On the go: KPMG allegedly helped US buyout fund HIG Capital force the insolvency of Silentnight to acquire the company without the burden of its £100m pension scheme, in a case brought by the UK’s accounting regulator.
According to the Financial Times, the Financial Reporting Council has alleged that KPMG and its insolvency partner, David Costley-Wood, were seriously conflicted when they arranged the sale of Silentnight, which took the form of a prepack administration in 2011.
The watchdog claimed the accountancy firm had courted the buyout fund as a client for about nine months before it was appointed as administrator to Silentnight, which presented a conflict with its duties to the company’s creditors and shareholders.
KPMG then “assisted” HIG in its plan to force a liquidity crisis at Silentnight by acquiring and then calling in some of its debt, the FRC claimed. This allowed the US buyout fund to purchase the business out of insolvency while its £100m pension liabilities were transferred to the Pension Protection Fund.
The pensions lifeboat inherited Silentnight’s scheme, with 1,300 members, in April 2011. The HIG deal led to criticism about “pensions dumping”, in which investors can cast off a company’s pension liabilities through a prepack insolvency procedure.
The Pensions Regulator launched proceedings against HIG in a bid to force it to pay a sum equivalent to the pension fund’s deficit at the time of the buyout. HIG challenged the proceedings claiming they were unlawful and unfair.
In a hearing on Monday, Richard Coleman QC, a barrister for the FRC, said: “False, misleading and materially incomplete explanations, with [KPMG’s] assistance, were given to the Pension Protection Fund, the Pensions Regulator and Silentnight itself about the causes of Silentnight’s financial difficulties and HIG’s so-called role as ‘white knight’.”
KPMG and Mr Costley-Wood have denied all the allegations. “We co-operated fully throughout the FRC’s investigation into this matter,” KPMG stated.
“As the tribunal hearing is now under way, it is not appropriate for us to comment in detail, save to say we do not agree with the FRC’s allegations, which are being defended in full,” it added.
