Eight years after MG Rover, once owned by BMW, collapsed, accountants Deloitte will next week return before a British tribunal which is assessing whether it failed to manage conflicts of interest in its advice to MG Rover and the so called ‘Phoenix Four’ directors who bought the company from the German firm before it collapsed.
MG Rover was put into administration in 2005 with debts of GBP1.4bn (US$2.1bn) and the loss of 6,000 jobs. Four of its directors had set up Phoenix to buy the loss-making carmaker for a token GBP10 five years earlier, Reuters noted.
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There was public anger when it emerged the four had paid themselves GBP40m in salaries and pensions before MG Rover collapsed. The four faced no criminal charges but were disqualified from being directors of any company for up to six years.
According to the news agency report, the Financial Reporting Council, which regulates accountants, said last year Deloitte and an employee, Maghsoud Einollahi, had failed to properly manage conflicts of interest.
Deloitte and Einollahi had acted as corporate finance advisors to companies involved with MG Rover and the Phoenix Four while Deloitte was also auditing MG Rover.
Deloitte disagreed with the finding and a hearing of the complaint began at an independent tribunal in March. The FRC said on Monday (15 July) the hearing will resume on 29 July. If upheld, Deloitte and Einollahi could face unlimited fines.
Deloitte could not comment immediately to Reuters.
The report added that the European Union is approving a law to avoid potential conflicts of interest between the auditing and advisory work done by accounting firms.
