A major shareholder in outsourcing giant Carillion considered legal action against the company before it went bust because of suspicions that directors knew more than they let on.
Kiltearn Partners, which owned 10 per cent, told MPs investigating the collapse that it thought managers may have underplayed what they knew and the extent of the company’s pending problems.
Reacting to the revelation Labour MP Frank Field, chair of the House Commons Work and Pensions Selcet Committee said investors evidence suggested “a disconnect” with evidence given by the directors. The directors who gave evidence included former chief executive Richard Howson.
Field said, with reference to losses on contracts in the Middle East state of Qatar: “On the one hand, the Carillion directors told us all was sunny until a bolt of Qatari lightning hit them out of the blue. On the other hand, investors were fleeing for the hills, and it appears those who looked closest ran fastest.”
A letter from Kiltearn’s chief executive Murdoch Murchison the select committee suggested Kiltearn that if the company had not gone in to liquidation his company would have “considered participation in civil action against Carillion with a view to recovering a proportion of its clients’ losses”.
The company’s bosses were accused of being “contemptuous” by its pension scheme trustees who had been pressing for more funds to fill a “yawning gap” in funds. The requests were continually refused.
Field said letters to the committee “suggest the Carillion directors were contemptuous of their pensions obligations. They refused to give an inch to the pensions schemes. Their private pleading that the company could not afford more was in stark contrast was in stark contrast to the rosy picture – and bumper dividends – being presented to the outside”.
Another member of the committee, Labour MP Rachel Reeves, accused Carillion’s accountants KPMG of “feasting” on the company after taking fees of £72 million in 10 years.