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Tuesday 16 October 2018

Banks under the spotlight over Carillion collapse

The Square Mile companies have been asked to provide information regarding advice they gave to Carillion executives.

Carillion investigation
Carillion investigation

By Ravender Sembhy, Press Association City Editor

The role of heavyweight City banks and law firms in the collapse of Carillion has come under scrutiny by MPs investigating the construction giant’s demise.

Parliament’s Business and Pensions Committees have written to investment banking giants Morgan Stanley and Lazard, as well as Magic Circle law firm Slaughter & May, as part of a joint inquiry into the debacle.

The Square Mile companies have been asked to provide information regarding advice they gave to Carillion executives before the company’s collapse in January, and detail fees that were received.

MPs Frank Field and Rachel Reeves, who are leading the inquiry, have also asked if the fees charged were “contingent on certain outcomes” and if their advice was acted upon.

Carillion’s collapse left in its wake a £900 million debt pile, a £590 million pension deficit, and hundreds of millions of pounds in unfinished public contracts.

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Frank Field on the welfare system

The investigation of banks and law firms comes after Britain’s big four accountancy firms were savaged by the MPs, who accused them of “feasting on the carcass” of Carillion and collecting more than £70 million in the process.

In a breakdown of fees collected by KPMG, PwC, Deloitte and EY, the committees claimed the professional services firms pocketed a total of £71.6 million in Carillion-related work over 10 years.

Former Carillion directors have also been ordered to answer further questions following a grilling in front of MPs earlier this month.

Former finance chief Zafar Khan has been asked to clarify the terms of his departure, including whether a non-disclosure agreement was attached to it.

Ex-chief executive Richard Howson has been further probed over a Carillion contract in Qatar, which was cited as a contributory factor in the firm’s collapse, and asked how much he was paid for work in the Middle East state after he was removed as CEO.

Keith Cochrane, who was at the helm in January, must clarify his interaction with the institutional investors and provide clarification about a “contradiction over negotiations with the main pension schemes’ trustee”.

Among others to receive requests for further information are Qatari contractor Msheireb and organisations that were left stranded by Carillion’s failure.

They include the Royal Liverpool Hospital, Aberdeen Road, The Hospital Company and the Crown Commercial Service.

Press Association

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