City firms 'squeezed' fee income from stricken Carillion

A scathing MPs’ report into the collapse of Carillion has revealed the stricken construction giant paid almost £4 million to ‘an array’ of City firms in the days before it was declared insolvent.

According to today’s report, on 12 January, three days before the company went under and one day before chairman Philip Green wrote to the government pleading for taxpayer funding to keep going, £3.9m was paid out to law and accountancy firms.

Slaughter and May was paid £1.19m while magic circle counterparts Clifford Chance and Freshfields Bruckhaus Deringer were paid £149,104 and £91,165 respectively. EY – one of the ‘big four’ accountancy firms – was paid £2.5 million.

The advisers were accused by MPs of ‘squeezing fee income out of what remained’ of the company.

Today’s report was published by the Work and Pensions and Business, Energy and Industrial Strategy (BEIS) committees and follows months of oral hearings and trawling through evidence. The wide-ranging report also critcises Carillion directors’ for ‘recklessness, hubris and greed’ and accuses them of putting their own financial reward ahead of all other concerns.

However, a specifc section on advisory firms noted that names like Slaughter and May and EY were ‘brandished by the board as a badge of credibility’. According to the report, the appearance of these prominent advisers proved nothing other than a willingness by the board to throw money at a problem and the willingness of those firms to accept generous fees.

‘By the end, a whole suite of advisers, including an array of law firms, were squeezing fee income out of what remained of the company. £6.4 million disappeared on the last working day alone as the directors pleaded for a taxpayer bailout,’ the report states.

The report warns that without corporate governance reforms, a collapse on the scale of Carillion could happen again. The committees also accused the big four accounting firms – which also include PwC, KPMG and Deliotte – of operating a ‘cosy club’.

Frank Field MP, chair of the Work and Pensions Committee, said: 'Government urgently needs to come to parliament with radical reforms to our creaking system of corporate accountability.’