Official Receiver Brings Billion Pound Claim Against Broken Carillion Construction Company Auditor | Economic news
The official receiver presents legal action against listeners at Carillion, the collapsed construction giant, which could target up to £ 1bn in damages.
Sky News understands that the liquidators of the former FTSE-100 constituent filed a claim form against KPMG on Friday – a ruling that gives the claimant four months to submit more details on his case.
Sources in the city said the action could become one of the largest ever in Britain against an accounting firm.
The official details of the claim document should not be filed by the RO for several weeks.
GOLD is supposed to pursue £ 230million in losses in the form of dividends which it says should never have been paid by Carillion as it headed for disaster.
He also wants to recoup £ 20million in advisory fees which he says could have been avoided.
However, the claim could ultimately be much larger if OR succeeds with an argument that it should also be compensated for business losses in the run-up to Carillion’s demise.
People familiar with the matter say the total damages claimed by the liquidators could amount to around £ 1 billion.
Earlier this year, OR reached a deal with Litigation Capital Management, a publicly traded company, to fund the claim.
Insiders say the action against KPMG was prompted by the liquidators’ legal obligation to maximize collections for Carillion’s creditors.
The construction group, which was involved in building and maintaining hospitals and roads, and delivering millions of school meals, went bankrupt in January 2018 due to nearly £ 7bn.
Thousands of jobs have been lost as a result.
Earlier this year, Kwasi Kwarteng, the commercial secretary, authorized the insolvency department to sue former members of Carillion’s board of directors, including Philip Green, its chairman, with a view to having them disqualified from acting in as directors of the company.
The lawsuit is expected to allege that KPMG failed in its statutory audit duties to detect inaccuracies in the accounts of the outsourcing group.
KPMG’s work for Carillion is the subject of a separate investigation by the Financial Reporting Council (FRC), the accounting regulator.
In September, the FRC alleged that KPMG and a number of employees provided it with false or misleading information regarding the Carillion audit.
Carillion’s demise has become one of the main catalysts for reforming the audit industry in Britain, with far-reaching consequences including the creation of a new watchdog and the obligation for the four major firms – Deloitte and EY being the others – to ‘operationally separate’ their audit and advisory branches.
At the time of its collapse, Carillion had approximately 450 construction and service contracts across government.
It employed over 43,000 people, including 18,000 in the UK.
In a scathing report on the company’s corporate governance, Commons’ trade, energy and industry strategy select committee said, “As a large company and competitive bidder, Carillion was well positioned to win contracts.
“Its failures in their subsequent management to generate profit were for a long time masked by a continuous flow of new work and… accounting practices which prevented an accurate assessment of the status of contracts.”
KPMG has been Carillion’s auditor for almost two decades, earning a total of £ 29million for its audit work.
OR and KPMG declined to comment.