Carillion bosses must face justice over £7billion loss — it’s the taxpayers who are footing the bill
Construction giant Carillion collapsed with a £1.2billion pile of unpaid debts, leaving almost 3,000 ordinary workers out of a job
AS corporate disasters go, it was seismic. And the aftershocks keep on coming.
Just eight months ago, construction giant Carillion collapsed with a £1.2billion pile of unpaid debts, leaving almost 3,000 ordinary workers out of a job.
Many of those owed thousands were small firms — blameless victims, set to get nothing.
Yet, well-connected City lawyers and accountants working for Carillion got their bills paid — surprise, surprise!
Now it’s emerged that beancounters are coining it in from the Carillion clean-up as well — and this time the mugs footing the bill are us.
Carillion, you will recall, held government contracts to build hospitals, roads and other infrastructure, while delivering “outsourced” public services from school meals to refuse collection.
Since the company collapsed in January, vital projects have been stalled and services disrupted.
The Government routinely paid it billions of pounds a year then awarded it eight additional public contracts, worth almost £2billion, in a barely disguised rescue bid.
These came after the hapless firm issued a jaw-dropping £845million profits warning in July 2017, which saw 70 per cent wiped from its share price.
Carillion was in such chaos when it collapsed, with an estimated £7billion of liabilities, that it went into “compulsory liquidation”.
But after years of bumper dividends and director bonuses, the company coffers were dry. So now taxpayers must also meet massive accounting bills to dismantle this debt-soaked mess.
The National Audit Office has put the cost to us taxpayers at £148million, and admitted it is “likely to be higher”.
Accountancy firm Price Waterhouse Coopers (PwC) is set to pocket more than £50million. This week we learnt it demanded £20million-plus for just two months of work on the insolvency.
How did they get to this figure, you might reasonably ask. Quite easily when you consider the Official Receiver paid PwC staff up to £1,156 AN HOUR.
It’s a different story at Flora-tec, a horticulture company near Cambridge that worked for Carillion from 2004. “They used every trick in the book to delay paying me,” managing director Andy Bradley told me in a Dispatches investigation into Carillion I’ve made for Channel 4.
“We started off on 45 days, then it was 65 days and, when it went under, we were technically on 126 days — over four months to get paid. It was a form of abuse.”
Carillion went bust owing Bradley’s firm around half a million pounds. “I don’t think we’ll see any of it,” he says.
Carillion is a story about far more than the demise of one company.
It’s a story about whether the British public can have faith in private firms delivering public services and about astonishing failures at the heart of our business and political establishments.
One of several recent Parliamentary investigations into Carillion’s collapse said the Financial Reporting Council — responsible for auditors and accountants — was “timid” in challenging “questionable” financial information and “wholly ineffective” in taking auditors to task.
The Pensions Regulator, meanwhile “clearly failed” in its statutory objectives to safeguard Carillion’s 27,000-member pension scheme, said MPs.
This had an eye-watering £800million deficit when Carillion imploded, the biggest ever shortfall to be absorbed by the Pension Protection Fund — where it will now be propped up by levies on other UK workplace pension schemes.
The Government “lacked decisiveness or bravery” to address the failures in corporate regulation that allowed Carillion to become a “giant and unsustainable corporate ”.
Carillion became a poster boy for all that is bad about capitalism. Indeed capitalism is in danger of becoming a four-letter word.
And that’s disastrous — seeing as capitalism and broader private enterprise, if they are to flourish and spread wealth, must be built on public consent.
No wonder the public’s trust in business is at its lowest ebb since 2012. Only 43 per cent of the adult population now “trusts business”, according to a recent survey.
That’s no surprise. Along with Carillion, we’ve seen the failure of British Home Stores. Then there’s the seemingly endless string of financial scandals, from Libor-rate rigging to PPI mis-selling, to the persistent tax avoidance strategies employed by the world’s largest tech firms.
And all this follows, of course, the 2008 financial crisis itself — an episode sparked by the reckless and, in some cases, fraudulent activity of white-collar professionals across the world’s leading financial capitals, not least the City of London.
Ten years on, despite the millions of ordinary businesses destroyed and lives upended, there’s been no major public inquiry, very few court cases and little in the way of any kind of public reckoning.
Lessons need to be learned, new systems need to be implemented, and, yes, even prosecutions may be necessary.
There needs to be an urgent shake-up of the “big four” auditors including PwC and KPMG (Carillion’s long-standing auditors) — whose relationships with large firms are far too cosy.
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And, with MPs having concluded that Carillion finance director Richard Adam “was the architect of Carillion’s aggressive accounting policies”, the FRC has now launched an investigation.
Adam told Dispatches he had done nothing wrong and discharged his duties in good faith, to the best of his abilities.
But Tory MP Antoinette Sandbach, who sat on a Parliamentary inquiry into Carillion, told me: “If directors are shown to have made misleading statements or misrepresented the position of the company, the book should be thrown at them.”
Asked if that meant possible criminal prosecution, Sandbach, who is a former criminal barrister, said: “There are grounds for investigation on the evidence that I have seen.”
- How To Lose Seven Billion Pounds – Dispatches is on Channel 4 at 10.30pm tonight.