"Big Four" accountant failed to spot conflicts of interest in MG Rover collapse
31 Jul 2013
Accountancy giant Deloitte has been fined £20 million after it was found guilty of "persistent" failings on professional standards in its dealings with collapsed car manufacturer MG Rover, BSkyB reported.
According to accountancy watchdog, the Financial Reporting Council (FRC) the "Big Four" accountant failed to spot conflicts of interest in its advice to MG Rover and directors who bought the company prior to its collapse, the report said.
West Midlands car maker MG Rover slipped into administration in 2005 with debts of £1.4 billion and job losses of over 6,000.
The company had been bought by directors known as the Phoenix Four for a token £10 five years earlier. Following the collapse the so-called Phoenix Four were banned from business.
Although the exact penalty was yet to be decided Deloitte was understood to be seeking a penalty of around the £1 million figure.
According to an FRC tribunal Deloitte and former partner Maghsoud Einollahi showed a "persistent and deliberate disregard of the fundamental principles" of the accountancy code of ethics.
It added Deloitte "failed to consider the public interest" in advising the Phoenix Four, leaving it unclear as to who was its client. The tribunal ruled against Deloitte on all 13 allegations.
Disagreeing with the ruling, Deloitte said it warned it could have implications for the wider accountancy profession and face an unlimited fine.
"The Financial Reporting Council Tribunal has confirmed its decision today at the International Dispute Resolution Centre, following the disciplinary hearing against Deloitte & Touche, who were advisers to MG Rover Group, and Mr Maghsoud Einollahi, who was a partner at Deloitte & Touche," the FRC said.
According to Paul George, executive director for conduct at the FRC, the outcome sent a clear reminder to all accountants and accountancy firms that they had a responsibility to act in the public interest in the work they undertook.
A spokesman for Deloitte said Deloitte's advice, which itself was not criticised, helped to generate over £650 million of value for the MG Rover Group, keeping the company alive for five years longer than might have been the case and securing 5,000 jobs in the West Midlands during this period.
He added, the company took its client and public interest responsibilities extremely seriously and esd proud of the value it helped create for the MG Rover Group."
A ruling on costs as also a possible fine would be expected over the next few days.
