Deloitte’s record £14m fine from the UK’s accountancy watchdog over conflicts of interest in its handling of the doomed MG Rover is set to be slashed after a partial victory in its appeal against the charges.
In 2013, the Financial Reporting Council’s independent tribunal ruled that Deloitte and its then partner Maghsoud Einollahi “showed in some instances a persistent and deliberate disregard” for accounting ethics when failing to manage the conflict of interest between advising MG Rover and advising the “Phoenix Four”.
The businessmen John Towers, Nick Stephenson, Peter Beale and John Edwards bought the firm in 2000 and took out tens of millions of pounds before it collapsed in 2005 with 6,000 job losses.
The FRC’s case focused on Deloitte’s work on “Project Platinum”, the project to dispose of the MG Rover loan book, as well as “Project Aircraft” a scheme to exploit Rover’s previous tax losses.
But eight of 13 charges against the accountancy firm were overturned yesterday and a new hearing will take place, which is likely to reduce the level of the fine greatly.
Deloitte was cleared of the more serious charges, including failing to consider the public interest and deliberate misconduct in working for Rover and the Phoenix Four.
But the appeal tribunal upheld other charges, including that it “failed adequately to identify and consider potential or actual conflicts of interest”, and that it failed to put in place safeguards such as advising Rover to seek independent advice. Deloitte was MG Rover’s auditor as well as corporate finance adviser to MG Rover and the Phoenix Four.Reuse content