Screws turn on Carillion executives as business secretary Greg Clark weighs in on misconduct probe
Pressure was mounting on Carillion’s former top brass last night after the government promised a thorough investigation into the actions of the failed firm’s executives.
A probe by the Official Receiver was ordered to be fast-tracked and widened by business secretary Greg Clark. “Any evidence of misconduct will be taken very seriously,” he said.
Cabinet Office minister David Lidington told parliament he would not pre-empt such a review but stressed “severe penalties” would be imposed if misconduct was found.
The tough stance came as fresh details emerged about the perilous state of Carillion’s finances when it crashed into liquidation early on Monday morning.
Read more: Carillion rescue “undermined” by Royal Bank of Scotland and Santander
Keith Cochrane, who was drafted in as Carillion’s interim chief executive in the wake of a catastrophic £845m contract write-down in July, claimed the actions of two of Carillion’s lead banks had “undermined” efforts to save Britain’s second-biggest contractor.
The construction veteran, who had served on Carillion’s board from July 2015 and was a member of the remuneration and audit committees, accused Royal Bank of Scotland of “unilateral action which in the company’s view undermined the group’s efforts to conserve cash”.
Court papers seen by City A.M. show Carillion held just £29m of cash when it failed, and that Santander was also blamed by Cochrane for terminating a critical early payment facility (EPF).
Read more: Carillion boss previously found guilty of breach of trust over pensions
Cochrane claimed accountants PwC and EY rejected requests to be Carillion’s administrator amid concerns huge funding costs could not be met – necessitating a taxpayer-funded insolvency process.
RBS insisted it withdrew support because the company “was not viable”. Santander said it removed the EPF in December after Carillion made a “material additional funding requirement”.
Meanwhile, details of Carillion’s contagion surfaced as thousands of small and medium-sized suppliers face difficulties resulting from unpaid bills. Experts estimated unsecured creditors may recover less than 1p in every £1 owed to them.
Landscaping firm Flora-tec was owed £800,000 prior to Carillion’s collapse. Managing director Andy Bradley said he was aware Carillion was facing financial difficulties and had intended to scale back exposure to the firm.
“However… the government continued to give them billion-pound contract after billion-pound contract and that said to me, as a small supplier, that the government had done their due diligence,” he said. “We were following the government lead… only to be given a sucker punch.”
Tory MP Bernard Jenkin, who chairs the Public Administration and Constitutional Affairs Committee and is planning an inquiry into Whitehall’s handling of private sector contracts, told City A.M.: “I think there is a lesson for capitalism as a whole that controversial levels of remuneration in the face of failure is unacceptable and undermines public confidence in private companies… Directors need to be much more alive to the long-term reputations of their business.”
Read more: The BoE says fallout from Carillion will be “entirely manageable”