Two former finance directors of collapsed firm Carillion have been fined and banned by the accounting watchdog for acting “recklessly” in the lead up to the outsourcing giant’s high-profile demise eight years ago.
The Financial Reporting Council (FRC) also imposed sanctions on three other unnamed former Carillion senior accountants over the part they played in preparing financial statements before the company’s collapse in 2018.
It comes eight years since the outsourcing giant, which employed about 43,000 people, including some 19,000 in the UK, went bust with massive debts.
Before its failure, Carillion had been one of the UK’s biggest construction and facilities management companies, with several major government contracts.
The FRC said Carillion’s former group finance director Richard Adam has been fined £222,019, reduced from £550,000 in light of Financial Conduct Authority (FCA) penalties, while his successor Zafar Khan, who was also previously Carillion’s financial controller, has been fined £60,228, reduced from £225,000.
The two former Carillion directors have also been banned from the accounting industry body, the Institute of Chartered Accountants in England and Wales (ICAEW), for 15 years and 10 years respectively.
Mr Adam and Mr Khan have already been fined £232,800 and £138,900 respectively by the FCA earlier this year.
The FRC said Mr Adam and Mr Khan “acted recklessly and failed to act with integrity in connection with the preparation of accounting information for Carillion’s financial statements”.
Mr Adam was Carillion’s group finance director from April 2007 until the end of 2016 and was succeeded by Mr Khan, who acted in the role from January 2017 until September of that year.
The FRC said the pair “have accepted their misconduct in respect of several areas of Carillion’s business, including certain specific transactions, major UK construction contracts and a supply chain finance facility, that were each material to the company’s reported financial performance”.
Mr Khan said he settled with the FRC to bring the matter to an end after lengthy proceedings.
He said: “I was finance director of Carillion for just eight months, before leaving in September 2017, some five months before Carillion went into liquidation in January 2018.
“Almost eight years later, the FRC’s proceedings against me were still continuing.
“However, I no longer have the financial resources to enable me to continue defending their allegations.
“Furthermore, the extremely drawn-out nature of these proceedings has had a considerable impact on me and my family.
“Therefore, I felt I had no choice but to accept the FRC’s allegations and agree a settlement to bring these matters to an end, despite my sincere belief that I acted at all times with integrity and in the best interests of the company.”
The three other, unnamed former senior accountants, were fined £45,500, £26,000 and £26,000 each and banned for 15 years between them.
Penrose Foss, the executive director of enforcement at the FRC, said: “It is critical that any individual who is responsible for preparing accurate financial information, whatever their level of seniority, undertakes their duties with integrity.”
“In this case, there was a sustained failure by Mr Adam in his role as group finance director, and by his successor, Mr Khan, over a shorter period, to act with integrity and ensure the accuracy of financial information relating to several business areas significant in Carillion’s financial reporting.
“The FRC has also secured admissions from three further individuals.
“The substantial sanctions imposed on these five individuals reflect the gravity of their failure to discharge their respective obligations to act with integrity in preparing financial information in the context of a large, listed company.”
In October 2023, KPMG was handed a record £21 million fine by the FRC over its audits of Carillion.