Carillion’s former finance director Zafar Khan has denied to MPs that he was “asleep at the wheel,” during a grilling on why the firm collapsed.
The Commons joint inquiry into Carillion, made up of the work and pensions committee and the business, energy and industrial strategy committee, questioned Carillion directors for several hours.
Carillion officially went bust on 15 January with just £29M to its name. By the time Carillion entered compulsory liquidation in January the firm was almost £1bn in debt.
Khan was forced to deny he was “asleep at the wheel” during his nine months as finance director when he stumbled over a question on Carillion’s debt, which had ballooned from £242M in 2009 to £1bn at the point of its collapse.
At first, Khan reassured South Cambridgeshire MP Heidi Allen he had helped bring down Carillion’s debt. But when pushed by co-chair Rachel Reeves, Khan faltered and admitted debt had actually increased under his financial leadership.
“Mr Khan, you are a CFO. You just said to Ms Allen that the debt went down. Did the debt go down?” asked joint chair Rachel Reeves.
“No, the debt didn’t go down, no,” replied Khan.
Khan was given a £425,000 pay-off when he was sacked after just nine months as finance director, MPs heard.
The firm’s interim chief executive Keith Cochrane apologised for the company’s collapse.
“It was the worst possible outcome, this was a business worth fighting for,” he said, later admitting Carillion’s board could have asked “further, more probing questions”.
Cochrance later revealed an “internal reporting issue” on presentation of accounts receivable (what a company is owed) and accounts payable (what a company must pay) had only become apparent in May 2017.
Joint chair Frank Field told Cochrane that Carillion’s directors were to blame for its collapse.
“The business didn’t [get into trouble], it doesn’t have an identity. The directors did,” said Field.
“It’s like these lads say: ‘I didn’t stab that person with the knife, it was the beer’. You were in charge. You were taking money. The company had no personality on its own that could have done this.”
Cochrane replied: “Do I wish we’d done something about it sooner? Absolutely, I recognise that.”
Finance director Emma Mercer told MPs how she found Carillion’s accounting practices had become more aggressive during the three years she had spent away in Canada. She returned to the UK in April 2017.
“The overall tone had become a little bit more aggressive than I had experienced previously,” she said.
Mercer went on to partly blame her predecessor Zafar Khan, sitting next to her, for the more aggressive accounting. But Khan dismissed her claim, saying: “I don’t agree that there was a concerted effort to adopt aggressive accounting as such.”
Cash flow problems were blamed on big contracts ending, and not receiving payment for work in Qatar for 18 months.