Former bosses of Carillion face potential fines and legal action by the City watchdog after being accused of ‘recklessly’ misleading investors before the construction group’s collapse.
The Financial Conduct Authority (FCA) said the company had released a string of statements that ‘did not accurately or fully disclose’ the true state of its finances in the months before it crumpled under the weight of huge debts.
This meant investors did not have the information they needed to value Carillion’s shares correctly, it added, with unnamed directors at the government contractor accused of ‘failing to act with integrity’.
Chaos: Carillion’s failure in January 2018 was one of the UK’s biggest ever corporate catastrophes
Carillion’s failure in January 2018 was one of the UK’s biggest ever corporate catastrophes, putting tens of thousands of jobs at risk and throwing a string of public projects into chaos. Former bosses including chief executives Richard Howson and Keith Cochrane, chairman Philip Green and finance chiefs Emma Mercer and Zafar Khan were later accused of prioritising dividend payouts over tackling growing debts, with MPs branding them ‘delusional characters’ who refused to accept blame in a fiery parliamentary hearing.
A spokesman for the FCA said yesterday it could not disclose which directors had received warning notices. It did not name any directors in its statement.
The FCA launched a probe into statements made by the firm just two weeks before the disaster and yesterday the regulator revealed it has now issued ‘warning notices’ to certain individuals – the first step towards possible enforcement action.
The regulator stressed it had taken no final decisions and that, depending on the response of those accused, its findings could still be referred to a tribunal. But should it push ahead with action against former directors, it has wide-ranging powers to prosecute, fine and ban individuals from directorships and freeze assets.
The FCA said statements from between December 2016 and May 2017 ‘made misleadingly positive statements about Carillion’s financial performance, which did not reflect significant deteriorations and the increasing financial risks associated with it’.
The firm later collapsed owing more than £7bilion in debt. ‘Relevant directors’ had failed to make the company’s board and audit committee aware of its financial issues despite knowing about them, it added.
‘The FCA considers that Carillion and the relevant executive directors acted recklessly in relation to the above matters,’ the regulator’s statement said.
Carillion’s bosses and its auditors were accused of publishing ‘increasingly fantastical figures’ by MPs during an inquiry.
They claimed the firm’s failure to turn a profit from key contracts was masked ‘by a continuing stream of new work’ and misleading accounting practices, while bosses approved ever-increasing dividends that gave the impression it was a healthy business.
Directors were accused of borrowing money and selling assets to help pay for £376m worth of dividends over five years.