Outsourcing giant collapsed eight years ago
The Financial Conduct Authority (FCA) has fined two former finance directors of the collapsed firm Carillion for acting “recklessly” and contributing to misleading statements issued by the outsourcing giant prior to its high-profile downfall eight years ago. The FCA said that Richard Adam and Zafar Khan were “both aware of serious financial troubles in Carillion’s UK construction business but failed to reflect this in company announcements or alert the board and audit committee”.
The regulator said it had fined Mr Adam and Mr Khan £232,800 and £138,900 respectively, after the pair withdrew their challenges to the FCA’s findings. This comes eight years after the outsourcing giant, which employed about 43,000 people including some 19,000 in the UK, collapsed in January 2018 with massive debts.
Prior to its failure, Carillion had been one of the UK’s largest construction and facilities management companies, holding several major government contracts. The FCA found that the ex-finance directors at Carillion “acted recklessly and were knowingly concerned in breaches by Carillion of the Market Abuse Regulation and the Listing Rules”.
Mr Adam served as Carillion’s group finance director from April 2007 to the end of 2016 and was succeeded by Mr Khan, who held the role from January 2017 until September of that year. The FCA stated that the pair had responsibility for Carillion’s procedures, systems and controls relating to financial reporting.
“These were not sufficient to ensure that contract accounting judgments made in its UK construction business were made, recorded and reported appropriately,” the FCA added. Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: “Those in positions of responsibility have a duty to keep the market accurately and adequately informed.
“With Carillion, we have seen the serious impact it can have when they don’t.
“The action taken against Mr Adam and Mr Khan demonstrates our commitment to preventing market abuse and upholding the standards we expect.”
Mr Khan said that he settled with the FCA to conclude the matter after lengthy proceedings.
He said: “I was finance director of Carillion for just eight months, before leaving in September 2017, some five months before Carillion went into liquidation in January 2018.
“Almost eight years later, the FCA’s proceedings against me are still continuing.
“However, I no longer have the financial resources to enable me to continue to defend these allegations and the extremely drawn-out nature of these proceedings has had a considerable impact on me and my family.
“Therefore, I have decided to agree a settlement with the FCA to bring this matter to an end.”
He concluded: “I continue to believe I acted at all times with integrity and in the best interests of the company.”
Richard Howson, the former chief executive of Carillion, was also issued a decision notice by the FCA in 2022, but he is contesting the regulator’s findings, with a tribunal hearing scheduled for February 16. In October 2023, KPMG received a record £21m fine from the Financial Reporting Council over its audits of Carillion.
