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Deloitte loses MG Rover tribunal

DELOITTE has lost at a tribunal over its role in advising the owners of MG Rover.

The Big Four firm will be sanctioned and ordered to pay costs. However, the tribunal, which announced the loss today, have yet to decide on the level of sanction. 

Accountancy Age understands that Deloitte will make an interim payment of £1.75m towards costs with an final figure likely to be agreed this week. 

Deloitte and its corporate finance partner Maghsoud Einollahi were hauled in front of the Financial Reporting Council’s independent tribunal for its role in advising the owners of MG Rover in 2000 over two transactions.

The FRC had alleged that Deloitte and Einollahi failed to adequately consider the public interest and mitigate risks of conflicts when they gave their advice.

They have been found to have committed misconduct in their roles by the independent tribunal. 

A spokesperson for Deloitte said: “We are surprised and very disappointed with the outcome of the Tribunal and disagree with its main conclusions.

“We take our client and public interest responsibilities extremely seriously and are proud of the value we helped create for the MG Rover Group.

“The quality of our work has not been criticised, but the Tribunal found against us on a number of points which could have negative implications for the advice that can be provided by ICAEW member firms and members, both within the profession and business.”

BMW sold MG Rover Group Limited (MGRG) in May 2000 to Techtronic for £10 with BMW additionally providing a £427m dowry, essentially a long term interest free loan. BMW also paid £75m in lieu of providing warranties. The Phoenix Four – John Towers, Nick Stephenson, John Edwards and Peter Beale – each owned and invested £60,000 in Techtronic.

In public the Phoenix Four made statements that their stewardship of the group would be for the public good. Phoenix Venture Holdings, the consortium formed by the four businessmen, later acquired all the shares of Techtronic which ultimately became the parent company of MGRG.

The tribunal will calculate sanctions according to new guidance issued by the FRC in February, which could result in a fine based on the fee income of the firm. 

 

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