Former Carillion chief executive Richard Howson has been banned from being a director for eight years.
Howson served as chief executive of the contractor, the UK’s second largest before it collapsed in 2018, between December 2011 and July 2017.
The Insolvency Service, which is overseeing the winding up of Carillion, announced yesterday (October 4) that Howson had accepted a disqualification for his conduct during his time at Carillion.
The incidences listed by the Bankruptcy Service include:
- Howson (pictured) had Carillion report, in its 2015 and 2016 annual accounts, the performance of its major construction contracts “in a way that should have known to falsify and conceal the reality of the impairment of large contracts that in fact became loss-making,” the Insolvency Service said in a statement. This also hid “the consequent serious and deteriorating financial position of Carillion”, he added. The contracts were for Royal Liverpool University Hospital, Battersea Power Station, Aberdeen Western Peripheral Route and Midlands Metropolitan Hospital in the UK, and Msheireb Phase 1 (B) in Qatar. The misstatement for 2015 in relation to major contracts was £95.4m “with the result that profits should have been £65.3m instead of the reported £155.1m”, the Insolvency Service said, adding that net current assets should have been £57m instead of the reported £41.5m. The misstatement of major contracts in 2016 was £179.2m and Carillion should have reported a loss of £61.7m instead of the announced £146.7m. Net current assets should have been £232.5m instead of the reported £52.4m.
- Howson also caused the company to breach international accounting standards by reporting payments made to IT consultancy Wipro totaling £39m in 2013, £2m in 2014 and £40m in 2016 as profits when they should have been reported as losses, according to the Insolvency Service. He said: “Mr Howson should have known about the false accounting, the overstatement of profits and the understatement of net debt and the concealment from the auditors of the true picture about Carillion’s obligation to make repayments at Wipro.”
- Additionally, Howson caused the company to make market announcements in December 2016, March 2017 and May 2017 “that it should have known were misleading as to the reality of the financial performance, position and prospects of Carillion,” the Insolvency Service said.
- Howson also caused the company to pay a final 2016 dividend of £54.4m, paid in June 2017, which “a payment which it should have known, could not be justified by reference to the financial statements of the fiscal year 2016” because of the misleading image they presented. . “Mr Howson should have known that the payment of the 2016 final dividend was not in the interests of PLC, its members or its creditors and that PLC could not reasonably afford it given its true financial performance,” the Service said of Insolvency. .
The government launched legal proceedings against eight Carillion directors and former directors in 2021.
“As the litigation against the remaining directors is ongoing, with a trial due to start the week of 16 October 2023, we are unable to comment further,” said a spokesman for the Insolvency Service.
Howson’s disqualification follows recent bans by former CFO Richard Adam and his successor Zafar Khan.
Last year, Carillion’s three former directors were also fined nearly £900,000 by the Financial Conduct Authority for “recklessly” publishing misleading accounts, although the three directors appealed lar the fines, and the appeals have not yet been heard in court.
Three of Carillion’s financial statements, published on 7 December 2016, 1 March 2017 and 3 May 2017, were “misleading and did not accurately or fully disclose Carillion’s true financial performance”, it said say the Financial Conduct Authority at the time.
Separately, the Financial Reporting Council has yet to conclude an investigation into KPMG’s audits of Carillion’s financial accounts, which it launched five and a half years ago.
In February, KPMG settled a £1.3 billion lawsuit with the Insolvency Service, which had alleged that the pre-collapse audit of accounting giant Carillion was negligent. KPMG had previously called the allegations “without merit”.
