Receive free updates from Carillion PLC
We will send you a myFT Daily Summary email summarizing the latest Carillion PLC news every morning.
The former Carillion finance chief was banned from holding company directorships for more than a decade, marking the first boardroom ban for an executive of the collapsed construction company.
Zafar Khan, who served as Carillion’s chief financial officer before its implosion in early 2018, has been banned from working as a director of a UK company for 11 years by the government’s insolvency service. Khan had provided “false and misleading financial information” in 2016, including reporting a pre-tax profit of £146.7million, the government agency said on Monday. Instead, Carillion should have reported an adjusted year-end loss of at least £61.7million.
The ban comes more than five years after the construction and outsourcing company collapsed with just £29m in cash and £7bn in liabilities in January 2018, leaving the UK government to step in to ensure the provision of key services such as school meals, hospital and prison. cleaning.
Proceedings against a number of other former Carillion directors, including former chief executive Richard Howson, are still ongoing. A trial is due to begin in October.
Khan said: “I took over as CFO of Carillion in January 2017 and only resigned eight months later. Six years after my resignation and five years after Carillion’s insolvency, the regulatory proceedings against me and other directors are continuing and I have decided, in the interest of my family and finally to draw a line under these proceedings, that I will provide an undertaking not to act [as] a director.
“I would like to emphasize,” he added, “that when I took office, I was aware that the group was facing significant business challenges and I devoted all my energies to overcoming them. I believe I acted at all times in the best interest of the company. I regret that I was not able to make a big enough difference in the short time I was in office.
Khan was also found to have caused the company to make market announcements in March and May 2017 that were misleading as to the reality of Carillion’s financial performance, the insolvency service said. It was found to be a breach of London listing rules and European market abuse regulations.
He was also responsible for paying £54.4 million in dividends in June 2017, which could not be substantiated as the company’s 2016 financial statements did not represent a ‘true picture’ of the company’s financial condition. , the agency added.
Ben Drew, a partner at law firm Fladgate, said: ‘The length of the ban is at the upper tier of directors’ disqualification periods, reserved only for the most serious breaches of a director’s duties.
However, Noble Francis, Economics Director of the Construction Products Association, said it was ‘appalling that it has taken anyone five years to be punished for something so serious’.
In 2022, the UK’s Financial Conduct Authority fined Khan and Richard Adam, another former CFO of Carillion, £154,400 and £318,000 respectively for posting advertisements in 2016 and 2017 that “had makes misleading positive statements about Carillion’s financial performance.
The Financial Reporting Council, the UK’s auditing and accounting regulator, has also been investigating Khan and Adam since 2018 in a separate investigation. The regulator has no power to investigate corporate directors unless they are qualified accountants, a shortcoming that should be addressed in long-awaited audit and corporate governance reforms developed partly in response to the collapse of Carillion.
Carillion’s auditor, KPMG, is also under investigation by the FRC. This year he settled a separate £1.3billion civil suit brought against him by Carillion liquidators for an undisclosed sum.