Deloitte administrators referred to accountant regulator over Comet collapse
Friday 25 July 2014
Three administrators from Deloitte have been referred to the accountancy regulator by the Insolvency Service over their part in the collapse retail chain Comet.
The Business Secretary Vince Cable said the Institute of Chartered Accountants in England and Wales must find out whether there was a conflict of interest because the accountancy firm had worked for Comet before the 2012 collapse that left 6,900 staff without jobs.
He also instructed ICAEW to look at Christopher Farrington, Nicholas Edwards and Neville Kahn’s role as Deloitte administrators in the company’s failure to consult properly with workers and unions over potential redundancies.
The move follows an 18-month investigation, which remains ongoing, into the company and its former owner OpCapita by the Insolvency Service and has seen the Government already foot an £18.4m bill for redundancy payments.
If the trio are found to have breached strict rules they could either face a fine or potentially lose their licences to practice.
Mr Cable said: “The taxpayer now faces a multi-million pound compensation bill as result of the failure to consult employees.
“There can be no excuse for failing to comply with the law which is very clear in this area. It is vital that the regulator establishes why this happened and whether disciplinary action against the administrators is appropriate.
“There are also important issues of possible conflicts of interest which need to be fully considered.”
An employment tribunal brought earlier this year by 2,000 former employees found that they had not been properly consulted about redundancies, after former head of finance Michael Walters testified.
It heard that the collapse was “simply an old fashioned corporate raid that resulted in a number of private equity investors choosing to liquidate a 75-year-old British company, at a cost of almost 6,900 jobs in order to realise a quick and substantial profit.”
After the ruling each worker would receive eight weeks pay, with a further case due to decide whether the remaining staff not involved in the tribunal are entitled to a payout, which could add a further £26m on the taxpayers’ bill.
Yesterday Deloitte strongly denied suggestions that there was a conflict of interest. A spokesman said: “It is not unusual for an administrator to be appointed to an insolvent company following a period as an adviser.
“Indeed, the administrator having knowledge of a company’s financial and commercial challenges is generally beneficial to all creditors and employees.”
OpCapita collected almost £117m from Comet’s demise when it bought the retailer for £2 and a £50m dowry from previous owners Kesa.
When it collapsed, OpCapita cashed in as biggest secured creditor, taking the £49m of cash on Comet’s balance sheet and the rest from the administration process. By comparison, unsecured creditors, including HMRC, dozens of landlords and suppliers lost out by £232m.
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