Insolvency Service drops case against former Carillion chair and CEO

The Insolvency Service has dropped court action against Carillion’s former chair and interim chief executive at the 11th hour. 

The defunct contractor’s chair, Philip Green, and Keith Cochrane, who was interim chief executive between July 2017 until the firm’s collapse in January 2018, were among five former non-executive directors who had been due in London’s High Court on Monday morning (16 October).

But on Friday (13 October), the Insolvency Service told Construction News that it had abandoned the disqualification proceedings against the five, brought under section six of the Companies Directors Disqualification Act 1986.

An Insolvency Service spokesperson said “the secretary of state is obliged to keep the public interest in all cases under constant review, and it was concluded that continuing with the proceedings against the non-executive directors was no longer in the public interest”.

“On that basis, the parties agreed that the proceedings should be concluded by way of agreement and without the need for a trial or the associated expense,” they added. “This concludes the proceedings.”

Along with Green and Cochrane, the others who have been reprieved are:

• former audit committee chair Andrew Dougal;
• former remuneration committee chair Alison Horner; and
• ex-sustainability committee chair Ceri Powell, who also sat on other committees, including Carillion’s audit and remuneration committees.

Former chief executive Richard Howson, and finance directors Richard Adam and Zafar Khan had already accepted disqualifications of eight, 12.5 and 11 years respectively.

The Insolvency Service found a variety of breaches by them, including making misleading statements about the contractor’s financial performance.

Five barristers from Five Erskine Chambers comprised two of the four defence teams in the case.

In a statement, Five Erskine Chambers said that the Insolvency Service’s decision to drop the case represented a “major triumph”, and that the case against its clients was “legally flawed, based primarily on an erroneous contention that directors owe a strict duty to know the true financial position of the company”.

Carillion, the UK’s second-largest contractor in 2017, became Britain’s largest ever corporate failure in 2018, collapsing with £7bn worth of liabilities.

Accountancy firm KPMG was fined £21m this week for failures of the firm’s audits.

In 2018, a parliamentary report into the company’s collapse said: “Non-executives are there to scrutinise executive management. They have a particularly vital role in challenging risk management and strategy, and should act as a bulwark against reckless executives.

“Carillion’s NEDs were, however, unable to provide any remotely convincing evidence of their effective impact.”

The report was written following a joint investigation by two select committees: the work and pensions committee and the business, energy and industrial strategy committee.

This story has been amended to make it clear that the Insolvency Service discontinued the proceedings on the sole basis that to continue the proceedings was not in the public interest. The only agreement between the parties related to costs.