The UK's Financial Conduct Authority (FCA) has imposed significant financial penalties on two former directors of the collapsed construction giant Carillion for misleading investors in the lead-up to the company's dramatic failure.
Directors Failed to Sound the Alarm
Richard Adam, the former finance director, and Zafar Khan, his short-lived successor, have been fined £232,800 and £138,900 respectively. The regulator found that both executives were aware of mounting financial troubles within the business but deliberately chose not to inform the market, the board, or the audit committee.
These fines come eight years after Carillion, a major government contractor, entered liquidation in January 2018 with staggering debts of £7 billion. The firm's collapse resulted in the loss of approximately 3,000 jobs and caused severe disruption to around 450 public and private sector projects across the UK.
The Devastating Fallout of the Collapse
The consequences of Carillion's failure were widespread and profound. Key public infrastructure projects were thrown into chaos, including the construction of two new NHS hospitals: the Royal Liverpool and the Midland Metropolitan in Sandwell. Both projects, originally scheduled to open in 2017 and 2018, were delayed for years and ran hundreds of millions of pounds over budget.
Other affected schemes ranged from school buildings and prison maintenance to the expansion of Liverpool Football Club's Anfield stadium. The FCA emphasised that the case highlights the "serious impact" when individuals in positions of responsibility fail to keep the market properly informed.
Steve Smart, the FCA's joint executive director of enforcement and market oversight, stated: "The action taken against Mr Adam and Mr Khan demonstrates our commitment to preventing market abuse and upholding the standards we expect." Both former directors have dropped their appeals against the FCA's findings.
A Pattern of Regulatory Action
The fines for Adam and Khan are the latest in a series of sanctions related to the Carillion scandal. In 2023, the accounting firm KPMG was fined £21 million by the Financial Reporting Council for "exceptional" failures in its audits of Carillion between 2013 and 2017.
Furthermore, Zafar Khan, who served as finance director for only nine months before resigning shortly before the collapse, is also facing an 11-year ban from holding company directorships. Meanwhile, a related case against former Carillion chief executive Richard Howson is ongoing, with a tribunal hearing scheduled for 16 February.
The regulator's investigation revealed that just months before its failure, Carillion shocked the market with an £845 million write-down linked to problematic construction contracts. Notably, the company's previous trading updates had given no indication that such a drastic measure was necessary.
