Ex-Carillion finance director banned for 11 years

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Carillion’s former finance director, Zafar Khan, has been banned from acting as a director for 11 years for his role in misstating the company’s financial position by more than £200m just before its collapse

It is the longest ban imposed on an executive of a listed company by the Insolvency Service in 60 years and is set to continue, as proceedings against several other Carillion directors are ongoing.

Formerly an accountant at EY, Khan joined Carillion’s senior finance team in 2011, before being promoted to CEO in August 2016.

Carillion, a major UK public sector supplier, collapsed in January 2018 with the loss of thousands of jobs, and a debt pile of £7bn. It had wrongfully declared a pre-tax profit of £146.7m in its year end accounts for 2017, when it had actually lost £61.7m, showing a misstatement of £208.5m.

According to the Insolvency Service, Khan caused the company to rely on ‘false and misleading information’ during his tenure and oversaw dividend payments of £54.5m to shareholders in June 2017, which could not have been justified if the company’s financial statements had given an accurate picture of its position.

There were significant material misstatements of profits in various projects, including Battersea power station, Royal Liverpool University hospital, and the Midlands Metropolitan hospital.

The two hospitals were subject to significant delays with spending overruns and both projects were left midway through construction when the listed company went bust.

The collapse of Carillion triggered an investigation into auditors KPMG by the Financial Reporting Council (FRC), which discovered fake documents and minutes of meetings relating to a number of audits. The regulator issued KPMG with a fine of £14.4m, alongside a penalty of £400,000 for the lead partner, Peter Meehan.

When proceedings were launched in January 2021, the Insolvency Service named eight former Carillion directors, including former chief executives Richard Howson and Keith Cochrane, as well as Richard Adam, who are due at the High Court later this year on the grounds of their misconduct whilst acting as directors at Carillion.

On top of this, Howson, Cochrane and Adams, were also fined almost £1m by the Financial Conduct Authority (FCA) for issuing misleading statements to investors about Carillion’s finances.

Khan was also handed a financial penalty of £154,400 by the FCA last June, for his role in the financial exposures associated with Carillion’s collapse.

Khan’s disqualification means he cannot serve as a director of a company in the UK or get other people to manage a company under his instructions.

An Insolvency Service spokesperson said: ‘The Insolvency Service has accepted a disqualification undertaking from Zafar Iqbal Khan for 11 years for his conduct as a director of Carillion plc.

‘As the litigation against the remaining directors is ongoing, with a trial set to commence the week of 16 October 2023, the Insolvency Service is unable to comment any further.’

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