Deloitte to face probe over UK retailer Comet's liquidation

Investigations would reveal the way Deloitte accountants handled the collapse of retailer Comet, The Yorkshire Post reported quoting UK business secretary Vince Cable said.

The collapse of Comet led to 7,000 jobs being lost, with taxpayers having to foot a bill of up to £26 million after an employment tribunal found that there had been no consultation with the staff on the potential for redundancies as legally required.

Insolvency specialists – Christopher Farrington, Nicholas Edwards and Neville Kahn have been referred to the Institute of Chartered Accountants in England and Wales (ICAEW) after an investigation by The Insolvency Institute lasting 18 months, the report said.

Concerns were voiced by The Insolvency Service that the Deloitte trio worked for Comet before its collapse and therefore faced a conflict of interest as administrators.

Comet staff received an award last month paying them between 70 and 90 days extra pay as they were not consulted over their redundancies.

The government's Redundancy Payments Service had already paid out £18.4 million in redundancy fees to almost 5,000 former Comet staff. According to Cable, taxpayers now faced a multi-million pound compensation bill as a result of the failure on employee consultations. He added, there could be no excuse for failing to comply with the law which was very clear in this area.

Meanwhile, according to Sky News, the news would attract significant attention in the UK's financial services industry, and form a part of a broader review of the UK's insolvency regime, introduced by Cable.

According to insiders, the ICAEW probe was expected to outline two areas in which it would examine whether the three men breached accounting profession guidelines - a possible conflict of interest which arose from Deloitte acting for Comet before its insolvency and also undertaking a role as the company's administrator; and because of their failure to consult the chain's employees properly before they were made redundant.

The second issue had led to a legal wrangle in recent months, with an employment tribunal ruling that over 2,000 former Comet staff should receive around £10 million in redundancy payments.

A judge would rule on the issue shortly as to whether such payments should be extended to a further 4,000 ex-employees of the retailer, which would add another £15 million to the taxpayers bill.

The collapse of Comet, was described by lawyers representing the employees, as "an old-fashioned corporate raid" and "one of the more regrettable episodes of British corporate history".