An Australian litigation funder has more than doubled its money after giving Carillion’s liquidator millions to fight a £1.3bn lawsuit against KPMG.
Litigation Capital Management (LCM) has generated more than £7m in profits after funding the claim brought by Carillion’s liquidator against the Big Four firm, the Aussie firm said today.
LCM’s announcement comes after KPMG on Friday said it had agreed to settle the £1.3bn Carillion case for an undisclosed sum, after Carillion’s liquidator first sued the auditor in February 2022.
The lawsuit claims KPMG’s incompetence in auditing Carillion’s accounts lulled the construction firm’s board into a false sense of security that ultimately led to its 2018 collapse.
KPMG received £29m in fees for its audits of Carillion over a 19-year period before the construction firm imploded in 2018, in a process that led to 3,000 job losses and £7bn in unpaid debts.
Carillion’s liquidator subsequently filed its £1.3bn lawsuit against KPMG, in line with its duties to the construction firm’s creditors to maximise the recovery of any losses.
Litigation funders raise cash from investors with a view to bankrolling lawsuits on a ‘no win, no fee’ basis and taking a cut of any potential winnings.
LCM first began funding the claim against KPMG in 2021, after Carillion’s liquidator “went to the litigation finance markets” in pursuit of external cash, the fund’s chief executive Patrick Moloney told City A.M.
He explained that bankrupt companies seeking to sue auditors often require external funding, due to lacking sufficient cash to fund lawsuits themselves.
The case saw LCM invest £5.2m in the case before today announcing it had generated £12.5m returns, including £7m in profit.
Moloney explained that funds raised from US and European pension funds, university endowments, and investment banks were used to bankroll the Carillion claim.