Deloitte Fine: 14 Million Pounds, or $22 MillionBy: Bennett Rieser - September 9, 2013
The accounting firm that advised the MG Rover Group and the Phoenix Four, Deloitte & Touche, has been fined £14 million, or roughly $22 million U.S., for a conflict of interest.
The Guardian reports that the Financial Reporting Council, which issued the record-breaking fine, gave the company a severe reprimand over ethical breaches and the amount of money made through sheer misconduct. A former director (Maghsoud Einollahi) received an individual fine of £250,000 and is banned from practicing accounting for three years.
The executive director of conduct for the FRC, Paul George, has said of the FRC report that “[it] provides a clear analysis of the case and how it reached its conclusions. It should be essential reading for all members of the profession.”
The Phoenix Four (John Towers, Nick Stephenson, John Edwards and Peter Beale) purchased MG Rover in 2000 for a combined total of £10, and paid themselves around £42 million before the company collapsed in 2005. Reuters reports that the firm of Deloitte and its director, Einollahi, were acting as finance advisers to firms involved with MG Rover and the Phoenix Four. When the company collapsed with a £1.6 million debt, 6000 jobs virtually evaporated.
Deloitte is charged with failing to consider a conflict of interest that granted the company massive profits under schemes conducted by the Phoenix Four related to MG Rover. The BBC has reported that, as early as 2005, Deloitte’s accounting was being investigated by the UK’s National Audit Office.
In 2004, a joint venture had been announced by the Shanghai Automotive Industrial Corporation that might rescue the struggling automaker, but little headway or success was gained. By April 2005, MG Rover’s administrators received an offer from the UK government for a £6.5 million loan. That same month, the Shanghai Automotive corporation pulled out of the joint venture, leaving Nanjing Automotive to pick up the pieces that remained of MG Rover.[Image via a Youtube video inside the MG Rover factory]