The Financial Reporting Council (FRC) today publishes the final report of the Appeal Tribunal (PDF) on sanctions in the hearing against Deloitte & Touche, who were advisers to MG Rover Group, and Mr Maghsoud Einollahi who was a partner at Deloitte & Touche.
The Appeal Tribunal hearing on 30 January 2015 upheld several findings of misconduct in relation to Deloitte’s work on ‘Project Platinum’, the project to dispose of the MG Rover loan book and granted the appeal against other findings including those in relation to ‘Project Aircraft’, the project to realise the value of tax losses within MG Rover Group.
The Appeal Tribunal has imposed the following sanctions:
Deloitte & Touche:
- A fine of £3 million
- A severe reprimand
- A fine of £175,000
- A severe reprimand
The Appeal Tribunal affirmed the need for accountants to act in the public interest and for accountants to take this into consideration in deciding whether to accept or continue an engagement. However, it identified a lack of clarity in how accountants should discharge these responsibilities. The FRC and the profession are addressing this issue.
Notes to editors:
1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment. We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work. We represent UK interests in international standard-setting. We also monitor and take action to promote the quality of corporate reporting and auditing. We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
2. In February 2012 following an investigation the FRC filed a formal complaint against Deloitte LLP and Mr Maghsoud Einollahi to be heard by an independent tribunal.
On 29 July 2013 the Tribunal announced that 13 allegations against Deloitte & Touche and Mr Einollahi had been proven and on 9 September 2013 imposed sanctions as follows:
- Deloitte & Touche: a severe reprimand and a fine of £14 million
- Mr Einollahi: Exclusion from the profession for 3 years and a fine of £250,000.
In November 2013 Deloitte & Touche was granted leave to appeal part of the decision of the Tribunal. On 30 January 2015 the Appeal Tribunal upheld several findings of misconduct in relation to Deloitte’s work on ‘Project Platinum’, the project to dispose of the MG Rover loan book. The Appeal Tribunal granted the appeal against other findings including Deloitte’s failure to act in the public interest and all those in relation to ‘Project Aircraft’, the project to realise the value of tax losses within MG Rover Group. The Appeal Tribunal also found that the misconduct by Deloitte was not deliberate.
3. In relation to disciplinary matters, the FRC is the independent, investigative and disciplinary body for accountants and actuaries in the UK dealing with cases which raise important issues affecting the public interest. In brief, the stages of the disciplinary process are:
- Decision to investigate
- Decision whether to bring disciplinary proceedings against Member Firm or Member and, if so decided, referral to Disciplinary Tribunal
- Tribunal hearing
- Determination and imposition of sanction and/or costs orders
The FRC can start a disciplinary investigation in one of two ways: (i) the professional bodies can refer cases to the FRC; and (ii) the FRC may decide of its own accord to investigate a matter. The Conduct Committee will consider each case identified or referred to it and decide whether or not the criteria for an investigation are met.
Investigations are conducted by Executive Counsel and the Professional Discipline team within the Conduct Division. If disciplinary proceedings are commenced, Executive Counsel delivers a complaint to the Conduct Committee. The Conduct Committee then instructs the Convener to appoint a Disciplinary Tribunal.
4. To ensure their independence no member of a Tribunal or Appeal Tribunal may be an officer or employee of any of the professional bodies or of the FRC. Tribunal hearings are normally open to the public except in exceptional circumstances where the Tribunal decides that this would not be in the interests of justice. Tribunal hearings are similar to hearings in court but less formal and the Tribunal will not be subject to the same restrictions as a court might be in accepting evidence. If the Disciplinary Tribunal finds that misconduct has been committed and upholds the complaint, it can impose sanctions.