Two former finance directors of collapsed outsourcing giant Carillion have been fined and banned by the accounting watchdog for acting 'recklessly' in the lead-up to the company's high-profile demise eight years ago. The Financial Reporting Council (FRC) also imposed sanctions on three other unnamed former Carillion senior accountants over their role in preparing financial statements before the company's collapse in 2018.
Sanctions Imposed
The FRC announced that Carillion's former group finance director, Richard Adam, has been fined £222,019, reduced from £550,000 in light of penalties imposed by the Financial Conduct Authority (FCA). His successor, Zafar Khan, who also previously served as Carillion's financial controller, has been fined £60,228, reduced from £225,000. Both former directors have been banned from the accounting industry body, the Institute of Chartered Accountants in England and Wales (ICAEW), for 15 years and 10 years respectively. Earlier this year, Mr Adam and Mr Khan were fined £232,800 and £138,900 by the FCA.
Misconduct Details
The FRC stated that Mr Adam and Mr Khan 'acted recklessly and failed to act with integrity in connection with the preparation of accounting information for Carillion's financial statements.' Mr Adam served as group finance director from April 2007 until the end of 2016, and was succeeded by Mr Khan, who held the role from January 2017 until September of that year. According to the FRC, the pair 'have accepted their misconduct in respect of several areas of Carillion's business, including certain specific transactions, major UK construction contracts and a supply chain finance facility, that were each material to the company's reported financial performance.'
Response from Zafar Khan
Mr Khan stated that he settled with the FRC to bring the matter to an end after lengthy proceedings. He said: 'I was finance director of Carillion for just eight months, before leaving in September 2017, some five months before Carillion went into liquidation in January 2018. Almost eight years later, the FRC's proceedings against me were still continuing. However, I no longer have the financial resources to enable me to continue defending their allegations. Furthermore, the extremely drawn-out nature of these proceedings has had a considerable impact on me and my family. Therefore, I felt I had no choice but to accept the FRC's allegations and agree a settlement to bring these matters to an end, despite my sincere belief that I acted at all times with integrity and in the best interests of the company.'
Other Sanctions
The three other unnamed former senior accountants were fined £45,500, £26,000 and £26,000 each and banned for a total of 15 years between them. Penrose Foss, the executive director of enforcement at the FRC, commented: 'It is critical that any individual who is responsible for preparing accurate financial information, whatever their level of seniority, undertakes their duties with integrity. In this case, 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. The FRC has also secured admissions from three further individuals. The substantial sanctions imposed on these five individuals reflect the gravity of their failure to discharge their respective obligations to act with integrity in preparing financial information in the context of a large, listed company.'
Carillion, which employed about 43,000 people including some 19,000 in the UK, collapsed in 2018 with massive debts. Prior to its failure, it was one of the UK's biggest construction and facilities management companies with several major government contracts. In October 2023, KPMG was handed a record £21 million fine by the FRC over its audits of Carillion.
