They were warned: Carillion's FD blew the whistle

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    Francois Badenhorst

    Francois Badenhorst Business Editor, UKBF & AWEB Staff Member

    91 18
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    It will offer scant relief for the reported 30,000 small firms still owed money after Carillion's collapse, but new revelations reveal the construction giant knew what was coming -- and chose to look the other way.

    Carillion’s last finance director blew the whistle on accounting irregularities at Carillion as early as May 2017, more than three months before the firm’s troubles were made public.

    Emma Mercer was just six weeks into her role as the FD of construction services in the UK when she identified issues with the company’s accounts. Mercer’s concerns, by all indications, were waved away by Carillion’s CEO Richard Howson, CFO Zafar Khan and and the board.

    Mercer identified serious issues with the accounting on major Carillion projects. Those projects included the redevelopment of Battersea power station in London and the construction of the new Royal Liverpool hospital. Specifically, she identified Carillion allegedly using refunds it expected to receive from subcontractors to lower the debt in its annual accounts.

    According to board minutes published by the Work and Pensions and Business Select Committees, Carillion’s non-executive director Alison Horner acknowledged Mercer, referring to her as “a whistleblower who did not feel she was listened to”.

    Frank Field, chair of the work and pensions committee, said Mercer’s whistleblowing illustrated a culture of denial within Carillion’s management. “While our witnesses have been reticent in oral testimony, these minutes begin to reveal the true picture of a company falling apart at the seams in full view of the board and their auditors.

    “Emma Mercer took just six weeks to spot and pull the thread that began the entire company unravelling. That the next Chief Financial Officer had to go through whistle blowing procedures to get her concerns about accounting irregularities taken seriously by the Carillion board is extraordinary. So too is that the board’s response was to reject an independent review and get KPMG, their pet rubber-stampers, to mark their own homework.”

    For KPMG, Carillion’s auditors, Mercer’s revelations raises yet more questions around the efficacy of their audit. Mercer's findings triggered a review of contracts and the board committed to an independent review into why the “sloppy accounting” wasn’t not spotted by KPMG, but ultimately decided against it.

    After investigating the errors, the KPMG partner Peter Meehan is quoted in the minutes as saying Carillion’s financial results did not need to be restated and that “he did not believe that there was an intent to deceive” but rather that it was due to “incompetence, negligence or sloppy accounting”.

    The board minutes puncture the narrative of Carillion’s management that they couldn’t have foreseen the collapse. “These board minutes point to a very different scenario,” said Rachel Reeves, chair of the Business, Energy and Industrial Strategy Select Committee. “Emma Mercer was sounding the alarm but none of the Carillion directors were willing to wake up and listen.”

  2. Noah

    Noah UKBF Ace Free Member

    1,161 290
    Depressingly following the pattern of this sort of story : "No-one could have seen this coming - honest guv!" ... "Err, I did!" ... "Well, apart from you... and us... but, look, it's complicated...".

    As is frequently pointed out on the forum here, continuing to trade as an insolvent business can have direct financial consequences for the directors involved; are directors of large companies like Carillion held to account?

    [disappears into the distance cackling madly]
    Posted: Mar 5, 2018 By: Noah Member since: Sep 1, 2009
    Kat Haylock likes this.
  3. Mr D

    Mr D UKBF Legend Free Member

    14,947 1,630
    From my reading of the insolvency forums and other business sites the problems are often things that happen over time. In this case the company was solvent and perfectly able to handle itself on one day and the next insolvent and unable to pay its bills?

    Or the process took months / years to go from one to the other?

    OK can accept that in a big organisation not many staff will have access to the big picture enough to raise concerns to the board. But just one member of staff and having been in the job just a few weeks? Is that credible?
    Posted: Mar 5, 2018 By: Mr D Member since: Feb 12, 2017