Reuters are reporting that MG Rover Group’s Accountants, Deloitte, will face a Disciplinary Tribunal later this month – the independent panel will be examining the firm’s conduct as Advisers and Auditors of MG Rover Group and the Phoenix Four Directors from 2000, when they acquired the UK carmaker from BMW Group for a nominal £10, until the company went into administration in May, 2005.
The Financial Reporting Council (FRC), which regulates Accountants, has appointed the independent Disciplinary Tribunal which will be assessing Deloitte’s advice to the Directors and whether that created a conflict with the best interests of MG Rover prior to the administration.
In the aftermath of MG Rover’s fall into administration and subsequent closure, it emerged that the Phoenix Four had paid themselves a whopping £40m in salaries, bonuses and pensions and, although the four faced no criminal charges at the time, they were disqualified from being Directors of any company for up to six years. It was the wages they paid themselves that was the big story – during the life of MG Rover, the Phoenix Four were the highest paid Automotive Industry executives in the UK.
The Financial Reporting Council said in 2012 that Deloitte and an employee, Maghsoud Einollahi, had failed to manage conflicts of interest between the Directors and MG Rover. Deloitte and Einollahi were corporate finance advisers to MG Rover and the Phoenix Four at the same time that Deloitte was auditing MG Rover’s accounts.
Deloitte disagreed with last year’s findings and an initial hearing of the FRC’s Formal Complaint took place before the Disciplinary Tribunal in March. The FRC has now confirmed that the hearing will resume on 29 July. Deloitte and Einollahi could face huge fines if the Disciplinary Tribunal upholds the FRC’s original findings. The news comes in the lead-up to the European Union’s approval of new laws which would prevent potential conflicts of interest between the auditing and advisory work done by accounting firms from arising in the future.
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