Carillion, a British management and construction company, recorded a negative annual report that showed the company’s failing financial health. The company’s financial condition gave rise to major concerns about corporate governance. On seeing Carillion on the verge of a collapse, investors were ‘fleeing for the hills’, said MPs.
The company was subjected to a parliamentary investigation last month. It has curtailed jobs of several sub-contractors and almost 1,000 jobs have become redundant.
Evidence to a parliamentary inquiry into the company’s collapse last month showed that one major investor was considering to sue the British facilities management and construction major.
Carillion’s former auditor KPMG has to now face the Business, Energy and Industrial Strategy Committee as well as the Work and Pensions Committee on Thursday. The company will be questioned why its accounts were signed off.
Both the committees have gathered evidence from former Carillion directors.
On Monday, the MPs released details of written comments from the company’s big shareholders.
Frank Field, the Chairman of the Work and Pensions Committee said: “Their stewardship had, they proudly told us, been adjudged ‘best in class’ by their friends at KPMG.
“On the other hand, investors were fleeing for the hills, and it appears those who looked closest ran fastest.
“We will be taking evidence from the auditors and the investors – as well as demanding more company papers – to get to the bottom of who knew what and, most importantly, when.”
Rachel Reeves, who chairs the Business, Energy and Industrial Strategy Committee, said: “Investors spotted that Carillion was heading for disaster and fled.
“The company had unsustainably high levels of debt, weak cash generation and was saddled with a widening pensions deficit.
“It’s a tragedy for those who have lost their jobs and the suppliers left struggling for survival that Carillion directors ignored these issues.
“Carillion’s annual reports were worthless as a guide to the true financial health of the company.
“The fact that it was impossible to get a true sense of the assets, liabilities and cash generation of the business raises serious questions about Carillion’s corporate governance.
“KMPG will have to explain why they signed off on accounts which appeared to bear so little relation to reality.”