October 2 2014 Latest news:
Friday, July 25, 2014
Three accountants from Deloitte are to be investigated over the way they handled the collapse of retailer Comet, business secretary Vince Cable said today.
The chain went under with the loss of 7,000 jobs and left the taxpayer with a bill of up to £26million after an employment tribunal found that staff had not been consulted on the potential for redundancies as legally required.
The Insolvency Service has referred the insolvency specialists − Christopher Farrington, Nicholas Edwards and Neville Kahn − to the Institute of Chartered Accountants in England and Wales (ICAEW) following an 18-month investigation into the case.
The Insolvency Service is concerned that the Deloitte trio worked for Comet before it collapsed and so faced a conflict of interest as administrators.
An employment tribunal last month awarded Comet staff between 70 and 90 days extra pay because they were not consulted over their redundancies, which will cost up to £26m.
The Government’s Redundancy Payments Service has already paid out £18.4m in redundancy to almost 5,000 former Comet staff.
Mr Cable said: “The taxpayer now faces a multi-million pound compensation bill as result of the failure to consult employees. There can be no excuse for failing to comply with the law which is very clear in this area.
“It is vital that the regulator establishes why this happened and whether disciplinary action against the administrators is appropriate.”
ICAEW has a range of powers at its disposal ranging from a warning, a reprimand, fines or licence withdrawal.
Deloitte said: “We note today’s announcement and will cooperate fully with any investigation. However, we strongly disagree with the suggestion of a conflict of interest.”
The firm added that it is not unusual for an accountancy body to work for a client before acting as its administrator, because a prior knowledge of a firm’s finances can help the administration process.
Deloitte added that all Comet staff were told in writing that they might lose their jobs. It also held talks with unions, organised job fairs and set up a website where prospective employers could post available positions to Comet staff.
The accountancy firm added: “Regrettably, it proved impossible to find a purchaser willing to save the business and the employees ultimately had to be made redundant.”
The collapse of Comet, which had more than 250 sites, was one of the biggest high street failures since the demise of Woolworths in 2008.
In December 2012, administrator Deloitte said it had failed to find a buyer for the company or any of its shops.
With insufficient funds raised from the winding down of the chain, it fell to the Redundancy Payments Service to meet outstanding redundancy pay, accrued holiday pay and pay in lieu of notice.
Mr Cable is currently taking a bill through Parliament that aims to tighten up insolvency regulation.