'Reckless' former Carillion finance chiefs fined over hush up at company months before collapse
Two ‘reckless’ former finance chiefs at Carillion have been fined for hushing up its woes before it collapsed.
Richard Adam was handed a £232,800 penalty and Zafar Khan was ordered to pay £138,900 by the Financial Conduct Authority (FCA).
The City watchdog said both were ‘aware of serious financial troubles in Carillion’s UK construction business but failed to reflect this in company announcements or alert the board and audit committee’.
Carillion’s demise eight years ago under the weight of huge debts was one of the biggest in UK corporate history. It had 43,000 staff, including 19,000 in Britain.
Its collapse caused chaos across hundreds of projects including public sector work on schools, roads and prisons as well as Liverpool FC’s Anfield stadium.
Adam was group finance director from April 2007 to the end of 2016 and was succeeded by Khan, who held the role from January 2017 until September that year.
Secrets: Richard Adam (pictured) was handed a £232,800 penalty and Zafar Khan was ordered to pay £138,900 by the Financial Conduct Authority
The FCA said: ‘Both acted recklessly and were knowingly concerned in breaches by Carillion of the market abuse regulation and the listing rules.’
It found that ‘positive statements’ in Carillion’s December 2016 trading update omitted ‘significant financial risks’.
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Adam had been aware of issues including a £550million exposure after a deterioration in financial performance of some projects.
Adam and Carillion ‘ought to have known’ information in the update was ‘false and misleading’, the FCA said.
By the time of the March results announcement, when Khan was finance chief, the performance of construction contracts had ‘continued to deteriorate’.
The FCA said he ought to have known information in the announcement was false or misleading.
In July 2017, Carillion announced an £845million hit, within three days its share price had plunged 70 per cent and in January 2018 it went into liquidation.
Steve Smart, joint executive director of enforcement and market oversight at the FCA, said: ‘Those in positions of responsibility have a duty to keep the market accurately and adequately informed.
‘With Carillion, we have seen the serious impact it can have when they don’t.’
Khan settled with the FCA to bring the matter to an end, adding: ‘I no longer have the financial resources to enable me to continue to defend these allegations. I believe I acted at all times with integrity.’
Former Carillion chief Richard Howson was handed a decision notice by the FCA in 2022, but is disputing the findings, with a tribunal hearing set for February 16.
In 2023, KPMG was fined a record £21million by the Financial Reporting Council over its audits of Carillion.
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