Deloitte hit by record fine for MG Rover work
DELOITTE has been fined a record-breaking £14m and slapped with its first ever severe reprimand from the accountancy watchdog for failing to manage conflicts of interest when advising MG Rover and its owners.
An independent tribunal for the Financial Reporting Council agreed with 13 allegations of misconduct in Deloitte’s role in the run-up to the car group’s collapse in 2005.
The panel also barred former Deloitte corporate finance partner Maghsoud Einollahi from the profession for three years and fined him £250,000, though the company has agreed to cover his penalty.
Deloitte was found to have ignored possible conflicts of interest when it worked with the buyers of Rover, a group of local businessmen known as the Phoenix Four.
The panel criticised Deloitte for not telling its audit client Rover to get independent advice once the Phoenix Four had taken over the firm from BMW in 2000, or later when Deloitte advised the directors as they paid more than £7m into a separate trust using the car company’s tax losses.
“It is difficult to think that the respondents would not have been aware of these conflicts. It would appear that they chose to ignore the evidence,” the tribunal said yesterday.
It also stressed that the accountancy company was covered by industry rules requiring it to consider the public interest, even when it was advising on corporate finance.
“We remain disappointed with the outcome of the tribunal and disagree with its main conclusions,” said a spokesperson for Deloitte, which has 28 days to lodge an appeal.
“This could have negative implications for the advice that can be provided by ICAEW member firms and members, both within the profession and business.”
PROFILE: THE COLLAPSE OF MG ROVER
1994
BMW buys Rover for £800m, six years after it was privatised and sold to British Aerospace
MARCH 2000
BMW plans to split the loss-making Rover operations. Private equity group Alchemy Partners named as an early bidder.
MAY 2000
The Phoenix Four – Peter Beale, Nick Stephenson, John Towers and John Edwards – make a counter-offer of £10, with the
support of BMW and the British government
APRIL 2005
MG Rover calls in the administrators, with debts of £1.3bn, after failed rescue talks with Shanghai Automotive
2009
A long-delayed report on Rover’s collapse finds that the Phoenix Four paid themselves £42m in pay and pensions. The four are
subsequently struck off as company directors for a total of 19 years
JANUARY 2012
Accountancy regulator brings complaint against Deloitte