The Financial Reporting Council today upheld its findings that top accountancy firm Deloitte & Touche’s had failed to act in the public interest in its dealings with MG Rover and the Phoenix Four between 2000-2005, at times displaying “a persistent and deliberate disregard” to professional guidelines.
MG Rover closed in 2005 leaving 6000 workers out of a job and almost £1.5 billion of debt. The Phoenix Four (Peter Beale, Nick Stephenson, John Towers and John Edwards) bought the struggling company for £10 from BMW in 2000. Over the 5 year period, the four earned over £40 million in salaries and pensions. It is thought that Deloitte received around £9 million in payments during this time for its financial advice.
These facts and figures led to accusations that public interest was not considered during the period and led the FRC to launch a tribunal last year to discover whether Deloitte, along with a former corporate finance partner Mr Maghsoud Einollahi, had failed to manage conflicts of interest during the period in which it advised the MG Rover Group and the “Phoenix Four”. It was decided at this tribunal that the company had failed in this respect.
Today the FRC heard Deloitte’s appeal against the earlier decision and confirmed that the tribunal found that: “Deloitte & Touche and Mr Einollahi showed in some instances a persistent and deliberate disregard of the fundamental principles and statements of the ICAEW’s [The Institute of Chartered Accountants in England and Wales] code of ethics.”
Paul George, FRC Executive Director Conduct said: “The outcome of this Tribunal sends a strong clear reminder to all accountants and accountancy firms that they have a responsibility to act in the public interest in the work they undertake. The result in this case underlines the FRC’s commitment to promote public confidence and ensure the integrity of the accountancy profession by upholding the standards expected of members.”
A statement from the FRC said: “The conduct of Deloitte & Touche and Mr Einollahi fell short of the standards reasonably to be expected of, respectively, a member firm and a member of the ICAEW. ” and said that sanctions against the company and Mr Einollahi will be heard today.
Northfield MP Richard Burden said: “Deloitte’s dispute with the Financial Reporting Council is the latest episode in the MG Rover drama which never quite seems to come to an end.
“It’s highly concerning that the Tribunal found Deloitte and Mr Einollahi failed to consider the public interest as corporate advisers to the Phoenix Four. They appear to have fallen far short of the standards expected of accountants.The full Tribunal decision has not been published yet so I cannot comment fully on the ruling at this stage, or on the sanctions that Deloitte will face. […]whatever the relationship between the Phoenix Four and Deloitte, the findings of the 2009 independent inquiry into the way MG Rover and associated companies were financially structured between 2000 and 2005 revealed issues of deep concern.”
On the impact of the findings for such a large company, Mr Burden added: ” Deloitte have written to me expressing their disappointment at the outcome of the appeal, and telling me that the implications of the case go well beyond the case of MG Rover. ”
Yet, for Longbridge, the MP believes that we should continue to push forwards for a brighter future for the area. “Two things remain at the forefront of my mind. First is the contribution of the 6,000+ MGR workers who lost their jobs. Second is the importance of building a new future for Longbridge, and for the communities whose identity “the Austin” factory defined for over a century. The MG Motor Company – and it’s European Design and technical centre – are ensuring car making is part of Longbridge’s future as well as its past. But so too are the new Bournville College, the Longbridge Innovation Centre, and the new Longbridge town centre that is at the centre of a £1 billion new redevelopment programme. ” Richard said.
And he added: “Today is an important day to remember Longbridge’s past, while ensuring the area can climb to the future.”