News Release issued by
the COI News Distribution Service on 08 September 2009
The Government
today published the results of an independent investigation into
the collapse of the MG Rover Group (MGRG).
The inquiry was set up by the then Secretary of State for Trade
and Industry after MGRG, the manufacturer of Rover and MG cars,
went into administration on April 8, 2005 owing creditors nearly
£1.3 billion.
Business Secretary Lord Mandelson today published the findings
and announced that lawyers have already begun work compiling the
underlying evidence required to bring proceedings against the
relevant directors to prevent them holding company office in
future. He also decided the report should be referred to the
Financial Reporting Council, the regulatory body for auditors,
accounting and corporate governance.
In addition he has today written to the Business and Enterprise
Select Committee after the Inspectors found inaccurate and
misleading explanations were given to MPs and others, including
some evidence given by one of the directors to the Select
Committee.
Gervase MacGregor FCA and Guy Newey QC were instructed to
investigate the affairs of MGRG, its parent company Phoenix
Venture Holdings (PVH) and MGR Capital Limited between the
purchase of MGRG from BMW in May 2000 and the date of it entering
administration.
The inspectors investigated the actions of the directors of PVH
throughout their 5 year ownership - particularly Peter Beale, John
Edwards, Nick Stephenson and John Towers, known as the Phoenix
Consortium or Phoenix Four.
They also investigated restructuring changes within the Group
which led to the creation of 33 separate companies throughout that
period; the scale of financial rewards made to the directors and
the events which led to administration itself. This included the
role of Government to secure bridge finance while take-over
discussions took place with Chinese car manufacturers Shanghai
Automotive (SAIC).
The inquiry studies the role played by professional advisors
including auditors and corporate finance advisers Deloittes and
lawyers Eversheds; aspects of corporate governance; and financial
statements and audit arrangements including the transfer of
assets.
The inspectors also investigated the purchase, installation and
operation of computer software to eliminate evidence held by one
of the directors, Peter Beale, the day after the inquiry was
announced.
The inspectors also looked at explanations the directors had
given to MPs and found that Peter Beale gave inaccurate and
misleading explanations to the Trade and Industry Select Committee
on 30 March 2004 about why the Phoenix Partnership was involved in
the MGR Capital joint venture.
Business Secretary Lord Mandelson today said:
“This has been a painstaking enquiry by independent inspectors.
It was important to get all the facts into the open so that
workers who lost their jobs and creditors who were not paid know
the truth.
“Action is being taken. Based on this report, work has been
commissioned to start legal proceedings to seek to declare
relevant directors unfit to hold office and to disqualify them
from management of any company in future.
“I have today written to the Business and Enterprise Select
Committee to ask them to look into the serious findings in the
report that one of the MG Rover directors, Mr Beale, misled their
Committee about the reasons for setting up a joint venture with
MGR Capital. It will be for the Committee Chair to decide whether
any action should be taken.
“We are also determined to learn any lessons we can to ensure
greater transparency about the impact of decisions which directors
are making and the state of the companies they are running. To
this end, I am asking the Financial Reporting Council to review
the report to see whether changes to audit or accounting standards
or guidance should be considered.”
The Secretary of State has received advice from independent
Queen’s Counsel that the findings made by the inspectors, if
supported by the underlying documents, are such that a Court is
likely to find that at least some of the Directors are unfit to be
concerned in the management of a company. If successful this would
lead to these Directors being disqualified from being directors or
otherwise involved in the management of the company. Work has
already begun on considering the underlying documents and
compiling the evidence that would be needed to commence director
disqualification proceedings. Thereafter, the usual procedures
will be followed.
The report has been sent to the Accounting and Actuarial
Discipline Board (part of the Financial Reporting Council) which
is currently investigating the work done by Deloitte’s for the
Rover Group. The AADB will review the Inspectors’ report to see
whether there are issues which need to be followed up.
The Inspectors suggested that improvements could be made to
auditing and reporting standards that would increase transparency
in financial statements. The FRC issued guidance earlier this year
to companies and auditors on Going Concern issues in the light of
current economic conditions and is currently consulting on updated
core guidance on Going Concern. The FRC will now be asked to look
at lessons from the Rover case and to consider whether any further
guidance should be issued to auditors.
The Inspectors suggest that although the transfer of assets and
tax losses between companies with the Rover Group was in
accordance with accounting standards, readers of the financial
statements would have been better informed had the “true or
potential value of these assets been explained”. They suggest that
making such disclosures mandatory would improve understanding of a
company’s financial performance. The UK Accounting Standards Board
(also part of the Financial Reporting Council) will now be asked
to consider the issues raised by the Report.
The report is available at: www.bis.gov.uk/mgrover-report
Notes to Editors
1. The Inspectors were appointed under Section 432 of the
Companies Act by then Trade and Industry Secretary Alan Johnson
and had wide powers to require documents and the attendance of
witnesses, including directors, officers and agents of the
company.
2. The inspectors were Guy Newey QC of Maitland Chambers,
Lincolns Inn and Gervase MacGregor FCA of BDO Stoy Hayward. Guy
Newey was called to the Bar in 1982 and took silk in 2001. He has
been Junior Counsel to the Crown (Chancery) to the Charity
Commission. He has acted as a DTI inspector. Gervase MacGregor
qualified as an accountant in 1986 and became partner in 1991, and
head of Litigation Support and Forensic Accounting Department of
Stoy Hayward in 1994. He is a member of the British Academy of
Experts, the Association of Certified Fraud Examiners and the
ICAEW's Fraud Advisory Panel.
3. The inspectors examined around 200,000 documents of which
105,000 (around 500,000 pages) were judged important to the
investigation. They obtained information from around 200
witnesses, 95 of whom were interviewed formally at least once.
4. The Financial Reporting Council is the UK’s independent
regulatory body for audit accounting and corporate governance.
Contacts:
BIS Press Office
NDS.BIS@coi.gsi.gov.uk
Fiona Webber
Phone: 020 7215 6140
Fiona.Webber@bis.gsi.gov.uk