Carillion paid out £6.4M to advisers the day before directors requested £10M of emergency government support, new figures released by the Official Receiver show.
Carillion chairman Philip Green wrote to the government on 13 January to request a £10M ‘bail-out’ and warn of the consequences of an unplanned ‘disorderly and value destructive’ insolvency process. The day before the company had paid millions to City advisors including £2.5M to consultants EY and £1.1M to law firm Slaughter and May.
“To date, the board has been able to conclude that, for so long as key stakeholders (including HM government) continue to engage meaningfully in relation to the provision of short term funding and a longer term restructuring, it is appropriate to continue,” Green wrote.
He added: “We are therefore deeply concerned that, if HM Government determines in the near term not to support Carillion, that will lead very rapidly into what is likely to be a very disorderly and value destructive insolvency process, with no real ability to manage the widespread loss of employment, operational continuity, the impact on our customers and suppliers, or (in the extreme) the physical safety of Carillion employees and the members of the public they serve.”
Work and pensions committee chairman Frank Field MP said on the publication of the documents: “With the company teetering on the abyss, Mr Green had the cheek to try and get the government to surrender another £160M of taxpayer’s money. I am not surprised the government took with a pinch of salt his assurances that all would be reimbursed once he had unscrambled the eggs.
“The most troubling element of this letter is its demands for an immediate £10M from taxpayers, the very next day after Carillion shelled out £6.4M to its illustrious advisers, including the EY restructuring gravy train and half the law firms in the City of London.
“The letter is adorned throughout with Carillion’s motto “making tomorrow a better place”. Perhaps, but better for whom? And, as it turned out, not the day after.”
Business, Energy and Industrial Strategy committee chairwoman Rachel Reeves MP added: “This 11th hour ransom note lays bare the cynical leadership of the Carillion board. Directors’ management ensured that the costs of failure would be picked up by the taxpayer – either from a bail-out or footing the bill for a desperate clean-up operation.
“Expensive advisers still pocketed millions while workers risked losing jobs and long-suffering suppliers faced financial ruin.”
Major investors told a joint parliamentary inquiry last week that Carillion bosses had been too focused on their own remuneration payments in the lead up to the company’s collapse on 15 January.
MPs accused Carillion of “gross failings of corporate governance and accounting” after an independent business review - commissioned by lenders following the company’s profit warning in July - emerged showing that the failed contractor had been “poorly managed for a significant period”.