FCA says trio recklessly mislead market before contractor鈥檚 collapse, but they plan to appeal
Three former Carillion executives have been fined by the UK鈥檚 financial watchdog for their 鈥渞eckless鈥� actions in the doomed contractor鈥檚 final months.
All three men have appealed against the penalties issued by the Financial Conduct Authority (FCA), which are worth just under 拢1m in total.
Carillion was the UK鈥檚 second biggest contractor and was working on 420 public sector contracts when it went bust in January 2018. The FCA found that the firm had 鈥渞ecklessly published announcements on 7 December 2016, 1 March 2017 and 3 May 2017 that were misleading and did not accurately or fully disclose the true financial performance of Carillion鈥�.
The watchdog said: 鈥淭hose announcements made misleadingly positive statements about Carillion鈥檚 financial performance generally and in relation to its UK construction business in particular.鈥�
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According to the FCA, the firm鈥檚 systems, procedures and controls were not robust enough to ensure that contract accounting judgements in its UK construction business were properly made, recorded and reported to the board and audit committee.
The regulator found that former chief executive Richard Howson, along with former finance directors Richard Adam and Zafar Khan 鈥渁cted recklessly and were knowingly concerned in Carillion鈥檚 contraventions鈥�.
It claimed that the three men were aware of Carillion鈥檚 deteriorating performance and the increasing financial risks associated yet failed to ensure that Carillion announcements for which they were responsible reflected these facts.
The FCA fined Howson 拢397,800, Adam 拢318,000 and Khan 拢154,400. All three men have referred their respective decision notices to the upper tribunal, which will determine whether to uphold the watchdog鈥檚 decisions following a hearing.
The FCA said it would have imposed a 拢37.9m fine on Carillion itself, were it not for the fact that the firm is insolvent and in liquidation. Instead, it has imposed a public censure on the company. Carillion has not referred its decision notice to the upper tribunal.
>> Also read: The Carillion legacy
Mark Steward, executive director of enforcement and market oversight at the FCA, said: 鈥淐arillion failed to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations under the listing rules.
鈥淎s a result its true financial position remained hidden over many months and the effects of its collapse were aggravated, causing substantial harm to shareholders and creditors.
鈥淭his is market abuse, and is as damaging to market integrity as insider dealing and manipulation, though not often described in this way. It should be.鈥�
The decision comes days after the Financial Reporting Council announced that it had fined KPMG 拢14.4m plus costs for its audit of Carillion.
Four former KPMG auditors were fined individually and banned from the sector鈥檚 professional body for various periods of time for their part in misleading the audit watchdog.
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