The UK firm Carillon has collapsed, declaring bankruptcy as its share price is just above zero. The “integrated support services business” held about 450 governmental contracts, from school meals to maintenance, construction, and traffic control. Last year, it issued three profit warnings in five months and wrote off more than £1 billion.
In a damning 100-page report, the Work and Pensions and the Business, Energy and Industrial Strategy committees said:
*The Big Four accountancy firms were a “cosy club incapable of providing the degree of independent challenge needed”
*Carillion’s collapse had exposed “systemic flaws” in corporate Britain and showed regulators were “toothless”
*And warned “Carillion could happen again, and soon”
Rachel Reeves, chair of the business committee, told BBC Radio 4’s Today programme: “The directors are culpable for the mess that Carillion got into and drove the company off a cliff.”
She accused them of a “relentless dash for cash” by taking on low-margin contracts which didn’t make money.”
And when we had the directors in front of our Select Committee, they seemed to be in total denial about what happened to their company,” she said.
What are the directors accused of?
In their report, the two committees called Carillion’s rise and fall “a story of recklessness, hubris and greed”.
Where did Carillion’s problems come from? They singled out former directors Richard Adam, Richard Howson and Philip Green for particular scrutiny, saying the men had grown the firm through ill-judged acquisitions while hiding Carillion’s financial problems from shareholders.
They added that even as the company publicly began to unravel, the board was “concerned with increasing and protecting generous executive bonuses”.”Long term obligations, such as adequately funding Carillion’s pension schemes, were treated with contempt,” they said.