The Financial Reporting Council (FRC) has fined two former Carillion finance directors, concluding its last unresolved investigation tied to the company’s collapse.
The UK accounting regulator said Richard Adam and Zafar Khan were penalised a combined £282,000 ($381,692) for acting “recklessly” in the preparation of the group’s accounts.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
The decision comes eight years after Carillion entered liquidation in January 2018.
At the time of its collapse, the construction and outsourcing group employed 43,000 people worldwide, including 19,000 in the UK.
It failed with liabilities of £7bn and cash of just £29m.
In its findings, the FRC said Adam and Khan had admitted misconduct in “several areas of Carillion’s business, including certain specific transactions, major UK construction contracts and a supply chain finance facility”.
The regulator said those issues affected the numbers reported by Carillion between 2013 and 2017.
Adam was fined £222,019, while Khan was fined £60,228.
Both were also barred from membership of professional accounting bodies, with Adam excluded for 15 years and Khan for ten years.
The FRC said the penalties were reduced to reflect sanctions already imposed by the Financial Conduct Authority (FCA).
Earlier this year, the FCA fined Adam £232,800 and Khan £138,900 for failing to alert investors and Carillion’s board to problems at the business.
The FCA also said it would have imposed a penalty of almost £38m on Carillion itself but issued a public censure instead because the company was insolvent.
The FRC said Adam and Khan put “considerable pressure” on Carillion staff to meet profit targets even as the business weakened.
According to the regulator, it “was apparent to them” that those targets may have been unrealistic.
The watchdog added that the pair knew this could leave senior accountants with the impression they were being directed to present financial information in a way that showed profit targets had been met, “regardless of how unrealistic a view that might be”.
As a result, the FRC said Carillion accountants changed figures on several occasions to make it appear that a number of contracts remained on track.
The regulator also fined three unnamed accountants who worked on Carillion’s accounts a combined £98,000.
It did not disclose details of their misconduct.
Adam served as Carillion’s finance director for almost a decade before retiring in December 2016.
Khan succeeded him in January 2017 and remained in the role until September that year.
The FRC’s action closes the final outstanding strand of its investigation into Carillion.
The regulator had previously acted against KPMG over its audit work on the company. It imposed a record £21m fine on the ‘Big Four’ company for what it described as “textbook” failings in the Carillion audit.
In 2022, it also fined KPMG £14.4m for deliberately misleading the regulator during inspections.
