25 Jul 2014 11:09am

Deloitte IPs referred to ICAEW over Comet

Business secretary Vince Cable has announced that the Insolvency Service has referred three Deloitte partners to ICAEW over a Comet administration conflict of interest

After an 18-month investigation by the Insolvency Service, Christopher Farrington, Nicholas Edwards and Neville Khan - all from Big Four firm Deloitte – are to be considered for disciplinary action on two different grounds regarding the administration of Comet.

Khan is global head of reorganisation services for Deloitte, and has been involved in high profile administrations for the firm including Woolworths and HMV.

Following Comet’s collapse in 2012, the three IPs – previous advisors to Comet – accepted their appointment as administrators despite potential for conflict of interest, according to the Insolvency Service.

There can be no excuse for failing to comply with the law, which is very clear in this area. It is vital that the regulator establishes why this happened.

Vince Cable

Additionally, the employment tribunal found that employees were not properly consulted on redundancy options as legally required, leading to a potential £26m compensation package which will be footed by the taxpayer, the tribunal found.

Cable said, “The taxpayer now faces a multi-million pound compensation bill as result of the failure to consult employees.

“There can be no excuse for failing to comply with the law, which is very clear in this area. It is vital that the regulator establishes why this happened and whether disciplinary action against the administrators is appropriate.

“There are also important issues of possible conflicts of interest which need to be fully considered.

“Cases such as these reinforce the need for a stronger insolvency regulation regime which will give us new powers to ensure regulators take firm action where abuse is found.

“The bill I am currently taking through parliament will ensure these changes to current law are made.”

Deloitte “strongly disagrees” with the suggestion of a conflict of interest.

A spokesperson for Deloitte said,"We note today's announcement and will cooperate fully with any investigation. However, we strongly disagree with the suggestion of a conflict of interest. It is not unusual for an administrator to be appointed to an insolvent company following a period as an adviser. Indeed, the Administrator having knowledge of a company’s financial and commercial challenges is generally beneficial to all creditors and employees.

"Once appointed, the administrators, along with our advisers and Comet management, worked tremendously hard under very challenging circumstances to provide consultation to nearly 7,000 employees across more than 250 sites.

"All employees were notified in writing of the risk of redundancy and consultations took place at sites in a very tight timescale and whilst significant efforts were being undertaken to rescue the business. Union representatives were also invited by the administrators to participate in consultation meetings.

"The administrators organised jobs fairs and employability events which were attended by hundreds of Comet employees, whilst Job Centre briefings were held at Comet sites. A helpline was set up to assist employees and a website was created where more than 50 prospective employers posted available positions.

"Comet staff acted professionally and with great passion for their company throughout this period. Regrettably, it proved impossible to find a purchaser willing to save the business and the employees ultimately had to be made redundant."

A judge recently ruled that approximately 2,000 former Comet employees could be entitled to £10m in redundancy payments, but if this is extended to a further 4,000, the cost could increase by £15m.

Oliver Griffin


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