UK MPs investigating the collapse of Carillion have said law firms and consultants got millions of pounds from the company one day before its chairman asked for an emergency government loan, and two days before it was forced into liquidation.
Documents dated 13 January show that Carillion was asking its banking group and the government to give it emergency loans of £10m each starting in the week beginning 15 January, the day it went bust.
One is a letter from Carillion chairman Philip Green to the Cabinet Office warning on 13 January that if the government did not stump up the £10m right away Carillion would be insolvent, prompting an MP chairing the investigation, Rachel Reeves (pictured), to call it a "ransom note".
Carillion’s board asked for the £10m after paying more than £6m 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, reports Bloomberg.
Bloomberg commented that 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 had contracts with many arms of government and, in his letter, letter Carillion chairman Philip Green warned the Cabinet Office that rejecting his plea for funds would lead to insolvency, which would "come with enormous cost to HM Government, far exceeding the costs of continued funding for the business".
This amounted to holding the government to ransom, said Rachel Reeves MP, chair of the Business, Energy and Industrial Strategy (BEIS) Committee.
"This 11th hour ransom note lays bare the cynical leadership of the Carillion board," she said, reports Bloomberg.
"Expensive advisers still pocketed millions while workers risked losing jobs and long-suffering suppliers faced financial ruin."
Frank Field MP, chairman of the Works and Pension Committee, which has joined Reeves’ committee in the investigation, told Bloomberg he wasn’t surprised the government rejected Green’s 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.
Image: BEIS committee chair Rachel Reeves MP