Carillion KPMG auditor fined £14m for misleading regulators

KPMG is set to be fined £14.4million for falsifying documents and misleading regulators ahead of contractor Carillion’s collapse.

The Financial Reporting Council (FRC), the body which oversees accountancy firms such as KPMG, has reached a court settlement agreement over the case, which was reached after the UK’s second largest contractor was fell under administration.

In January, the UK boss of KPMG admitted misleading the financial watchdog over the records of the number of construction services contracts the accountant had reviewed in his role as an auditor at Carillion.

The accounting misconduct fine was originally set to be £20m, which would have made it a UK record fine for accounting discrepancies, but was reduced to £14.4m after KPMG cooperated with the authorities. The accounting firm is also expected to pay £4.3million in fees.

Five KPMG employees were found guilty of misconduct, including Peter Meehan, who was in charge of Carillion’s audit. The FRC has called on Meehan for a £400,000 fine and a 15-year ban for his role in falsifying documents.

Another KPMG employee, Stuart Smith, was fined £150,000 and given a three-year ban in January.

In January, KPMG’s UK chief executive, Jon Holt, admitted the firm had misled regulators. In a statement following the settlement, he said: “As I said at the start of the court, we are deeply sorry that such gross misconduct occurred at our firm. It was unjustifiable and wrongful. C It was a violation of our processes and a betrayal of our values.

“I am saddened that a small number of former employees acted so inappropriately, and it is right that they – and KPMG – now face serious regulatory penalties.

“We became aware of the misconduct at the center of this matter as a result of our own internal investigations and immediately reported it to our regulator. We have cooperated fully throughout the FRC’s investigation and with the Tribunal.

“As a firm, we are committed to serving the public interest with honesty and integrity. We have worked hard, and in full transparency with our regulator, to ensure that this issue does not represent the broader culture or practice of our office.”

In a separate case, KPMG is being sued for £1.3billion by the Official Receiver over work it undertook in the run-up to the contractor’s collapse. A formal complaint was filed against KPMG in February.

The claim includes £230m to cover dividends Carillion distributed in the years before its collapse. The Official Receiver asserted that these monies should not have been paid. He is asking for an additional £20m which KPMG received in consultancy fees from the contractor. The most important element of the claim is believed to be the business losses that the receiver is trying to recover.

KPMG has made a provision of £144 million to cover potential future costs related to its work with Carillion.

KPMG has been contacted for comment.

Alice F. Ponder