Patricia Hewitt has ordered an investigation into the accounts of MG Rover and the companies owned by the four Phoenix directors, who controversially bought the carmaker for just £10.
The Secretary of State for Trade and Industry has asked Sir Brian Nicholson, chairman of the Government's Financial Reporting Review Panel, to head the probe into the transfer of assets and money between MG Rover and the Phoenix companies.
The news follows the final collapse of MG Rover on Friday, when the administrator, PricewaterhouseCoopers, announced the break-up of the 100-year-old car company and 5,000 redundancies at Longbridge.
Ms Hewitt told The Independent on Sunday: "I have asked Sir Brian Nicholson - and he has agreed - to investigate the accounts of MG Rover and all the associated companies over the last five years to find out what has happened to all the money and assets that were made available by BMW."
The Phoenix Four, led by chairman John Towers, have faced allegations of asset stripping. If Sir Brian unearths misconduct by the directors, he has the power to refer the matter to the Serious Fraud Office.
However, a source at the Department of Trade and Industry (DTI) insisted it had no such evidence: "It may be that everything they did was perfectly legal. But it leaves a nasty taste in the mouth. There are questions to be answered."
A spokesman for Phoenix Venture Holdings said: "There has been considerable scrutiny of our assets and a number of due diligence processes by various auditors. All have given us a clean bill of health."
The DTI is particularly keen for Sir Brian to investigate the movement of money between MG Rover and Techtronic (2000), a company owned by Phoenix Venture Holdings that is the immediate parent company to MG Rover.
In 2000, Techtronic received a £427m interest free-loan from the car maker's former owner, BMW, which is repayable in 2049. The loan was subsequently repackaged by Phoenix directors and lent to MG Rover at commercial rates of interest. In 2003, £14m in interest from the loan was paid into Phoenix Venture Holdings.
Tony Lomas, one of the PwC administrators, said that Techtronic was MG Rover's largest creditor. In effect, this means the Phoenix four are MG Rover's largest creditors. As a result, a significant proportion of the money recovered from any sale of assets belonging to MG Rover would have to be paid to Techtronic.
Mr Lomas confirmed that provided Techtronic remained solvent - and he stressed this was likely - it would not have to pay the loan back to BMW until 2049.
MG Rover creditors cannot make claims against assets held by the Phoenix four.
Mr Lomas said the sports car maker MG was the most valuable asset.
Jon Moulton, the businessman whose offer to buy MG Rover in 2000 was spurned by the Government, has been touted as a possible buyer for MG. However, he said: "From an emotional point of view I am very interested in MG. But from a practical point of view, I don't know what is for sale."
The owner of the Longbridge site, the property company St Modwen, is now drawing up plans for a £500m redevelopment. Its chairman, Anthony Glossop, said: "We are probably looking at four to five million sq ft off offices, technology space and industrial sheds. There is no point in sitting on our backsides complaining about the loss of Longbridge - we need to get out there and create jobs."
Meanwhile, the Government, which announced a £150m aid package for MG Rover workers and suppliers, is facing another £16m bill from the collapse of the group. Unions confirmed they would this week be making a claim for a "protective award" as there had not been the statutory 90 days' consultation under European law before redundancies were announced.
A recent court ruling, following the receivership of Allders, the department store chain, said that in the absence of consultation, employees were entitled to an extra 90 days' pay to a maximum of £270 a week. This works out at about £3,250 per Longbridge worker.Reuse content