Photographer: James Beck/Bloomberg

U.K. Lawmakers Angry After Carillion Paid Millions to Advisers

  • Carillion board sought emergency loan from government
  • More than $8.3 million paid to law firms, consultants

British lawmakers released documents that show law firms and consultants got millions of pounds from Carillion Plc, a day before the failing company’s chairman asked for an emergency government loan in a letter that one committee head called a “ransom note.”

Carillion’s board requested 10 million pounds ($13.9 million) after paying more than 6 million pounds to companies including Ernst & Young LLP, FTI Consulting LLP and law firm, Slaughter and May, according to letters and a statement released Sunday by two committees in the House of Commons investigating the collapse. The company is now in liquidation.

The disclosures could renew the debate over public-sector contracts being given to private firms, and may add pressure on Prime Minister Theresa May to explain why Carillion continued to win government work after the company issued a profit warning when a series of construction contacts soured last year.

Carillion Chairman Philip Green warned the Cabinet Office by letter on Jan. 13 that rejecting a plea for funds -- what he called a bridge during restructuring rather than a bailout -- would led to insolvency. Attempts to manage insolvency “will come with enormous cost to HM Government, far exceeding the costs of continued funding for the business,” he said, according to the letter released by the two committees.

“This 11th hour ransom note lays bare the cynical leadership of the Carillion board,” said Rachel Reeves, chair of the Business, Energy and Industrial Strategy Committee. “Expensive advisers still pocketed millions while workers risked losing jobs and long-suffering suppliers faced financial ruin.”

Government Contracts

Carillion had contracts with many arms of government, including building roads and rail links, managing housing for the armed services, and running facilities for schools and hospitals. The company had 43,000 employees worldwide, almost half of them in Britain.

Frank Field, chairman of the Works and Pension Committee, said he wasn’t surprised the government rejected the demand, and he described as “troubling” the disclosure that Carillion paid its ‘illustrious advisers” and “half the laws firms” in London but not subcontractors.

“The smaller suppliers that are the lifeblood of the British economy of course got no such treatment,” Field said.

The company failed to secure additional funds from the U.K. and filed for liquidation on Jan. 15 after racking up debts of 1.6 billion pounds. Its collapse triggered a debate in Britain about the extent to which the government relies on businesses to provide public services and build infrastructure including schools, libraries and roads.

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