Carillion auditor being sued for more than £1bn

KPMG is being sued for more than £1bn over its work with Carillion leading up to the contractor’s collapse.

The Official Receiver, which is trying to recover as much money as possible for creditors, has filed a formal legal claim against KPMG, according to Sky News. It is understood the total value of the claim is around £1.2bn, significantly more than the £1bn that it was previously reported to be seeking.

Within the claim is £230m to cover dividends that Carillion distributed in the years before its collapse. The Official Receiver has claimed these should not have been paid out. It is seeking a further £20m that KPMG received in advisory fees from the contractor. The largest element of the claim is believed to be trading losses that the receiver is trying to recover.

KPMG has made a provision of £144m in relation to cover potential future costs related to its work with Carillion.

In a statement released on Monday afternoon the accountant acknowledged the claim, but said it was “without merit”. A spokesperson said:”We believe this claim is without merit and we will robustly defend the case. Responsibility for the failure of Carillion lies solely with the company’s board and management, who set the strategy and ran the business.”

Separately, the Financial Reporting Council (FRC) has been investigating KPMG’s auditing of Carillion between 2014 and its collapse in early 2018. It was reported in March that the auditor was moving towards a settlement with the FRC, which could reach £25m.

A tribunal examining the conduct of KPMG staff during a review of its auditing of Carillion began last month. KPMG UK chief executive Jon Holt said it was clear that “misconduct has occurred and that our regulator was misled”. The tribunal is ongoing.

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