KPMG has announced that following years of disputes, it reached a confidential deal with the liquidator of Carillion, the now-defunct builder and government contractor it once audited, reports The Times.
The building firm went defunct in 2018 with £7bn ($8.4bn) in debt, leading to nearly 3,000 people finding themselves unemployed and triggering a government-backed review which recommended “a shake-up” of auditing standards.
In 2021, the liquidators of Carillion sued KPMG for £1.3bn, alleging that the network had missed “red flags” during the auditing of the company. The Official Receiver, part of the Insolvency Service, the liquidator, alleged that negligence by KPMG to detect mis-statements had led to “extensive loss and damage”.
KPMG received £29m in fees for its audits of Carillion over a 19-year period prior to the firm’s collapse in 2018.
In the aftermath of the settlement, it was reported that the Australia-based litigation funder Litigation Capital Management (LCM) had doubled its worth after having financially supported the Insolvency Service’s claim against the Big Four firm, generating more than £7m in profits for LCM, according to City A.M.
It is worth noting that KPMG came to be widely criticised for its role in the collapse of Carillion, with the Financial Reporting Council (FRC) going as far as fining the network and penalising the auditors involved in the auditing process. The FRC’s fine on KPMG came to amount to £14.4m, together with an additional £3.95m in costs, one of the largest penalties in UK audit history.
KPMG UK chief executive Jon Holt said he was “pleased” to have resolved the claim. He further added: “Carillion was an extreme and serious corporate failure, and it is important that we all earn the lessons from its collapse. The FRC’s ongoing investigation into our work as Carillion’s auditor is an important part of that process, and we will continue to cooperate fully with it.”
