The financial press is regularly castigated for its failure to spot problems before innocent people get burnt. But what happens when the press does spot a big problem and alerts all concerned?
Witness the MG Rover saga.
Back in May 2000, the car maker was rescued from collapse by a group of four businessmen, collectively known as the Phoenix Four. Led by John Towers, a former Rover chief executive, the team bought Rover from BMW for just £10, picking up a soft loan of £550m in the process.
Now, Mr Towers and his colleagues kept a suspiciously low profile after the takeover – causing followers to sniff around and go and look in the private company accounts.
On doing do, in 2003, Chris Hope of the Daily Telegraph realised that the Phoenix Four had arranged for a handy restructuring whereby these supposed rescuers would actually trouser £10m in loan notes between them. With the underlying car business seemingly being run into the ground at the time, the arrangement for the directors carried an unpalatable whiff – and that original Telegraph piece slowly encouraged further investigatory work at other newspapers.
By the time Rover actually collapsed two years later, revaluations were appearing on a near-daily basis: huge value appeared to have evaporated, thousands of jobs had been lost, and all the while the directors were enjoying the fruits of a structure put together by accountants Deloitte that saw them skim off tens of millions of pounds.
Yet it took months of campaigning before the government finally agreed that the matter should be properly investigated – and, with the appointment of independent inspectors in June 2005 we were finally promised an accelerated DTI enquiry.
Four years later, having ploughed through £16m in costs, the inspectors have finally written up their report – which Business Secretary Lord Mandelson has promptly bounced off to the Serious Fraud Office, from whence it may never re-appear.
It’s tempting to scream ‘political conspiracy’ at this point, so that’s what we’ll do.
The Rover debacle runs like a sore through the New Labour years; minister after minister has been made to look comically naive by a case that stank from Day One. A SFO referral will certainly keep the confirmatory facts under lock and key for years to come.
But why has this case been allowed to deteriorate in such Dickensian fashion?
The suspicion here is that something called the Accountancy & Actuarial Discipline Board is at least partially to blame. This is the investigative and disciplinary wing of the Financial Reporting Council, which could well qualify as the sleepiest professional regulator in Britain.
Pressing cases include whether certain actuaries gave the government the right advice in respect of Equitable Life between the years 1990 and 2001. Also, in April this year, the AADB said it was looking into something called the First Quench Pension Fund.
In fact, given that we have just been through the deepest financial crisis in more than 50 years, it is probably worth publishing an unexpurgated list of the AADB’s “present cases” — work that has somehow filled the past four years:
The eleven member AADB board, who appear to be in danger of nodding off, consists of: chairman Timothy Walker, along with Graham Aslet, Jeremy Barnett, Sarah Brown OBE, Norval Bryson, James Gemmell, James Kellock, Neil Lerner, Stuart McKee FCCA, Paul Smith, and Stephen Walzer.
The executive counsel is one Cameron Scott, and then there is also a 33 strong “tribunal panel,” made up of former investment bankers (such as Ian Abrams), former police chiefs (Paul Acres) a collection of retired lawyers and competition regulators, and too many ex-civil servants to name…
Will somebody please reform this lot?
Related links:
The Accountancy Scheme Review — consultation paper on the AADB