Big Four condemned for “feasting on the carcass” of Carillion
The Big Four accountancy firms have been accused of “feasting on the carcass” of collapsed construction and support services group, Carillion.
The roles of KPMG, PwC, Deloitte and EY in the affair have come under scrutiny as part of the inquiry launched into the group’s collapse by a joint parliamentary committee.
Between them, the quartet charged more than £70m in fees during the course of their dealings with the Wolverhampton-based company.
Aside from charging the company itself more than £50m, the pension scheme was charged £6.1m and the Government £14.3m.
(See KPMG response below)
The revelation came as the Official Receiver announced the latest on Carillion’s former employees.
In a statement, the OR said arrangements had been finalised to transfer Carillion’s former prison facilities management and defence bases catering and cleaning contracts to new providers, resulting in 4,418 workers having their jobs safeguarded.
“Ongoing employment has been confirmed for more than a third (6,668) of Carillion’s workforce so far as part of the liquidation,” it said.
However, jobs could not be secured for a further 59 workers, bring the total number of redundancies to 989.
The attack on the accountancy firms comes a week after MPs quizzed former Carillion directors, going on to brand them as delusional in their handling of the company in the months leading up to the collapse last month.
Frank Field, chair of the Work and Pensions Committee, said: “The image of these companies feasting on what was soon to become a carcass will not be lost on decent citizens.
“We saw at the end of our evidence session that the former directors of Carillion are, unlike their pensioners, suppliers and employees, alright.
“These figures show that, as ever, the Big Four are alright too. All of them did extensive – and expensive – work for Carillion.”
He singled out PwC – which is handling the liquidation – for special attention.
“PwC managed to play all three sides – the company, pension schemes and the Government – to the tune of £21m and are now being paid to preside over the carcass of the company as Special Managers,” said Mr Field.
“It was perhaps telling that, with their three fellow oligarchs conflicted, PwC were appointed to this lucrative position without any competition.”
Ironically, it was Carillion which was constructing the new PwC offices at the Paradise development in Birmingham.
One Chamberlain Square was topped out shortly before Carillion’s collapse but the site had lain idle since the liquidation on January 15.
Rachel Reeves Chair of the Business, Energy and Industrial Strategy (BEIS) Committee – and co-chair of the joint committee, reserved her attention for KPMG.
She said: “KPMG has serious questions to answer about the collapse of Carillion. Either KPMG failed to spot the warning signs, or its judgement was clouded by its cosy relationship with the company and the multi-million pound fees it received.
“For the sake of all those who lost their jobs at Carillion and in the interests of better corporate governance, KPMG should, as a bare minimum, review its processes and explain what went wrong.”
Twisting the knife further, the committee also made the point that the past three Chief Financial Officers at Carillion were ex-Big Four.
Richard Adam (CFO 2007-2016) and Emma Mercer (CFO 2017) were both ex-KPMG, while Zafar Khan (CFO 2017) was ex-EY. Andrew Dougal (Carillion’s audit chair since 2011) was also ex-EY.
In a letter to the joint committee, Bill Michael, chairman and senior partner of KPMG, said the firm welcomed the inquiry and would cooperate fully.
“We believe it is important that regulators acting in the public interest review the audit work related to high profile cases such as Carillion. We will be cooperating fully with the FRC’s investigation,” he said.
“If there are lessons to be learned, either from our review or that of the FRC, we will learn them.”
He added: “We will always review our work when challenged, and the Carillion audit is no exception. Whilst that review work remains ongoing we have no reason to believe that the 2016 Accounts showed other than a true and fair view, and, as we have commented publicly, we believe we conducted our work appropriately and responsibly.”
Representatives from KPMG will be questioned by the joint committee on February 22.