Richard Howson, the former chief executive of Carillion, has been penalised by the Financial Conduct Authority (FCA) for his involvement in misleading investors prior to the company’s dramatic collapse in January 2018. The FCA has imposed a fine of £237,700 after Howson decided to withdraw his appeal against the regulatory body’s initial ruling.
Misleading Announcements and Regulatory Findings
The FCA’s investigation revealed that Howson was cognisant of the severe financial difficulties facing Carillion’s construction division. Despite this knowledge, he failed to adequately inform both the board and audit committee, which ultimately resulted in insufficient oversight and transparency in the company’s communications. According to the FCA, while the group finance director bore primary responsibility for delivering accurate financial information, Howson’s actions constituted recklessness and a clear violation of market abuse and listing regulations.
The Fallout from Carillion’s Collapse
Carillion, once one of the largest construction and facilities management firms in the UK, entered liquidation with staggering debts amounting to £7 billion, leading to the loss of approximately 3,000 jobs. The company’s downfall wreaked havoc across more than 450 projects, including critical public infrastructure initiatives such as schools and roads, as well as the expansion of Liverpool Football Club’s stadium. The delays in construction of two significant hospitals—the Royal Liverpool and the Midland Metropolitan—were particularly glaring, as both facilities were expected to open in 2017 and 2018, respectively. The ultimate costs of these projects ballooned to hundreds of millions above initial budgets.
Steve Smart, a director at the FCA, emphasised the profound impact of Carillion’s failure, stating, “Jobs were lost, public sector projects put at risk, and investors, who trusted the company to give them accurate information, suffered large scale losses.” He reiterated the FCA’s commitment to holding both the company and its senior leaders accountable for their actions.
Legal Developments and Comparisons
The fine against Howson follows similar penalties imposed on two other former executives of Carillion, Richard Adam and Zafar Khan, who were fined £232,800 and £138,900, respectively, for their roles in the scandal. Both Adam and Khan also opted to withdraw their appeals against the FCA’s findings.
In the lead-up to its collapse, Carillion had shocked stakeholders by announcing an £845 million writedown due to ongoing issues within its construction projects. Board minutes revealed that former chair Philip Green was preparing a positive announcement for investors just days before the company disclosed the significant financial setback, highlighting a troubling disconnect between internal knowledge and public communication.
In a related context, accounting firm KPMG faced its own repercussions when it was fined £21 million by the accountancy regulator in 2023 for “exceptional” failings in its audits of Carillion from 2013 to 2017, further underscoring widespread governance issues surrounding the company.
Why it Matters
The repercussions of Carillion’s collapse extend far beyond financial penalties for its leadership. The fallout has sparked significant concern over corporate governance and transparency within the construction industry, prompting calls for stricter regulatory frameworks to prevent similar disasters in the future. As the dust settles on this chapter, the case serves as a stark reminder of the vital importance of accountability in corporate leadership, especially in sectors that play a crucial role in public infrastructure and services.
