Accountants at advisory firm Deloitte are to face renewed accusations of helping the Phoenix Four transfer £7.7 million from ill-fated MG Rover into an offshore trust.
Deloitte will return before a long-awaited tribunal which is assessing whether it failed to manage conflicts of interest in its advice to the Longbridge car maker and the four directors, John Towers, Nick Stephenson, Peter Beale and John Edwards.
MG Rover collapsed in 2005 with debts of £1.4 billion and the loss of 6,500 jobs. Four of its directors had set up Phoenix to buy the money-losing carmaker for a token £10 five years earlier.
READ MORE: {}
There was widespread public outrage when it emerged the four had paid themselves £40 million in salaries and pensions before MG Rover collapsed.
The four faced no criminal charges but were disqualified from being directors of any company for up to six years after volunteering to accept a ban. The former directors continue to contest there was any evidence whatsoever to support disqualification and dispute they siphoned off funds.
The Financial Reporting Council, which regulates accountants, said last year that Deloitte and a since-retired former mergers and acquisitions partner, Maghsoud Einollahi, had failed to properly manage conflicts of interest. Deloitte and Mr Einollahi had acted as corporate finance advisers to companies involved with MG Rover and the Phoenix Four while Deloitte was also auditing MG Rover.
Timothy Dutton QC, acting for the Accountancy and Actuarial Discipline Board, told a preliminary hearing last July: “Deloitte, to coin a phrase, were all over MG Rover Group and they were acting for the Phoenix Four’s interests.”
Last year’s hearing was told that one of the deals – Project Aircraft – on which Deloitte advised the four men, involved exploiting £100 million of MG Rover tax losses by transferring them to an aircraft leasing company. The leasing firm was bought from Barclays by Phoenix Venture Holdings, the vehicle used by the directors to control the carmaker. Transferring the tax losses to the profitable leasing company generated a tax saving of £36 million. The Phoenix Four’s share of this saving was £7.7 million, which was paid to a Guernsey trust – to be used by them as a pension fund – that Deloitte helped them set up.
Most Read
The four directors paid Deloitte £1.9 million for advising on the transaction. Mr Dutton told last year’s hearing that the Phoenix Four had been hailed as ‘saviours’ of Longbridge.
“Instead, they were structuring transactions with the assistance of the respondents to channel very large benefits to themselves; in this instance, £7.7 million into the Guernsey Trust.”
Deloitte argued that it was not advising the company itself on the deal, and therefore could not be blamed if the board did not discuss the surrender of the tax losses. Deloitte disagreed with the initial findings and a hearing of the complaint began at an independent tribunal in March.
The FRC said the hearing would resume on Monday, July 29.