News
2 Feb 2012

Deloitte faces inquiry over MG Rover conduct

A formal complaint against Deloitte has been made to the UK accountancy profession’s highest disciplinary body over the big four firm’s conduct in relation to the ‘Phoenix four’ and the MG Rover Group

A preliminary inquiry by the Accountancy and Actuarial Discipline Board’s executive counsel alleges that the work of the firm fell short of the standards of objectivity and due care reasonably to be expected of ICAEW members and member firms.

The complaint focuses on corporate finance partner, Maghsoud Einollahi, and corporate finance advisers Peter Beale, Nick Stephenson, John Edwards and John Towers.

Birmingham-based MG Rover collapsed in 2005 with debts of £1.3bn and the loss of 6,000 jobs, five years after the four, all directors of Phoenix Venture Holdings, had bought the group for £10.

Over that time, they had paid themselves £40m in pay and pensions.

After a lengthy and detailed inquiry by Companies Act inspectors into MG Rover’s collapse and subsequent liquidation, the four were disqualified from acting as directors for between three and six years.

It is as a result of that report and the executive counsel’s own investigation that the formal complaint against Deloitte and Einollahi has been made.

This alleges that, in connection with certain transactions, they failed adequately to consider the public interest; the potential for there to be different commercial interests between the Phoenix four, MG Rover Group and associated companies and shareholders; and the conflicts of interest and self-interest threat in relation to advising the Phoenix four while maintaining client relationships with the group.

The AADB has made it clear that it is not alleging misconduct in relation to the firm’s audit work for MG Rover.

An independent disciplinary tribunal will be set up to hear the complaint.

 

Julia Irvine

Topics