THE FINANCIAL WATCHDOG has reprimanded the former chief executive of Farepak’s parent company.
The Financial Reporting Council (FRC) has reprimanded Farepak director William Rollason, who was also CEO of its parent company.
ICAEW-qualified Rollason was CEO of European Home Retail and was accused of failing to act in accordance with the institute’s ethical code, allowing his conduct to fall short of the standards expected of members.
Rollason will not be excluded but, he has been “severely reprimanded” – an official label that he must disclose to all current and future employers. He will also have to pay a £15,000 fine and pay a £50,000 contribution towards the FRC’s costs.
A settlement was agreed where he accepted that he acted recklessly, in a way that was contrary to the fundamental principle of integrity as set out in the ICAEW guide to professional ethics.
He accepted that he had drafted and distributed to his fellow directors a memorandum which could mislead as to the true financial position of the business.
He had also signed a standard form letter to Farepak on behalf of EHR claiming it would support Farepak in meeting its future liabilities, knowing the auditors would rely on this information for the 2004/05 financial statements. The letter could have misled as Farepak’s parent company had failed to provide support in a previous instance.
Rollasons was found to have not acted dishonestly in either drafting and distributing the memorandum, or in signing the letter.
Gareth Rees QC, the executive counsel to the FRC, said: “The FRC is pleased with the outcome of this case. This case shows the high level of integrity expected from chartered accountants who take up executive positions in business.
“It is vital that chartered accountants in business comply with good governance to ensure the accuracy of financial statements.”
Farepak collapsed in 2006, depriving more than 100,000 customers of their Christmas savings. A case against the directors brought by the Insolvency Service, earlier this year, collapsed after the presiding judge blamed Farepak’s bank, HBoS, and not the directors. The bank, now part of Lloyds, donated £8m to the Farepak compensation scheme.
Farepak collapsed owing more than £40m after its parent company, European Home Retail, went into administration in 2006.
BDO liquidators Martha Thomson and Dermot Power were appointed to Farepak in 2010 with unsecured creditors such as the customers due to receive about 32p for every pound owed.
Ernst & Young is due to face a similar proceeding from the FRC, for its role as auditor of Farepak. A preliminary hearing to set a tribunal date and a tribunal hearing are both due later this year.
In an FRC document dismissing a request to have the complaint against Rollason struck out, it was revealed that the tribunal had formally dismissed complaints against EHR group FD Stevan Fowler and Farepak FD Stephen Hick in November 2012.
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