Carillion: “Akin to a ponzi scheme” with a “culture of fear”, new documentary reveals

The UK will get an inside look into the catastrophic demise of the former construction giant Carillion as Channel 4 Dispatches airs its documentary revealing the greed and incompetence of former directors who walked away with riches.

How to Lose Seven Billion Pounds which airs tonight documents the views of insiders from across the City and Whitehall, some for the first time, on what really happened behind the scenes and how industry supergiant was able to collapse with liabilities of up to £7bn, including a record pension deficit, unfinished projects across the country which still remain idle and subcontractors with over £1bn of unpaid bills.

The programme looks to find out why regulators and big city auditors failed to spot the warning signals and stop this disaster and why politicians and civil servants gave Carillion hundreds of millions of pounds of new contracts as its accounts unraveled.

Dispatches speaks to people whose job it was to scrutinise government expenditure and viewers hear the bemusement of some on why the government still announced Carillion as one of the contractors for the HS2 train line despite the firm issuing a profit warning just a week before in July 2017.

Speaking to Dispatches, Sir John Bourn, head of the National Audit Office for two decades from 1988 to 2008, said he would sum up the government’s scrutiny of Carillion as ‘”inadequate”. “The government should not in my view have given Carillion so much work and it didn’t have to do it, Bourn added. “You could see that Carillion was in trouble - it was all rather like I thought a Ponzi scheme because it was taking small contracts as a way of keeping the bigger contracts going.”

The documentary’s presenter Liam Halligan also hears from those inside the troubled firm and is told about a “culture of fear” which was systemic within the inner workings of Carillion. Jon Hull, Carillion’s head of recruitment from 2015 to 2018, detailed how Richard Adam, Carillion’s finance director from 2007 to 2016, operated.

“It was a culture of fear. And confusion, and I think deliberately so,” Hull added. “I think he [Richard Adam] was absolutely, totally responsible for that culture. You know I think in their terms, it was it was fearful. You know it was get this done because, you know otherwise there’ll be consequences. Richard Adam at the time was very aloof, seen as very controlling. He made the numbers look better without tackling the fundamental issues in the company, which is what a director should do right?”

Perhaps one of the most concerning pieces of evidence to be presented tonight on the firm’s demise is financial analyst Stephen Rawlinson, who dealt with Carillion’s senior management and speaks about serious concerns he had about Richard Adam and how numbers could simple be made up to fit. 

Rawlinson reveals: “When the numbers didn’t come to where he wanted them to be he would simply say to the management ‘Go back and do the numbers again.’”

However, responding to the documentary Adam says he doesn’t recognise these views, and he’s not aware of any such accusations being raised while he worked at Carillion. He’s also told the documentary makers that throughout his time at Carillion all of its accounts were approved by the board and audited.                    

Furthermore, while paying out ever-rising dividends, Carillion ran up a pensions shortfall of hundreds of millions of pounds. Robin Ellison, chairman of Carillion Pension Trustees, and the man in charge of Carillion’s pension funds, reveals that he tried to convince the company to bring that shortfall down.

In his very first interview since the collapse, he tells Dispatches: “We thought they could pay more without affecting the value of the company, and they weren't prepared to pay that. Were we worried for members - yes we were. Did we do our best to try and recover it - yes we did. And the difference in this case, which was unique in my experience was that they were in a non-negotiating mode.”

How to Lose Seven Billion Pounds airs tonight on Channel 4 at 10.30pm.