Insolvency Service ‘£8m out of pocket’ over Carillion proceedings

Disqualification case against former non-execs of failed outsourcer was dropped this month
Photo: Yorkshire Pics/Alamy Stock Photo

By Jim Dunton

26 Oct 2023

A government-mandated bid to bar former directors of Carillion from UK boardrooms has left the Insolvency Service £8m out of pocket after the case against five non-execs was dropped this month, it has emerged.

The Insolvency Service had launched disqualification proceedings against eight bosses from the failed construction firm and outsourcing giant, which went bust in 2018, plunging hundreds of government contracts into crisis. A subsequent National Audit Office analysis found the firm was around £1.5bn in debt.

Proceedings launched in 2021 on behalf of then-business secretary Kwasi Kwarteng have now succdeeded in disqualifying former chief exec Richard Howson and ex-Carillion finance directors Zafar Khan and Richard Adam from boardrooms.

However, bids targeting former chairman Philip Green, interim chief exec Keith Cochrane, audit committee chair Andrew Dougal, remuneration committee chair Alison Horner and sustainability committee chair Ceri Powell were dropped ahead of a trial earlier this month.

In a written parliamentary question, Labour MP Emily Thornberry asked the Department for Business and Trade how much it and the Insolvency Service – an executive agency of the department – had spent on the proceedings.

Junior minister Kevin Hollinrake responded on 24 October. He said that while costs had been recovered in relation to the three disqualifications secured, the balance was in excess of £8m.

“The Department for Business and Trade has not incurred any costs in relation to the proceedings,” he said. “The Insolvency Service has incurred estimated costs in the proceedings against all eight directors of £11,064,519.

“Following the successful disqualification of the three executive directors, costs of £2,725,000 have been recovered.”

The five Carillion non-execs had been due to face a 13-week trial that would seek to establish “contributory responsibility” for failings at the company. However, days before the civil trial was due to begin, the Insolvency Service said proceedings were “no longer in the public interest” and “should be concluded by way of agreement and without the need for a trial or the associated expense”.

Earlier this month auditor KPMG was fined a record £21m by regulator the Financial Reporting Council for its failings in relation to Carillion.

The accountancy giant was also hit with £5.3m in costs over “seriously deficient” work probing Carillion’s finances in the years before its demise.

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