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Firm fingered in MG Rover collapse

2012-02-03 12:36

LONDON - Deloitte and one of its partners failed to properly consider conflicts arising from advising MG Rover Group and its "Phoenix Four" directors who bought the carmaker before it collapsed, Britain's accounting policeman said on Thursday.


Deloitte said it disagreed with the complaint which it expected to be dismissed at a public hearing.


MG Rover was put into administration in 2005 with debts of 1.4 billion pounds and the loss of 6000 jobs. Four of its directors had set up Phoenix to buy the loss-making automaker for a token 10 pounds five years earlier.


There was public anger when it emerged the four had paid themselves 40 million pounds in salaries and pensions before MG Rover collapsed.


PROBE


The four faced no criminal charges but were disqualified from being directors of any company for up to six years.


The Accountancy and Actuarial Discipline Board (AADB) in 2011 opened a probe into Deloitte, which audited MG Rover, and Maghsoud Einollahi, who worked in the auditor's corporate finance department which advised MG Rover group companies.


The AADB said it had filed a formal complaint alleging that the "conduct of Deloitte & Touche and of Mr Einollahi fell short of the standards reasonably to be expected" regarding objectivity and due care.


The complaint will be heard before an independent tribunal and, if upheld, Deloitte and Maghsoud could face unlimited fines.


'DISAPPOINTMENT'


The regulator said Deloitte and Einollahi failed to consider adequately the public interest and the potential for there to be different commercial interests between the Phoenix Four, MG Rover, associated companies and shareholders.


Deloitte said in a statement it was disappointed that the AADB had taken the view that limited aspects of its advisory work relating to two transactions in 2001-2002 fell short of acceptable standards.


"We do not agree with the AADB and are confident that when all the evidence is considered, the tribunal will conclude that there is no justification for criticism of either Deloitte or our former partner Mr Einollahi," Deloitte said.


"We are pleased that the AADB confirmed that there are no grounds for complaint in relation to Deloitte's audit work," Deloitte added.

Reuters