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Carillion liquidators move ahead to recover £250m from auditor KPMG

Carillion liquidators move ahead to recover £250m from auditor KPMG
Carillion liquidators move ahead to recover £250m from auditor KPMG

Carillions liquidators have reportedly taken a big step toward a massive legal claim against KPMG, who served as the auditor of the former FTSE 100 company. The collapse of Carillion, a leading construction company, in 2018 became one of the biggest corporate scandals of Britain.

According to reliable reports, earlier in June, the Official Receiver's representatives sent a letter to KPMG as it sues the accountancy company for up to £250 million.

The before-action letter, which was sent by the Official Receiver, who is working as a special manager at PricewaterhouseCoopers, represents another important milestone towards one of the most widely followed court battles in the UK involving a major audit company.

Meanwhile, KPMG has declined to make an official comment but a source privy to the matter stated that no official claim had been filed with the courts.

The news comes about a month after Official Receiver finalized an agreement with Litigation Capital Management, a firm that is publicly traded on the stock exchange, to finance the claim. 

According to people who are close to the case, the move against KPMG was motivated by the liquidators' legal duty to achieve maximum recoveries for Carillion's creditors.

As a giant construction firm and strong bidder, Carillion was well-placed to secure contracts, the Commons business, energy, and industrial strategy select committee stated in a damning report on the corporate governance of the firm.

KPMG was Carillion's auditor for nearly 20 years, collecting £29 million for its services.

Now, the Financial Reporting Council (FRC), the authority for accounting, is independently investigating the services offered by KPMG to Carillion.

Carillion's failure became one of the main drivers for audit reform in the UK, with far-reaching implications such as the establishment of a new regulatory body and a need for the top four companies - EY and Deloitte being the others - to segregate their audit and consulting operations openly.

Carillion collapsed in January 2018 under the burden of £7 billion in debt, putting 3,000 jobs in jeopardy and affecting more than 450 key public-sector projects, including the postponement of construction on two state-of-the-art hospitals in Birmingham and Liverpool.

Source credit: https://news.sky.com/story/carillion-liquidator-advances-250m-claim-against-auditor-kpmg-12339979

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