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FCA would have fined Carillion £38m – if it hadn’t already collapsed

The Financial Conduct Authority (FCA) has announced that it would have imposed a £37.9m fine on Carillion – were it not for the fact that it is already insolvent and in liquidation.

The would-be fine came after the FCA determined that Carillion “recklessly published announcements” on 7 December 2016, 1 March 2017 and 3 May 2017. The FCA said these were misleading and did not accurately or fully disclose Carillion’s true financial performance.

It said the announcements made misleadingly positive statements about Carillion’s financial performance generally and in relation to its UK construction business in particular. They did not reflect the “significant deteriorations” in the expected financial performance of Carillion’s UK construction business. Nor did they reflect the increasing financial risks associated with it.  

Executives handed provisional fines

Meanwhile, the FCA has fined three former Carillion executives a total of £870,000.

Former chief executive Richard Howson has received a provisional fine of £397,800 The FCA also provisionally fined former finance director Richard Adam £318,000 and former finance director Zafar Khan £154,400. The FCA said that Howson, Adam and Khan had acted recklessly and were “knowingly concerned in Carillion’s contraventions”.

All three have referred their respective decision notices to the Upper Tribunal where they will each present their case. The Upper Tribunal will decide whether or not to uphold the FCA’s decisions against the three former executives.

Financial position ‘remained hidden’

Mark Steward, executive director of enforcement and market oversight at the FCA, 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. It should be.

“The FCA’s decisions on the three senior individuals whom the FCA alleges were involved in these failures will now be reviewed in the Upper Tribunal.”

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Comments

  1. Other than suffering fines are these former executives going to be prosecuted and hopefully imprisoned?

  2. Carrilion went straight into liquidation in January 2018, no intermediate insolvency periods, after extracting as much cash as it could from clients and subcontractors in the preceding months. Why has it taken so long for the FCA to reach its conclusions? Carillion’s 2016 and 2017 accounts were clearly a pack of lies, obvious to those in the know, including its auditors, which have only been fined a smack on the wrist amount.

  3. Why didn’t anyone act sooner and save a lot of people a lot of money, I, like many, lost pensions money that will affect the rest of my life income, why can’t the FCA go after the Board members who were complicit in what is basically fraud.

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