On the go: KPMG has received a £13m fine over serious misconduct in its role in the sale of bed manufacturer Silentnight, which lead to the company’s insolvency and its pension scheme having to be absorbed by the Pension Protection Fund.
The audit company, which has been severely reprimanded by a tribunal and ordered to appoint an independent professional to conduct a root cause review of this matter and its own policies, will also have to pay more than £2.75m in costs.
David Costley-Wood, former partner and head of KPMG Manchester restructuring, was also severely reprimanded, receiving a £500,000 fine. He has been excluded from membership of the Institute of Chartered Accountants in England and Wales for 13 years and precluded from holding an insolvency licence for the same period, a statement read.
The investigation by the Financial Reporting Council followed a referral from the Pensions Regulator in relation to Costley-Wood’s conduct in respect of Silentnight in 2010-11.
During that time, Costley-Wood advised both Silentnight and US buyout fund HIG Capital in a proposed acquisition of the former by the latter, and “as a result the respondents’ judgement was compromised and objectivity impaired,” a statement from the FRC read.
The tribunal found that Costley-Wood then assisted with a strategy designed to drive Silentnight into an insolvency process, “with a view to passing Silentnight’s pension scheme to the PPF at the expense of pension scheme members and PPF levy payers”.
Silentnight went into administration in May 2011, and as a consequence the pensions lifeboat inherited Silentnight’s scheme, with 1,200 members.
Costley-Wood “dishonestly advanced and associated himself with untrue and misleading and/or materially incomplete statements” to the PPF, TPR, Silentnight and the trustees of the pension scheme as to the causes of company’s difficulties, “in order to assist HIG in its efforts to enable Silentnight to shed its liability under the Pension Scheme as cheaply as possible,” the statement added.
Elizabeth Barrett, FRC’s executive counsel, said: “The scale and range of the sanctions imposed by the tribunal mark the gravity of the misconduct in this matter.
“The decision serves as an important reminder of the need for all members of the profession to act with integrity and objectivity, and of the serious consequences when they fail to do so.”
A spokesperson at TPR, which agreed a £25m settlement in its anti-avoidance case against the owners of Silentnight in March, said: “We are pleased with the tribunal’s decision and agree with its comments about the conduct of KPMG and Costley-Wood.
“If we see advisers acting in a manner that is unacceptable to us, we will refer matters to other appropriate regulatory bodies and assist them with their investigations, as well as consider the availability of our own powers.
“Today’s announcement highlights the important role the audit, accountancy and actuary industry plays helping to safeguarding pension savers’ interests.”
A PPF spokesperson said: “The FRC Tribunal findings make clear the significant detriment caused to the Silentnight pension scheme, which is currently in PPF assessment. We believe it’s only right that the proceeds of the fines imposed by the FRC should benefit the Silentnight pension scheme so it can achieve the best possible outcome for its 1,200 members.”
