Alan Johnson faces his first major decision as Secretary of State for Trade and Industry this week, when he must decide whether to launch a full-blown inquiry into the failure of the carmaker MG Rover.
He will be handed the outcome of an initial inquiry that is expected to conclude that improprieties might have been committed in the run-up to the collapse. The Financial Reporting and Review Panel will say that it has uncovered possible evidence of wrongdoing which requires further investigation, weekend reports said.
The FRRP was ordered last month by Patricia Hewitt, Mr Johnson's predecessor, to review the company's accounts over the past five years for breaches of the Companies Acts.
She said any wider issues were a matter for the DTI. Sir Bryan Nicholson, the chairman of the FRRP's parent body, the Financial Reporting Council, told The Independent his report, which should be submitted towards the end of the week, would raise issues outside the FRRP's direct remit.
"When we deliver our report to the Secretary of State it will also deal with any issues that we have found during the course of these inquiries. Mr Johnson will have to choose between starting a preliminary investigation and launching a full-scale inquiry, chaired by an outside expert such as a QC, which could could last weeks and cost millions of pounds.
Any inquiry is certain to focus on the role of the so-called Phoenix Four - the founding directors who bought the company for a pittance but who were able to take out £40m for their personal benefit.
John Towers, Peter Beale, John Edwards and Nick Stephenson jointly bought MG Rover for £10 from BMW, which also lent the group £427m in an interest-free loan. Over the five years between the deal and MG Rover going into administration last month, the four directors received about £40m in salaries, interest payments and contributions to their pension funds. In 2002 and 2003 alone, these totalled £20.87m, of which £4.79m went to just one director.
The DTI could use this report, with information it expects to receive from Rover's administrators PricewaterhouseCoopers, to launch legal actions to have the four disqualified as directors.
The report will remain confidential, prompting opposition MPs and unions representing former Rover workers to call on the Government to publish the document. The company collapsed in April with the loss of more than 5,500 jobs. On Friday the administrators said there was a "slim chance" car production could resume at MG Rover's Longbridge plant. PwC said it was considering proposals from five potential buyers, two for the MG sports car business and three for the rest of the business. It warned that Longbridge's revival would be costly and complex and remained an "outside possibility".
A potential stumbling block remains from the sale of the intellectual property rights to the Rover 25 and 75 models to the Shanghai Automotive Industry Corporation. SAIC has said this prevents any other company manufacturing Rover cars, but PwC believes it owns about "2 per cent of the exclusivity of the cars".
Meanwhile DTI officials will today meet executives from Marconi, the beleaguered telcoms company, over its plans to shed hundreds of R&D jobs.
Two weeks ago Marconi revealed that 800 workers would lose their jobs after its failure to land a major BT contract. Although only 180 of those are engineers, ministers are understood to be concerned that a further cull would undermine the UK as a research base.
The DTI's fears are thought to have been fuelled by Marconi's signing of a partnership deal last Thursday with its Chinese rival Huawei.
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