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Outcome of disciplinary hearing: MG Rover Group, Deloitte & Touche and Mr Maghsoud Einollahi

FRC PN 074
29 Jul 2013


The Financial Reporting Council (FRC) Tribunal has confirmed its decision today (29 July) at the International Dispute Resolution Centre, following the disciplinary hearing against Deloitte & Touche, who were advisers to MG Rover Group, and Mr Maghsoud Einollahi, who was a partner at Deloitte & Touche.

The Tribunal found that Deloitte & Touche and Mr Einollahi showed in some instances a persistent and deliberate disregard of the fundamental principles and statements of the ICAEW’s code of ethics. The conduct of Deloitte & Touche and Mr Einollahi fell short of the standards reasonably to be expected of, respectively, a member firm and a member of the ICAEW. The Tribunal found all 13 allegations proven (note 2).

The Tribunal will hear submissions on the sanctions today.

Paul George, Executive Director Conduct said:
“The outcome of this Tribunal sends a strong clear reminder to all accountants and accountancy firms that they have a responsibility to act in the public interest in the work they undertake. The result in this case underlines the FRC’s commitment to promote public confidence and ensure the integrity of the accountancy profession by upholding the standards expected of members.”

The final written report from the Tribunal will be published by the FRC in due course.


Notes to editors:
  1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.
  2. The allegations against Deloitte & Touche and Mr Maghsoud Einollahi were;
    • In relation to the sale by BMW of a profitable loan book, Deloitte & Touche and Mr Maghsoud Einollahi
      • Failed to consider the public interest as corporate advisers to the Phoenix Four
      • Failed to identify which of MG Rover Group, Phoenix Venture Holdings, or the Phoenix Four was Deloitte’s client
      • Failed to identify and consider conflicts of interest between the MG Rover Group, the A-C shareholders (the executives, employees and dealers of MG Rover) in Phoenix Venture Holdings and the Phoenix FourFailed to make it clear to MG Rover Group that Deloitte did not represent them or act in their interests
      • Failed to put in place safeguards between MG Rover Group and the Phoenix Four, including advising MG Rover Group to seek independent advice
      • Held themselves out as advising MG Rover Group when in fact they were advising the Phoenix Four.
      • Failed to identify, consider and safeguard against the self-interest threat of earning a large contingent fee and acquiring an interest in the venture.
    • In relation to a scheme to transfer MG Rover Group’s tax losses to a company indirectly controlled by the ‘Phoenix Four’ and enabling substantial payments to be made for the benefit of the Phoenix Four, Deloitte & Touche and Mr Maghsoud Einollahi
      • Failed to consider the public interest as corporate advisers to the Phoenix Four.
      • Failed to identify and consider conflicts of interest between the MG Rover Group, Phoenix Venture Holdings and the Phoenix Four.
      • Failed to make it clear to MG Rover Group that Deloitte did not represent them or act in their interests.
      • Failed to put in place safeguards between MG Rover Group and the Phoenix Four, including advising MG Rover Group to seek independent advice.
      • Wrongly used an old letter of engagement from another project.
      • Failed to identify, consider and safeguard against the self-interest threat of earning a large contingent fee.
  3. All Press enquiries should be directed to: Peter Timberlake, Head of Communications on telephone: 020 7492 2397/ 07768 502332, or email p.timberlake@frc.org.uk. Or to Sophie Broom, Communications Executive, on telephone: 020 7492 2395/ 07771 808464 or email: s.broom@frc.org.uk.
     


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