Carillion executives misled markets ahead of collapse, FCA finds
CARILLION and some of its top executives recklessly misled markets as the outsourcer’s finances deteriorated before it eventually collapsed into liquidation in 2018, the City watchdog has found.
The firm’s demise in the face of spiralling debts sparked a wave of criticism of its executives, auditors and the Government’s reliance on private companies to deliver public services. Wolverhampton- based Carillion won contracts across the public sector, working on the construction of rail infrastructure, providing cleaning and maintenance in hospitals, and running school canteens.
The Financial Conduct Authority (FCA) has now found that a series of Carillion announcements in 2016 and 2017 were misleading and did not accurately or fully reflect the firm’s financial performance.
The FCA said: “They made misleadingly positive statements about Carillion’s financial performance generally and in relation to its UK construction business in particular, which did not reflect significant deteriorations in the expected financial performance of that business and the increasing financial risks associated with it.”
The watchdog said it was proposing to issue a public censure against the company, rather than a financial penalty.
It did not say what sanctions it would seek to impose on the directors.
It made its findings in a warning notice issued yesterday.
The business and the directors will have an opportunity to make representations before the regulator reaches a final decision.
The watchdog did not name the former directors facing sanctions.
The FCA f ound t hat Carillion breached market abuse regulations by giving false or misleading signals as to the value of the company’s shares. It also found a breach of City rules for
Uk-listed firms that required companies to take reasonable care to ensure their announcements were not misleading, false or deceptive.
The accounting watchdog delivered a separate report to auditor KPMG in September outlining possible breaches of professional standards in the firm’s work for Carillion between 2014 and 2017.
The Financial Reporting Council will publish a final decision, which could result in a fine for the company, once
KPMG has responded to its findings. The business employed 43,000 people, including 19,500 in the UK, before it collapsed, causing thousands of job losses.
Gail Cartmail, assistant generalsecretary of the Unite union, said: “This case demonstrates everything that is wrong with corporate law in the UK: a failure to act before a company collapses, very slow investigations following a collapse, and then if action is taken, it is only a slap on the wrist.”