The Financial Reporting Council (FRC) has imposed sanctions against two former finance directors of Carillion following an investigation into the preparation of financial statements.
Former group finance director Richard Adam and his successor Zafar Khan admitted to “acting recklessly and failing to act with integrity” before the company collapsed in 2018.
The misconduct related to several business areas, including major UK construction contracts and a supply chain finance facility, between 2013 and 2017.
Adam has been excluded from the Institute of Chartered Accountants in England and Wales for 15 years and received a £222,019 fine.
Khan has been excluded for 10 years and fined £60,228. The penalties were reduced to account for prior fines imposed by the Financial Conduct Authority.
Three other former senior accountants also faced sanctions for reckless conduct, though the FRC has declined to name the individuals due to confidential circumstances.
These three accountants received bans ranging from two to eight years and fines between £26,000 and £45,500.
Carillion was a multinational construction company employing 43,000 people before it entered compulsory liquidation in January 2018.
The company issued a series of profit warnings in 2017, reporting a first-half loss of approximately £1.15bn and total provisions against contracts exceeding £1bn.
The FRC noted that while the individuals acted recklessly, there were no findings or admissions that they acted dishonestly or deliberately.
Executive director of investigations and enforcement Penrose Foss said: “It is critical that any individual who is responsible for preparing accurate financial information, whatever their level of seniority, undertakes their duties with integrity.
“This is a fundamental requirement for every organisation. For a large publicly listed company, the consequences of failing to meet this requirement can be wide-ranging, affecting investors suppliers, employees, and the many communities served by an organisation across the UK and beyond.”
She added: “In this case, there was a sustained failure by Mr Adam in his role as group finance director, and by his successor Mr Khan over a shorter period, to act with integrity and ensure the accuracy of financial information relating to several business areas significant in Carillion’s financial reporting. The FRC has also secured admissions from three further individuals.
“The substantial sanctions imposed on these five individuals reflect the gravity of their failure to discharge their respective obligations to act with integrity in preparing financial information in the context of a large, listed company.”
