Disappointment as Silentnight members denied compensation

Disappointment as Silentnight members denied compensation

MPs have expressed their disappointment that members of the Silentnight Pension Scheme will not receive any compensation from the £13m fine handed to KPMG for serious misconduct.

The All Party Parliamentary Group on Fair Business Banking took to Twitter to criticise the decision, made by the Institute of Chartered Accountants in England and Wales, to keep the proceeds of the fine levied by the Financial Reporting Council rather than reimburse pension holders, who MPs consider were “ripped off by one of the body’s own members”.

KPMG was handed the £13m fine in August over its conduct in the sale of Silentnight, which led to its insolvency and the Silentnight Pension Scheme ending up in the Pension Protection Fund.

David Costley-Wood, former partner and head of KPMG Manchester Restructuring, was severely reprimanded and handed a £500,000 fine for his role in the sale and excluded from the ICAEW for 13 years.

An FRC tribunal found that Costley-Wood had assisted with a strategy designed to drive Silentnight into an insolvency process, “with a view to passing Silentnight’s pension scheme to the PPF at the expense of pension scheme members and PPF levy payers”.

In a letter to APPG Banking co-chairman Kevin Hollinrake MP, ICAEW chief executive Michael Izza said that, although the board “had sympathy” with members of the Silentnight Pension Scheme who may have been adversely affected, it would not be passing on any of the £13m as compensation.

He said the board had considered the merits of the request, but had noted that the Accountancy Scheme, the regime setting out how cases are dealt with by the FRC, “was never intended to operate as a compensation scheme for third parties who may have suffered losses as a result of actions of ICAEW members and member firms.

“Indeed, this would have complicated and potentially duplicated the civil rights of third parties to seek redress through the courts directly from the member or member firm alleged to have caused the loss,” he wrote.

The board thus concluded “that it would not be appropriate for ICAEW to remit any part of the Accountancy Scheme fine it may receive from the FRC in relation to this matter to the pension scheme”.

APPG Banking was not satisfied with this response and said it was reinforcing the "vital need for sector reform”.

Benjamin Mercer is a reporter at FTAdviser's sister publication Pensions Expert