Richard Adam, Carillion’s former group finance director, and his successor in the role, Zafar Khan, have both accepted findings of misconduct in connection with the preparation of accounting information for the company’s financial statements ahead of its collapse in January 2018.

Both men acted recklessly and failed to act with integrity, although neither was found to have behaved dishonestly or deliberately.

The FRC found that the misconduct related to several material areas of Carillion’s business, including specific transactions, major UK construction contracts and a supply chain finance facility, spanning the financial years from 2013 to 2016 inclusive and the half year to 2017.

Mr Adam has been excluded from the Institute of Chartered Accountants in England and Wales (ICAEW) for a recommended period of 15 years and issued a severe reprimand. His original financial sanction of £550,000 was reduced to £222,019 to reflect a fine of £232,830 previously imposed by the Financial Conduct Authority for related events, together with a settlement discount.

Mr Khan, who served as financial controller before taking over as group finance director, has been excluded from the ICAEW for a recommended period of 10 years and similarly issued a severe reprimand. A £225,000 financial sanction was reduced to £60,228 after accounting for an FCA fine of £138,960 and a settlement discount.

In addition, three further former senior accountants at Carillion have accepted sanctions for similar conduct. The FRC’s Conduct Committee has decided not to name those individuals or publish full details of their misconduct, citing specific and exceptional confidential circumstances affecting their cases.

The unnamed accountants received exclusions from their respective Recognised Supervisory Bodies of eight, five and two years, along with financial sanctions of between £26,000 and £45,500 after settlement discounts, and severe reprimands. 

The case has resonance well beyond London. Prior to its failure, Carillion was a UK-based multinational construction and facilities management services company, employing around 43,000 people globally and holding multiple contracts with public authorities. Those contracts spanned schools, hospitals and infrastructure projects across Scotland, and the firm’s liquidation in January 2018 forced ministers and councils north of the border to scramble to safeguard services and subcontractor payments.

The path to that collapse was rapid once concerns surfaced. In July 2017, Carillion issued a profit warning and announced an expected provision against its construction contracts of approximately £845 million. Two months later, a further provision of around £200m was disclosed alongside a first-half loss of roughly £1.15 billion.

A third profit warning followed in November 2017, with the company indicating it would breach its banking covenants the following month, before being placed into compulsory liquidation on 15 January 2018 in one of the biggest corporate failures in UK history. 

Penrose Foss, executive counsel and executive director of Investigations and Enforcement at the FRC, said: “It is critical that any individual who is responsible for preparing accurate financial information, whatever their level of seniority, undertakes their duties with integrity. This is a fundamental requirement for every organisation.

“For a large publicly listed company, the consequences of failing to meet this requirement can be wide-ranging, affecting investors suppliers, employees, and the many communities served by an organisation across the UK and beyond.

“In this case, there was a sustained failure by Mr Adam in his role as group finance director, and by his successor Mr Khan over a shorter period, to act with integrity and ensure the accuracy of financial information relating to several business areas significant in Carillion’s financial reporting. The FRC has also secured admissions from three further individuals.

“The substantial sanctions imposed on these five individuals reflect the gravity of their failure to discharge their respective obligations to act with integrity in preparing financial information in the context of a large, listed company.”

Today’s announcement marks the conclusion of the FRC’s investigations arising out of Carillion’s collapse, following earlier enforcement action against auditor KPMG and two of its former partners in 2024.