The UK’s financial watchdog today fined three former Carillion executives for “recklessly” publishing misleading statements prior to the construction firm’s collapse in 2018.
The Financial Conduct Authority (FCA) said it would have also fined the company itself a sum of £37.8m if it were not for the firm’s 2018 bankruptcy.
The FCA’s sanctions saw Carillion’s former chief executive Richard Howson fined £397,800, and the firm’s former finance directors Richard Adam and Zafar Khan fined £318,000, and £154,000 respectively.
The FCA said the three executives were each aware of Carillion’s “deteriorating” financial performance but failed to ensure the firm’s announcements “accurately and fully reflected these matters”.
The three men also failed to make Carillion’s board and audit committee aware of the increased risks, resulting in a lack of proper oversight, the FCA said.
The fines come after the London listed construction firm collapsed into insolvency in 2018, with liabilities of more than £7bn. Prior to its collapse, the firm employed around 43,000 workers.
Mark Steward, Executive Director of Enforcement and Market Oversight, said: “Carillion 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.”
“As 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.”
“This is market abuse, and as damaging to market integrity as insider dealing and manipulation, though not often described in this way.”
Dr Susan Hawley, executive director at Spotlight on Corruption, said the sanctions come as a “welcome move” but suggested the fines against the three executives “are peanuts compared to the millions these individuals earned as senior executives at the firm.”
“Given the huge cost of the company’s collapse – around £150 million of taxpayers money was lost – there are real questions as to whether this sends a serious enough message to senior executives that oversee corporate failure on this scale,” Hawley said.
“There needs to be much stronger clawback provisions as a legal requirement for companies, so that those at the helm when companies fail can be held more fully accountable.”