Business & Finance

Insolvency fraud: KPMG gave false information to regulator

Insolvency fraud: KPMG gave false information in the Carillion insolvency

Insolvency fraud and corruption runs rife in the UK’s practically unregulated insolvency sector, with practitioners using insolvency, both corporate and personal, as a license to print money, unlawfully profiteering through the administration of the role of the fiduciary trustee / liquidator / administrator.

The Financial Reporting Council (“FRC”) has accused KPMG and the Official Receivers responsible for the liquidation of the construction company, Carillion of providing “false and misleading” information.

On Monday 15 January 2018, the High Court appointed the Official Receiver as liquidator of Carillion PLC upon presentation of a winding up petition by it’s directors, going into liquidation with around £7 billion of debt, costing thousands of jobs and reducing over 450 building projects to ruin.

FRC carried out routine check on the quality of KPMG’s audit of Carillion’s accounts, finding the irregularities. The FRC accounted it has commenced a similar complaint of misconduct against KPMS over it’s involvement in the insolvency audit of Regenersis.

The FRC stated that “the formal complaint alleges misconduct against KPMG and several individuals regarding the provision of allegedly false and misleading information and/or documents to the FRC by KPMG in connection with the FRC’s inspections of two audits carried out by KPMG.”

The insolvency sector is poorly regulated and rife with corruption

The UK’s insolvency sector is poorly regulated and is rife with corrupt practices. The Insolvency Service itself has a blemished history, with several of its staff under investigation for corruption.

Our investigation yielded a cover up by Dean Beale, Chief Executive of the Insolvency Service who sought to conceal the fact that several senior staff, including Anthony Hannon, the Official Receiver of London, and David Chapman, the Senior Official Receiver. This kind of malfeasance runs wild throughout the insolvency sector, with trustees and administrative receivers charging exorbitant fees, often for time they never even incurred.

The insolvency practitioners at KPMG subject of the complaint include Stewart Smith and Peter Meehan.

The FRC points out that the complaint does not claim the audits were wrongly done or that financial statements were not properly prepared.

The 2016 audit of Carillion’s financial statements is being investigated separately, with KPMG facing substantial fines when the investigation completes toward the end of this year.

Speaking of the complaint, a KPMG spokesperson reported that “the allegations in the Formal Complaint would, if proven, represent very serious breaches of our processes and values. We have cooperated fully with our regulator throughout their investigation.”

In January this year, the All-Party Parliamentary Group (APPG) on Fair Business Banking announced it commenced an “in-depth investigation into standards in the UK insolvency profession” in response to claims that insolvency practitioners had been prioritising lenders’ interests.

Kevin Hollinrake, co-chair of the APPG said that “in recent years there have been a number of high-profile failures in the insolvency industry. The APPG has also received its fair share of complaints about the system. This is why we thought now would be a good time to conduct our review, identify any failures and suggest practical ways they might be addressed”.

9-months on, since the investigation was announced, there is no sign of the report. Another cover up by the establishment?

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