KPMG halts referrals to its former restructuring unit in bid to recover from Silentnight scandal
KPMG will no longer refer any work to its former insolvency unit, Interpath Advisory, in a bid to mend its reputation after the scandal over the sale of bed manufacturer Silentnight to a private equity firm, according to reports.
The Big Four firm was fined £13m by the UK accounting watchdog earlier this year for knowingly giving an “untruthful” defence over its conflict of interest in the 2011 sale of Silentnight, after selling the restructuring business to private equity fund HIG Capital for over £350m.
It was the first time ever that the Financial Reporting Council (FRC) tribunal had found an accountancy to have been dishonest in its defence.
The steep sanctions, which KPMG tried to bring down to £5m, are also the highest ever imposed on an accounting company in a non-audit case.
Even though the sale of Interpath has enabled the business to win work from KPMG’s audit clients as there is no longer a conflict of interest, KPMG will not refer any work to the insolvency business, according to the Financial Times, which first reported the news.
KPMG’s head of UK deal advisory practice, Liz Claydon, was reportedly one of the decision-makers in the move aimed at recuperating the company’s image.
The news swiftly follows reports that KPMG decided to also temporarily withdraw from pitching for any new public contracts, in order to curtail a threat by the UK government to ban the firm from bidding for such contracts.
The FRC issued a fine of £13m against KPMG and £500,000 against former partner David Costley-Wood in August, after finding that the Big Four firm had acted as an advisor to both bed manufacturer Silentnight and US private equity firm HIG Capital, which sought to buy the British company, despite a conflict of interest.
Silentnight was advised from 2010 by KPMG’s restructuring advisers until its collapse a year later.
Separately the accounting giant is also under investigation by the FRC for its auditing role in the collapse of Carillion.