AROnline recently reported that the Financial Reporting Council (FRC) would be holding a Disciplinary Tribunal into the conduct of MG Rover and the Phoenix Four’s Accountants, Deloitte (formerly Deloitte & Touche). The hearing took place earlier this week and was effectively an appeal against an earlier ruling which stated that Deloitte had failed to manage conflicts of interest between MG Rover and the company’s Directors correctly.
The FRC’s Disciplinary Tribunal upheld the original decision and found that Deloitte and Mr Maghsoud Einollahi, who was one of that firm’s partners, had shown ‘in some instances a persistent and deliberate disregard of the fundamental principles and statements of the ICAEW’s [Institute of Chartered Accountants England and Wales] code of ethics.’ Paul George, the FRC’s Executive Director Conduct said: ‘The outcome of this tribunal sends a strong and clear reminder to all accountants and accountancy firms that they have a responsibility to act in the public interest in the work they undertake.’ The full version of the FRC’s Press Release, which contains details of the allegations against Deloitte & Touche and Mr Einollahi, can be accessed via that link.
The Disciplinary Tribunal is expected to set out the sanctions it will impose on Deloitte and Mr Einollahi as well as to deal with the issue of payment of costs in the next couple of weeks. Deloitte responded to the decision with this statement: ‘Deloitte’s advice, which itself was not criticised, helped to generate over £650m of value for the MG Rover Group, keeping the company alive for five years longer than might have been the case and securing 5,000 jobs in the West Midlands during this period. We take our client and public interest responsibilities extremely seriously and are proud of the value we helped create for the MG Rover Group.’
However, according to a report in the Daily Telegraph, the FRC is pressing for Deloitte to face a £20m penalty and also for Mr Einollahi’s suspension. The same newspaper also refers to other reports which suggest that Deloitte earned more than £9m in fees from its work on the MG Rover administration, as well as advising the Phoenix Four.