“Delusional” former Carillion directors appear before MPs

The former directors of Carillion who appeared before the joint Work and Pensions and Business, Energy and Industrial Strategy Committees inquiry into the company’s collapse last month were labelled as “delusional” by its co-chairs Frank Field MP and Rachel Reeves MP.

Carillion directors

Frank Field MP and Rachel Reeves MP called former Carillion bosses “delusional”

Field and Reeves said: “We heard variously that this was the fault of the Bank of England, the foreign exchange markets, advisers, Brexit, the snap election, investors, suppliers, the construction industry, the business culture of the Middle East and professional designers of concrete beams. Everything we have seen points the fingers in another direction – to the people who built a giant company on sand in a desperate dash for cash.”

Much of the MPs questioning focused on whether Carillion’s 2016 accounts should have been signed off in March last year given that there was a profit warning only three months later in July and whether there was enough appreciation of the lack of confidence in the company by particular investors even before that profit warning.

MPs also questioned whether the company had prioritised paying shareholder dividends over pension contributions. Keith Cochrane, who was the company’s interim chief executive at the time of the collapse, having previously been its independent non-executive directors said the company had been paying into the pension scheme at an agreed level.

Philip Green, who was a non-executive director from September 2013 and chairman from May 2014 defended the board. He said the non-executive directors had consistently challenged the executive directors about its increasing debt levels during 2016. Once the profit warning was issued Green said they had replaced Richard Howson as chief executive. However, it was suggested that this action was taken too late.

The select committee inquiry also published Carillion’s final business recovery plan produced in January.  Its analysis suggested that “the group had become too complex with an overly short-term focus, weak operational risk management and too many distractions outside of our ‘core'”.

Issues of weakness within Carillion that were identified included an insufficient understanding of, and adherence to, contract requirements; ineffective change control; poor planning and lack of effective contract controls. The plan suggested that there would be networking capital of minus £834 million by the end of 2017 and that there would not be positive working capital until 2021.

In the previous session of evidence-gathering, it had emerged that the Financial Reporting Council had been monitoring the audit of Carillion since the company issued its profit warning in July 2017.

Meanwhile, trade union Unison said MPs on the select committee inquiry have agreed to investigate potential conflicts of interest by asset managers after Dave Prentis, its general secretary urged them to. Unison conducted an investigation which found that Blackrock was short selling Carillion shares while it was also running the company’s defined contribution scheme.

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