Former directors of Carillion will face public questions from MPs about the firm's collapse under a joint inquiry launched today (24 January) by the work and pensions and the business, energy and industrial strategy (BEIS) committees.
Besides Richard Howson, chief executive of the contractor until July 2017, and Phillip Green, chairman of the company, the committees are also calling the Insolvency Service, which will be investigating the company’s descent into bankruptcy, and the Financial Reporting Council, whom regulate the auditors that signed off the company’s accounts.
Chris Martin, managing director of Independent Trustee Services, a member of Carillion pension scheme trustee board since 8 January, and Robin Ellison, chair of trustees, will also be present at the first evidence session, which will occur on 30 January.
The defined benefit (DB) pension schemes of Carillion, one of the UK government's biggest contractors, are all either in the retirement fund of last resort, the Pension Protection Fund (PPF), or will soon enter it.
Carillion has 13 final salary schemes in the UK with more than 28,500 members, and a deficit of £587m at the end of July.
Seven pension funds have already entered a period of assessment at the pensions lifeboat, which have around 5,900 members, a spokesperson at the PPF said.
After unsuccessful talks with its lenders and the UK government, Carillion made an application last week (15 January) to the High Court for compulsory liquidation.
The accountancy firm PwC has been appointed as administrator.
Carillion, which employs about 43,000 people, has been struggling for several months, issuing a profit warning last year that sank its share price – which has fallen from more than £2 a year ago to about 14.2p on Monday, the last day it was traded (15 January).
Recent reports put the full liability buyout figure for the pension fund at £2.6bn, with the PPF estimating it will cost them £800-900 million to finance the shortfall in the scheme, the committees said.
Labour MP Frank Field, chair of the work and pensions select committee, said: “Another day, another company goes bust hot on the heels of a clean bill of health from a Big Four financial services firm.
“The particularly nasty twist in this now grimly familiar tale is the mountain of debt and giant pension deficit this public services contractor leaves in the wreckage of its collapse– with an accompanying massive hit to the public purse.
“It must also be time now for the auditors who cosily signed off this disaster-in-the-making as a ‘going concern’ less than a year ago to begin to account for themselves.”
FTAdviser reported yesterday that the committee wants the government to tighten the net around auditors and their role in company pensions collapses in its upcoming paper on DB schemes.
Labour MP Rachel Reeves, chair of the BEIS Committee said: “In the wake of the BHS scandal, Carillion has the hallmarks of another corporate governance failure with directors asleep at the wheel while the business went off a cliff, in this case leaving jobs, pensions and public services under threat and a host of suppliers out of pocket.
“How is it that so many warning signs were ignored by the company and the government? What were the Carillion board and senior management doing to address the spiralling problems at the company? Why are the regulatory bodies stepping in only after Carillion’s collapse?
“As a committee we will also want to explore the executive pay arrangements at Carillion, the potential cost to the taxpayer of the insolvency, and the role of both directors and non-executive directors in the company’s collapse.”
On Monday (15 January), Liberal Democrat MP Stephen Lloyd submitted a motion in Parliament calling for an inquiry into collapsed Carillion.
Labour MP Debbie Abrahams, shadow secretary of state for work and pensions, demanded answers about the large deficit in the Carillion schemes, having written to The Pensions Regulator and Esther McVey, secretary of state for work and pensions.
In the meantime guidance body The Pensions Advisory Service (Tpas) has set up a dedicated helpline for members of the Carillion pension schemes.
FTAdviser reported last week (17 January) that there are already signs that scammers may be circling the company’s DB scheme members.
maria.espadinha@ft.com
