Deloitte will face a tribunal over all allegations about its work in the run up to MG Rover’s demise as the fall-out from the collapse of the car giant refuses to go away.
The Accountancy and Actuarial Discipline Board (AADB), the industry’s watchdog, has accused the professional services group of misconduct related to its work with the so-called Phoenix Four, who owned the car-maker when it collapsed causing the loss of more than 6,500 jobs.
The specific allegation that Deloitte had attempted to have struck out was that the firm and its now retired former mergers and acquisitions partner Maghsoud Einollahi had “failed to consider adequately the public interest”, to have taken an “inappropriate” fee and to have failed to consider the potential for a conflict of interest on two tax transactions for the owners of MG Rover.
The two deals – called Project Aircraft and Project Platinum – earned John Towers, John Edwards, Nick Stephenson and Peter Beale millions of pounds.
The business advisory giant had applied to get the allegations regarding Project Aircraft to be dismissed as the case has “no real prospect of success” and should not be allowed to progress “in the public interest” and because of “the passage of time, the repeated changes in the allegations made, the weakness of the allegations ultimately pursued, the expense of a trial on the issue and the oppression involved”.
However, the executive counsel to the AADB said the allegations are “in the public interest” and the tribunal does not have the jurisdiction to strike-off the allegations unless there had been an “abuse of process” and there will now be a full hearing next March.
The allegations by the AADB follow an inquiry report by the Department for Business, Innovation and Skills (BIS) in 2009 which revealed the Phoenix Four walked away with £42 million among them after buying the company for £10.
Birminghampost.net blogger David Bailey has been following the fall out from the MG Rover collapse for seven years and said the BIS report did leave unanswered questions in this area.
Professor Bailey, of Coventry University Business School, said: “The AADB’s main concern seems to focus not on the audit work where there are no allegations of any misconduct, but rather on the relationship of Deloitte with the Phoenix Four. In particular, a Deloitte partner gave corporate finance advice to the Phoenix Four and MG Rover, while at the same time also working with the car maker as its auditor.
“So, the AADB alleges that Deloitte failed to mitigate potential risks of conflicts and to adequately consider the public interest, with Deloitte’s conduct seen as effectively falling short of what could reasonably be expected chartered accountants.”