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MG Rover accountants slammed

With the UK car industry in robust good health, it seems a lifetime ago that the sorry saga of MG Rover played itself out across out newspapers. The company was admittedly in dire straits when the 'Phoenix Four' of John Towers, Peter Beale, Nick Stephenson and John Edwards bought the firm for just £10 in 2000. In the five years until the company went into administration in 2005 with debts of £1.4 billion, the four plus managing director, Kevin Howe, paid themselves some £42 million.

With the UK car industry in robust good health, it seems a lifetime ago that the sorry saga of MG Rover played itself out across out newspapers. The company was admittedly in dire straits when the 'Phoenix Four' of John Towers, Peter Beale, Nick Stephenson and John Edwards bought the firm for just £10 in 2000. In the five years until the company went into administration in 2005 with debts of £1.4 billion, the four plus managing director, Kevin Howe, paid themselves some £42 million. Sadly, 6,000 workers lost their jobs in the debacle. The Phoenix Four were banned in 2011 from working as company directors for a total of 19 years.

Now, financial watchdog, The Financial Reporting Council (FRC), has criticised accountancy firm Deloitte for its role during the Phoenix Four's takeover of MG Rover. The FRC is the professional body that regulates accountants and it has found in a tribunal that Deloitte failed to manage conflicts of interest during the takeover. It emerged that Deloitte was advising both MG Rover and the Phoenix Four and at the same time was acting as auditors for MG Rover. FRC executive director for conduct, Paul George, commented: "The outcome of this tribunal sends a strong clear reminder to all accountants and accountancy firms that they have a responsibility to act in the public interest in the work they undertake."

Commenting on the FRC decision on Monday 29th July, a Deloitte spokesperson said: "We are surprised and very disappointed with the outcome of the tribunal and disagree with its main conclusions. Deloitte's advice, which itself was not criticised, helped to generate over £650m of value for the MG Rover Group, keeping the company alive for five years longer than might have been the case and securing 5,000 jobs in the West Midlands during this period. We take our client and public interest responsibilities extremely seriously and are proud of the value we helped create for the MG Rover Group".

Industry commentators though dispute that Deloitte created £650 million of value. The figure consists mainly of cash already held in the company, the firm's stockpile of cars, the MG Rover car parts business and an interest free loan from BMW to the Phoenix Four's holding company, Techtronic. The MG Rover parts business was later sold for close to £100 million. The tribunal may be the final act in the tragedy that was MG Rover's demise and the FRC will now consider the sanctions it wishes to impose upon Deloitte. It has the power to hand down unlimited fines and suspensions. Deloitte is considering an appeal

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