Yahoo Finance FCA investigates allegations of insider trading at Carillion
The City watchdog has revealed it is investigating allegations of insider trading at the building and services contractor Carillion before its spectacular collapse in January.
In a letter to MPs, the Financial Conduct Authority (FCA) chief, Andrew Bailey, said he was looking into allegations that people connected to the company had traded in its shares using inside knowledge before Carillion’s huge profit warning on 10 July 2017.
The shock warning started the chain of events that led to the collapse of the business. It included an £845m writedown on three huge public-private partnership projects – the Royal Liverpool and Midland Metropolitan hospital construction contracts and the Aberdeen bypass. The chief executive Richard Howson departed, the company admitted it had huge and rising debts and the share price plunged 40% in a day.
It is understood the FCA has yet to agree whether the allegations could form the basis of a formal investigation but Bailey said he had made “good progress” after a series of interviews and meetings “with senior Carillion staff, key advisers and shareholders”.
The letter adds a further twist to one of the biggest corporate crashes in British history. It has triggered an investigation by two parliamentary select committees, an FCA inquiry and an accounting industry examination of the company’s auditor KPMG.
Carillion eventually went bust at the start of this year with debts of £900m, despite government contracts to build and operate hospitals and schools, and a construction business involved in a series of infrastructure projects.
Hundreds of staff lost their jobs and thousands of subcontractors were left without work. A huge deficit in the firm’s occupational pension fund meant it needed to be rescued by the industry-backed lifeboat scheme, the Pension Protection Fund.
Ministers have come under fire for maintaining a close relationship with the firm and inviting it to bid for government contracts even though it was close to bankruptcy.
A damning 100-page report into the company’s collapse compiled by two select committees, published last month, said Carillion collapsed as a result of “recklessness, hubris and greed” among directors who put their own financial rewards ahead of all other concerns.
The FCA announced in January it would look into concerns that Carillion had manipulated financial statements in the years before it collapsed but refused to give any details.
In response to calls for an update from MPs on the work and pensions and business joint select committee examining Carillion, Bailey said the main focus of the investigation was into announcements made in July last year and whether they were deliberately delayed.
Bailey said: “Our investigation is into the the timeliness and content of the firm’s announcements. Our primary focus is to determine whether the matters announced in Carillion’s trading update on 10 July 2017 were identified and announced at the appropriate time.
“We are also considering whether earlier anouncements made by Carillion were false or misleading as a result,” he added.
“We are aware of allegations of insider trading in Carillion’s shares prior to its trading update on 10 July and are looking into them.”
Bailey refused to tell MPs how long the investigation would take, saying only that it would be completed as soon as possible.
However, the FCA has a strong track record of investigating insider trading and pursuing cases to trial.
