Carillion was run like ‘Ponzi scheme’ Senior figures reveal ‘culture of fear’ at firm
COLLAPSED Midland construction giant Carillion was being run like a Ponzi scheme amid a culture of fear, according to a new investigation.
Channel 4’s Dispatches this week spoke to senior government figures and staff about the demise of the Wolverhampton-based group which held thousands of public contracts ranging from construction to house maintenance.
It claims the company’s management reassured the Cabinet Office its profit warnings were wrong, despite them being issued to the stock exchange in summer 2017.
And the programme says its former finance director, Richard Adam, would tell management to “go back and do the numbers again” when he was not happy with the company’s figures – something he denies in the show.
Despite Carillion issuing several profits warning during 2017, the Government continued to award it around £2 billion worth of new contracts, most notably design work on tunnels for the HS2 highspeed rail line, where it was part of a three-way joint venture. The group eventually collapsed into liquidation in January this year, stalling work on two major West Midlands projects – the first office building at Paradise in Birmingham city centre and the Midland Metropolitan Hospital in Smethwick.
The Paradise building restarted in March and the hospital has just been offered a Whitehall bailout. At the time of the collapse, the Official Receiver said it had liabilities of up to £7 billion pounds, including a record pension deficit of £590 million and subcontractors owed more than £1 billion.
Dispatches spoke to Sir John Bourn, who was head of the National Audit Office between 1988 to 2008 during which time he scrutinised government expenditure.
In his first interview, he said: “The Government should not in my view have given Carillion so much work and it didn’t have to do it. You could see that Carillion was in trouble – it was all rather like I thought a Ponzi scheme because it was taking small contracts as a way of keeping the bigger contracts going.
“I was surprised that the Gov- ernment had gone on giving it contracts. So many hedge funds were betting against its continuance and that was open for everyone to see.”
Another claim made in the documentary is about the behaviour of Richard Adam, the group’s finance director from 2007 to 2016.
Jon Hull, Carillion’s head of recruitment from 2015 to 2018, told the programme: “It was a culture of fear and confusion.
“I think he (Richard Adam) was absolutely, totally responsible for that culture. It was get this done because you know otherwise there’ll be consequences.
“Richard Adam at the time was very aloof, seen as very controlling.
“He made the numbers look better without tackling the fundamental issues in the company which is what a director should do, right?”
Mr Adam told MPs that he retired in 2016, he didn’t produce numbers that misled his colleagues and he acted with complete transparency.
He also told Dispatches that, throughout his time at Carillion, all of its accounts were approved by the board and audited.