The former finance director of British building giant Carillion sold almost £800,000 (US$1.1 million) in shares shortly after retiring before the firm went into liquidation in January of this year, it has now emerged.
Richard Adam who was responsible for the firm’s finances for a decade offloaded his shares in two transactions, according to new evidence uncovered by UK MPs investigating the collapse of the business. Details of the “share dump” have only just been released.
He sold £534,000 worth of shares on March 1, 2017, three months after leaving the company, before selling a further £242,000 of stock given to him in May as part of a bonus scheme payment.
The second transaction came before auditor KPMG performed a review of the company’s key contracts that eventually resulted in Carillion announcing a profit warning after downgrading its value by £845 million (US $1.039 billion). That decision resulted in the firm’s rapid descent into liquidation and the loss of more than 1,000 jobs — while a further 11,000 workers are still waiting to discover their fate.
Details of the share sales emerged just days after evidence was given to a parliamentary inquiry on Thursday, February 22, that revealed the chair of the Carillion’s pension trustees believed Adam considered payments into its ailing pension scheme a “waste of money.”
The news has already prompted anger on social media with one posting “rats fleeing sinking ship.”
Work and pensions committee chair, Frank Field, who is leading the inquiry along with the business committee chair, Rachel Reeves, said Adam’s share sales were indicative of his view of the company’s prospects.
In a statement, Mr. Field said: “Mr Adam presided over Carillion’s finances for a decade. He, more than anyone else, ought to know the merits of Carillion shares as a long-term investment in the light of his lengthy and lucrative tenure. His assessment? Dumping the last of his shares at the first possible moment because he is — with his own money at least — ‘risk averse’. What conclusions are we to draw from that?”
In letter to the inquiry, Mr. Adam revealed: “I sold the shares on these days because they were the days that I was invited to do so by the company.”
The parliamentary committee has also published evidence from Adam’s successor, Zafar Khan, who claimed in his statement to MPs that he was sacked in September 2017 after he “spooked” the rest of the board with a presentation warning Carillion’s finances had worsened.
In it, Mr. Khan said he could not understand the board’s reaction as it “should have been apparent to the board by then that the company was struggling to improve both its net debt and profit positions.”
Khan told MPs that while the deterioration in key contracts had been an important element in Carillion’s demise, the “principal contributing factor” was the level of debt that had built up before his brief tenure as finance director.
He said that by the time he became a director on 1 January 2017, the board had “over a number of years, allowed Carillon’s debt to get, in my view, far too high, and had not addressed the reduction of debt as a priority”.
Mountain of debt
Carillion’s average net debt on a monthly basis increased from £41.8m in 2010 to £586.5m by 2016, Khan said.
Commenting on this, Mr. Field said: “The other directors appear keen to set up the hapless Zafar Khan as the fall guy for the collapse. It is not lost on us, however, that he inherited Carillion’s mountain of debt.”
The collapse of Carillion has thrown a number of its projects into serious doubt. The company was responsible for maintaining 50,000 homes for military personnel, maintain 50 UK prisons, and provide 11,500 in-patient hospital beds. It is also involved in the £400 million Battersea power station redevelopment as well as the HS2 rail link between London and cities in the north.
The building and maintenance giant announced on Monday, February 26, that a further 230 people would be losing their jobs in the wake of its collapse.The latest job losses means more than 1300 have been paid off out of its workforce totalling 20,000 in Britain.
Carillion has debts totalling more than £900 million as well as a pensions shortfall of £590 million.
Sourse: sputniknews.com
