Carillion directors 'delusional' to have expected a Government bailout
Directors of Carillion have been told they were 'delusional' in believing the Government would bail out the business with taxpayers' money.
Four senior company chiefs were facing another inquiry by MPs into the collapse of the Wolverhampton construction and services giant.
Chairman Philip Green and former acting chief executive Keith Cochrane both maintained they did not think the company would fail until the Government rejected a rescue plan that would have seen it lending Carillion £10m a week for a fortnight.
But Meg Hiller MP, chair of the Public Accounts Committee said: "It seems, and you might have picked up the mood around the table, delusional that you would assume or believe that Government would use taxpayers' money to prop you up at that point."
The MPs were also told that Carillion had warned the Government in November or December that a liquidation would see creditors get "no more than 1p in the the pound".
Since the company's collapse five weeks ago it has been estimated suppliers and sub-contractors, a third of them small or medium sized companies, are owed up to £1.4bn.
The hearing was also told by Keith Cochrane that Carillion's liquidation would add to the delays and to the cost of the £350 million construction of Smethwick's Midland Metropolitan Hospital, where work remains at a standstill.
And former chief executive Richard Howson revealed Carillion recruited the aid of the Secretary of State for International Trade, Liam Fox, and UK ambassadors in trying to get paid for work it had carried out in Oman and Qatar.
Earlier another set of MPs probing the collapse of Carillion say board minutes reveal the group’s last finance chief had ‘blown the whistle’ on accounting irregularities just weeks into her new job.
And they have launched fresh attacks against directors for not listening to alarms being raised about the state of the company.
So far 1,371 people have lost their jobs and another 8,000 jobs hang in the balance six weeks after the company went into liquidation.
Now new information published by the Work and Pensions and Business Select Committees revealed that Emma Mercer was raising concerns about the accounts she found just six weeks into her job last year as financial director of UK construction services.
Minutes of board meetings described her as ‘whistleblowing’, said the MPs, adding that her revelations threw up serious questions, not least for Carillion’s auditors, KPMG.
Mrs Mercer’s concerns triggered a review of contracts, although the board’s initial decision to have an independent element was later reconsidered.
Frank Field, who chairs the Work and Pensions Committee, said: “Emma Mercer took just six weeks to spot and pull the thread that began the entire company unravelling.
“That the next Chief Financial Officer had to go through whistle blowing procedures to get her concerns about accounting irregularities taken seriously by the Carillion board is extraordinary.
“So too is that the board’s response was to reject an independent review and get KPMG, their pet rubber-stampers, to mark their own homework.
“While our witnesses have been reticent in oral testimony, these minutes begin to reveal the true picture of a company falling apart at the seams in full view of the board and their auditors.”
Rachel Reeves, who chairs the Business, Energy and Industrial Strategy Select Committee, said: “Carillion directors say they couldn’t foresee what investors and company staff could – that spiralling debt problems and failing contracts were destined to sink the company.
“These board minutes point to a very different scenario – Emma Mercer was sounding the alarm but none of the Carillion directors were willing to wake up and listen.”
The committees said the board minutes reveal that Mrs Mercer was blowing the whistle on accounting irregularities.
The committees have launched a joint inquiry into the collapse of Carillion.
This morning MPs on Parliament’s Public Accounts Committee will be questioning former Carillion executives this morning including Mrs Mercer, company chairman Philip Green and chief executives Richard Howson and Keith Cochrane.
