPMG, which has denied wrongdoing and pledged to defend the case.

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