Regulators hit Carillion finance directors with more fines

More than eight years after its implosion, regulatory investigations into the collapse of Carillion have completed with the last two finance directors of the contractor being fined again.

Today’s decision by the Financial Reporting Council (FRC) to hand penalties to Richard Adam, who was Carillion’s finance director between 2007 and 2016, and his successor, Zafar Khan, draws a line under a slew of hearings and investigations that began in the weeks after its demise in January 2018 with a host of bosses appearing before MPs at Public Accounts Committee the following month.

The FRC, which is the watchdog for chartered accountants, today said it had fined Adam £550,000, although this was cut to £222,019, given the Financial Conduct Authority (FCA), in a separate investigation, had already fined him £232,830 earlier this year. He was also banned by the FRC from the accountancy profession for 15 years.

The FRC also banned Khan - for 10 years – and fined him £225,000 although this was reduced to £60,228 to take into account the £138,960 penalty he had previously received from the FCA – the regulator for the financial services industry.

The FRC also said that three other unnamed “senior accountants”, who were accused of acting recklessly and without integrity, were each fined £40,000 and excluded for between two and eight years.

Of Adam and Khan, the FRC said: “Both acted recklessly and failed to act with integrity in connection with the preparation of accounting information for Carillion’s financial statements, prior to the company’s collapse in 2018.”

Penrose Foss, the FRC’s executive director of investigations and enforcement, added: “There was a sustained failure by Mr Adam in his role as group finance director, and by his successor Mr Khan over a shorter period, to act with integrity and ensure the accuracy of financial information relating to several business areas significant in Carillion’s financial reporting.”

Earlier this year, former chief executive Richard Howson, who was banned from being a director for eight years by the Insolvency Service in 2023, was fined more than £230,000 by the FCA for his part in a series of misleading statements being issued by the collapsed contractor.

In its report, the FCA revealed that one of the four major contracts that ending up costing Carillion millions of pounds in losses was priced to make the firm no money.

The FCA revealed that Carillion’s scheme to build more than 850 flats on the first phase of the Battersea Power Station development in London was bid at a 0% profit margin.

Carillion had shocked the market in July 2017 when it announced an £845m provision, £345m of which related to problem construction jobs. In its ruling, the FCA said: “The market’s adverse reaction resulted from the unexpected nature and size of the provision, which effectively wiped out Carillion’s profits over the previous six years.”

Adam and Khan were also banned in 2023 by the Insolvency Service from being directors for 12 years and six months and 11 years, respectively.