An external probe of Metronet’s accounts failed to reveal the scale of its
troubles, because the company books were significantly off track, government
watchdogs have been told.
London Underground’s manag-ing director Tim O’Toole said that LU had found it
difficult to gauge the situation at Metronet after bringing in outside auditors
to probe the company in 2006, because the beleaguered company ‘did not know what
the numbers were’ itself.
O’Toole revealed the dire state of the finance function at Metronet when he
faced the House of Commons’ transport committee last week.
The transport committee also grilled Metronet’s former chairman Graham
Pimlott on the ‘serious black hole in [its] finances’. Pimlott conceded that the
company was in such financial disarray that Metronet ‘ran out of cash. There
were undoubtedly inefficiencies’.
Metronet’s finance function was proportionately smaller than that of its
rival Tube Lines, despite maintaining two thirds of the Underground network.
When asked who was to blame for the situation, Pimlott said: ‘Those who were
on the board of Metronet each had the opportunity to do something about it.’
Former FD Philip Pacey and four other executives parted company with Metronet
in the wake of the debacle. O’Toole said that they had not been ousted, but
simply that they ‘did not figure in [London Underground’s] plans’.
Ernst & Young administrator Alan Bloom added that Pacey and the other
four executives had not been given severance packages.
‘We made no payments for loss of office to any of the five Metronet
executives. We offered them a certain amount in retention payments to stay on
for a short period,’ Bloom said.
UK banks under scrutiny
In the wake of Northern Rock and the accounting issues linked to the US
sub-prime crisis, the Financial Reporting Review Panel is set to run the rule
over accounting at UK banks, but also stressed it would look at smaller
institutions rather than the big guns of British banking. The panel, part of the
FRC, will also review the retail, travel and leisure, commercial property and
house building sectors. The scrutiny of banks will add further pressure to
accountants working in the area, who are already under pressure to account for
derivatives related to sub-prime loans.
Key provisions delayed
The government has shelved the introduction of key Companies Act provisions,
including those safeguarding directors at risk from militant groups, for another
year for fear that Companies House cannot cope with the changes. Competitiveness
minister Stephen Timms said the government had already allowed an extra year
with commencement of areas relating to company formation until 1 October 2008,
to provide time to implement important changes to Companies House systems and
processes, and give users appropriate notice of new forms.
Citigroup faces charges
Participants in Citigroup’s 401K retirement plans are suing the company and
others for sinking a large part of their funds into the company’s stock and
allegedly causing them to lose more than $1bn (£477bn). The complaint charges
Citigroup, former CEO Chuck Prince, the plans’ administrative committee and
others, with violating US federal pension law by allowing the ‘imprudent
investment’ in Citigroup stock, although they knew it was ‘unduly risky’ because
of the company’s serious mismanagement and improper business practices, reports
Share scheme CGT hit to affect 272,000
Nearly 300,000 UK workers will have to shoulder the burden of Alistair
Darling’s CGT tax hike, a pressure group has warned. Ifs Proshare said that
272,000 of the 1.7 million UK employees making monthly savings through Save as
you earn schemes are likely to be worse off. From next April, workers will owe
18p in the £1 to the taxman instead of 10p on any cash deposited above £9,200.
The second largest improvement in ‘significant’ levels of financial distress since the EU Referendum was in professional services, found research from Begbies Traynor
Steve Absolom and Will Wright from KPMG Restructuring have been appointed joint administrators to City Motor Holdings and associated companies
Partners from Johnston Carmichael have been appointed as joint administrators to Axon Well Interventions Products UK
Begbies Traynor have been appointed administrators of William Anelay Ltd, York, one of Britain’s longest-established construction and heritage restoration companies