Litigation Capital Management backs £250m claim against KPMG over Carillion
Litigation Capital Management (LCM) has agreed to back a £250 million negligence claim against KPMG for its audits of Carillion.
The litigation funder said it would fund a High Court claim brought by the liquidator of the collapsed contractors entities.
Carillion collapsed in 2018 with £7 billion of liabilities, costing 3,000 staff their jobs and affecting 75,000 people in its supply chain.
The official receiver, the government agency in charge of liquidating Carillion, made a court application last year to obtain working papers from KPMG in preparation for a claim related to audits carried out on Carillion’s books for 2014, 2015 and 2016.
Court documents revealed that the application relates to Carillion’s accounting for long-term construction contracts and goodwill, The Times reports.
The documents read: “Carillion has grounds to believe KPMG’s auditing was negligent in relation to these matters.”
The official receiver has quantified claims for about £250m in dividends and advisory fees paid between 2014 and 2017, which, it argued “would not have been paid if the misstatements in the financial statements had been detected by KPMG”.
Nick Rowles-Davies, executive vice-chairman of LCM, said: “We are delighted to be supporting thousands of creditors who have suffered as a consequence of the biggest insolvency in recent UK history.”
The Financial Reporting Council is also assessing KPMG’s audits of Carillion’s accounts in a separate investigation.
A High Court judge rejected the application to force KPMG to hand over documents in June because he said Carillion could satisfactorily plead its case without the disclosure.
Patrick Moloney, chief executive of LCM, added: “LCM has long and deep experience in funding insolvency-related disputes. As such, LCM is well placed to tailor a finance package to pursue these claims.”