Bosses at collapsed builder Carillion tried to cut a deal to protect themselves from fines for wrongdoing, officials have found.
Executives at the government contractor – thought to be interim chief executive Keith Cochrane and chairman Philip Green – asked for immunity from fines or penalties by regulators for actions it took before July 2017, says the National Audit Office (NAO).
They made the request at the end of December 2017, three days before the City watchdog Financial Conduct Authority (FCA) announced a probe into the company’s stock market announcements before July 2017.
Interim chief executive Keith Cochrane, left, and chairman Philip Green, right, are thought to have asked for immunity from fines or penalties by regulators
On July 10 last year, Carillion stunned markets by announcing major problems, raising questions about why it hadn’t disclosed them sooner. It collapsed five months later, owing more than £5billion.
The request for immunity is revealed in an NAO report published today. It was listed in a table detailing requests made by Carillion, between December 31, 2017 and January 31, 2018.
Under ‘other support’ it says: ‘Protection from the imposition of fined or penalties by regulators for actions taken by the company before July 2017.’
Bosses have repeatedly defended their handling of the firm, which had more than 420 government contracts and was helping build high-speed rail-line HS2 as well as schools, hospitals and roads.
They have been accused of putting payouts ahead of pensions and manipulating accounts to make it look in better health.
Immunity was among a string of requests Carillion made of the Government as the firm fought for its survival at the turn of the year, the NAO report shows.
Accountants’ £50 Bill
Bean-counters PwC are expected to pocket £50million for around six months’ work on the insolvency of Carillion.
Taxpayers face having to foot a liquidation bill expected to reach £148million.
PwC was hired for the work as it had fewer conflicts of interest than the three other big accountancy firms.
The collapse of Carillion has sparked calls for a break-up of the so-called Big Four due to concerns too little competition makes them do their job badly.
In addition to immunity, bosses wanted a £160million loan, a £63million tax waiver, assistance getting out of troublesome Middle East contracts, and help negotiating with the Pension Protection Fund.
But the Government denied the bailout, opting instead to let the company fall into compulsory liquidation. It believed this would cause less trouble and avoid setting a precedent. The request for immunity was withdrawn by January 8.
When it collapsed on January 15, Carillion owed more than £5billion, with a pension black hole of around £1billion. It had only £29million cash in the bank and employed around 20,000 UK workers.
Since then, 2,340 have been made redundant while 11,739 people have found new work. The rest are still employed by Carillion or have left.
Many of the 30,000 suppliers are expected to get back a fraction of the £2billion thought to be owed.
Carillion was struggling to bring in cash and was facing particularly heavy losses on public finance initiative contracts.
These included £91million on building roads in Aberdeen, £83million on the Royal Liverpool Hospital, and £48million on the Midland Metropolitan Hospital.
As problems mounted, on average Carillion was paying almost one-third of its invoices more than 60 days later, the NAO report says.
It announced £1.9billion of new Government work after the July 10 profit warning and was handed the HS2 contract despite extra stress tests, which it passed based on rosier accounts in March 2017.