GovernanceRegulationDeloitte Rapped by FRC over MG Rover Sale

Deloitte Rapped by FRC over MG Rover Sale

Accountancy group Deloitte faces a possible fine of up to £20m and the suspension of one of its partners after the UK’s Financial Reporting Council’s (FRC) tribunal ruled that it demonstrated a “deliberate disregard” for professional ethics in its handling of the sale of bankrupt carmaker MG Rover.

The tribunal dismissed an appeal by the firm against an earlier ruling and said that Deloitte failed to manage the conflicts of interest created by its role as the advisers to MG Rover and the so-called ‘Phoenix Four’ group of directors that bought the business out of administration.

The tribunal has the power to impose an unlimited fine and the FRC is pressing for Deloitte to face a £20m penalty, as well as the suspension of Maghsoud Einollahi, a partner at the firm who was involved in the deal.

MG Rover collapsed in 2005 with the loss of 6,000 jobs after amassing debts of £1.4bn, having been bought five years earlier from BMW for a token £10 payment by businessmen Peter Beale, Nick Stephenson, John Towers and John Edwards.

The Phoenix Four were struck off as company directors for a combined 19 years in 2011, having shared £42m in pay and pensions after buying the company in 2000. Deloitte had acted as adviser to MG Rover on its administration but, in addition, also acted corporate advisers to the buyout group.

In its judgment, the tribunal said Deloitte’s conduct had “showed in some instances a persistent and deliberate disregard of the fundamental principles and statements of the Institute of Chartered Accountants England and Wales’s [ICAEW] code of ethics.

“The outcome of this tribunal sends a strong and clear reminder to all accountants and accountancy firms that they have a responsibility to act in the public interest in the work they undertake,” said Paul George, executive director of conduct at the FRC.

Comments are closed.

Subscribe to get your daily business insights

Whitepapers & Resources

2021 Transaction Banking Services Survey
Banking

2021 Transaction Banking Services Survey

2y
CGI Transaction Banking Survey 2020

CGI Transaction Banking Survey 2020

4y
TIS Sanction Screening Survey Report
Payments

TIS Sanction Screening Survey Report

5y
Enhancing your strategic position: Digitalization in Treasury
Payments

Enhancing your strategic position: Digitalization in Treasury

5y
Netting: An Immersive Guide to Global Reconciliation

Netting: An Immersive Guide to Global Reconciliation

5y