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Former Carillion directors to be investigated over financial reporting

The Financial Reporting Council (FRC) has announced it’s launching an investigation into two former Carillion directors over possible misconduct following the collapse of the construction giant in January.

The probe will surround the conduct of ex-finance directors Richard Adam and Zafar Khan. They will be investigated by the watchdog “as quickly as possible” for the part they played in preparing and approving the collapsed company’s accounts between 2014 and 2017.

The FRC said it is liaising closely with the Official Receiver, the Financial Conduct Authority, the Insolvency Service and the Pensions Regulator “to ensure that there is a joined-up approach to the investigation of all matters arising from the collapse of Carillion”.

The FRC investigation announced today comes in addition to another probe under the audit enforcement procedure into the audit of the financial statements of Carillion by KPMG on 29 January.

It adds to the ever-growing investigation into the liquidation of Carillion. Back in February, the Work and Pensions, and Business, Energy and Industrial Strategy Committees began examining why the firm collapsed.

The two former finance chiefs were hauled before MPs along with former chairmen and senior executives. It was here when the Carillion board was heavily criticised by the governmental joint inquiry. Rachel Reeves, chair of the business committee, called out Khan and suggested he had “fell asleep at the wheel” during his eight-month tenure before being sacked. 

Khan refuted the claims and claimed he continuously looked to tackle the main issues. Speaking to the committees, Khan said: “The key focus of my time in the role was to bring net debt down. I believe I did everything that I could have done, essentially.”

Adam was also the target for MP frustrations during the hearing at the start of last month. He was accused of dumping his shares in the company at the earliest possible moment after selling shares worth £776,000 in early 2017 as soon as he qualified for them after leaving Carillion in December 2016.

On 15 January, ex-chairman Philip Green announced the industry giant would be folding after it was later revealed it had just £29m in cash to draw on, £800m of liabilities and a pension deficit estimated to be just short of £1bn.

The latest figures show that to date, 1,582 former employees have lost their jobs following the collapse, while 8,592 jobs have been saved by the Official Receiver with many of Carillion’s contracts being taken on by rival firms.