UK accounting regulator bans five former Carillion executives

The UK’s Financial Reporting Council (FRC) said Tuesday it has banned five former senior finance executives at collapsed construction contractor Carillion from the accountancy profession, citing reckless conduct and failures of integrity in financial reporting. Carillion entered compulsory liquidation in January 2018, a failure that hit public-sector projects and triggered job losses.

The FRC said the sanctions follow admissions of misconduct tied to how the company’s financial performance was presented in the years before the collapse.

Richard Adam, Carillion’s former finance director, received a 15-year exclusion and a financial sanction of £222,019. Zafar Khan, his successor in the role, was banned for 10 years and fined £60,228. The FRC said both men accepted misconduct connected to certain transactions, large UK construction contracts and a supply chain finance facility.

The regulator said the conduct affected Carillion’s reported financial performance between 2013 and 2016 and in the half-year to 2017. Both men were also issued severe reprimands, and the FRC noted they had previously been fined by the Financial Conduct Authority for misleading investors.

Sanctions also imposed on three unnamed senior accountants

The FRC said three other senior accountants, who were not named, also admitted to acting recklessly and failing to act with integrity when preparing information for Carillion’s financial statements. One received an eight-year ban and a financial sanction of £45,000. The second was banned for five years, and the third for two years; each of the latter two received a £26,000 penalty.

All three were issued severe reprimands, the regulator said. It added that the financial penalties were reduced as part of settlements.

Regulator warns on integrity for large listed companies

The FRC said the case underscores the importance of integrity in the preparation of financial information, particularly at large, listed companies. It said individuals responsible for financial reporting, regardless of seniority, must ensure the information they prepare is accurate and complete.

Carillion’s collapse was one of the UK’s biggest corporate failures in recent years and left the company with £7bn of debts, officials have said. The FRC action focuses on conduct connected to reporting and contract accounting in the period before liquidation.

Further enforcement steps will be watched for indications of how aggressively the regulator intends to pursue individual accountability in major corporate failures.