Government will ask court to ban MG Rover 'Phoenix Four'

Move comes after SFO says it will not investigate collapse of the car maker

The government will seek to disqualify the so-called Phoenix Four as company directors, despite being told by the Serious Fraud Office yesterday that it will not investigate the collapse of MG Rover four years ago.

Lord Mandelson last month asked the SFO to look at whether the four – John Towers, Peter Beale, John Edwards and Nick Stephenson – should face a fraud investigation after they bought the company from BMW in 2000, but was told yesterday that there was insufficient evidence for the SFO to proceed.

The Business, Innovation and Skills department said it would seek to ban the four from running companies in the future, adding that independent counsel had advised that a court would be likely to find that "at least some of the directors are unfit to be concerned in the management of a company" following their role in the demise of the Midlands-based group.

A spokesman for the four said that yesterday's disclosure was a typical of the Government's behaviour towards the former directors. "It is clear that the Government wishes to deflect attention away from its own role in the collapse of the company. At every turn the Government has tried to lay the blame for the failure of the company at the door of the former directors," he said.

The announcement from the SFO, which draws a line under the criminal investigation, was seized upon by opposition politicians who accused the Business Secretary of creating a smokescreen to delay the publication of an independent report into events surrounding the collapse.

"I always thought the Serious Fraud Office would not allow themselves to be used as an excuse for delay," said Ken Clarke, the shadow Business Secretary. "My suspicion has always been that delayed publication of the report was being sought because of criticism of the Government within it – I wait to see if my fears are allayed."

Jon Moulton, the head of the private equity firm Alchemy Partners, which tried to buy MG Rover in 2000 before losing out to the Phoenix Four, said he was not surprised by the SFO decision: "It was a very odd referral in the first place and no doubt it was based on some level of smoke. The fact that the SFO have come back in just four weeks makes the referral look even more bizarre."

Lord Mandelson maintained that the referral to the SFO was justified: "It was important to have clarity on whether or not this was a case that the SFO should be investigating. The workers who lost their jobs and the creditors who were owed nearly £1.3bn by the collapse deserved no less. They have waited a long time to see the findings of the report and the way is now clear for us to publish."

The Government initially asked for the independent inquiry, written by Gervase MacGregor, a partner at the accountants BDO Stoy Hayward, and the barrister Guy Newey QC, to be returned with 12 months. Its findings could cause embarrassment, as Tony Blair's goverment supported Phoenix's takeover in 2000 and offered £6m in aid in 2005 after a failed effort to resurrect the group. The report will now be published on 11 September.

In 2000, the German car maker BMW, which then owned MG Rover, threatened to close the company, but agreed, with government backing, to sell to the Phoenix Four for a nominal fee of £10. BMW also provided a loan of £427m. However, MG Rover slid into administration with debts of more than £1bn in 2005. The Phoenix Four earned as much as £40m in pay and pensions.