Auditing Firms Involved with MG Rover Group and ‘Phoenix Four’ Penalized
Upon failing in handling conflicts of interest in its advice to warped British carmaker MG Rover Group, accountancy firm Deloitte has been fined a record £14 million.
This is for the first time that such a huge fine has been charged for a punishment by the Financial Reporting Council.
Prior to this, it was in 2012, when PricewaterhouseCoopers was charged the £1.4 million penalty by the council.
Maghsoud Einollahi, a former partner at Deloitte has been fined £250,000 and has been forbidden from the accounting profession for next three years. So, he won’t be allowed to carry any transaction in his service for next few years.
In 2005, when China’s Shanghai Automotive Industry decided to invest in the business of MG Rover, the company collapsed. The carmaker was then put into administration with debts of £1.4 billion. Around 6,000 employees lost their jobs and became unemployed that time.
In 2008, four of its directors, the “Phoenix Four” decided to buy the loss-making carmaker for a value of £10. For this, they had set up the Phoenix group.
As said by Paul George, FRC’s Executive Director for conduct, “The final ruling should be essential reading for all members of the profession. The sanctions imposed are in line with the FRC’s aim to ensure penalties are proportionate and have the necessary deterrent effect to prevent misconduct and bolster public and market confidence”.
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