Crime

Former Carillion execs fined £870k over ‘reckless’ statements

The FCA has decided to fine three of Carillion’s former directors, which includes Richard Howson, former chief executive officer, Richard Adam, former finance director, and Zafar Khan, former finance director, for almost £1m

The FCA has revealed that former Carillion executives are facing over £870,000 in collective fines over “reckless’ public statements published before the group’s collapse in 2018. 

The regulatory body added that Carillion has not referred its Decision Notice to the Upper Tribunal, and as a result, the regulatory body will impose a public censure on the firm, rather than a financial penalty, given the firm is currently insolvent and in liquidation.

It is also reported that, were it not for Carillion’s financial circumstances, the FCA would have imposed a financial penalty of £37,910,000. 

However, the FCA has decided to fine three of Carillion’s former directors, which includes Richard Howson, former chief executive officer, £397,800, Richard Adam, former finance director, £318,000, and Zafar Khan, former finance director, £154,400, or around £870,000 in total. 

The Upper Tribunal will reportedly determine whether to uphold the FCA’s decisions against the three individuals or not and whether there are any other actions that should be taken by the FCA. The Upper Tribunal’s decision will be made public on its website following a hearing. 

It comes as the FCA said it considers that Carillion “recklessly” published announcements on 7 December 2016, 1 March 2017 and 3 May 2017 that were “misleading and did not accurately or fully disclose the true financial performance” of the group. 

Furthermore, the regulatory body believes that those announcements had made “misleadingly positive” statements about the group’s financial performance generally and in relation to its UK construction business in particular. The announcements also did not reflect significant deterioration in the expected financial performance of Carillion’s UK construction business and the increasing financial risks associated with it.  

In the view of the FCA, Carillion’s systems, procedures and controls were “not sufficiently robust to ensure that contract accounting judgments made in its UK construction business were appropriately made, recorded and reported internally to the Board and the Audit Committee”. 

Mark Steward, executive director of enforcement and market oversight, said: “Carillion failed to take reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations under the Listing Rules. As a result its true financial position remained hidden over many months and the effects of its collapse were aggravated, causing substantial harm to shareholders and creditors. 

“This is market abuse, and as damaging to market integrity as insider dealing and manipulation, though not often described in this way. It should be. The FCA’s decisions on the three senior individuals whom the FCA alleges were involved in these failures will now be reviewed in the Upper Tribunal.”

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