Business Secretary, Vince Cable, has brought the hammer down on the liquidators who handled the winding-up of an electrical retail chain, Comet, more than a year and a half after its folding.
Yielding the loss of roughly 7,000 jobs, the liquidation process has been criticised for the suspect conditions in which it was enacted. As such, Cable has referred three high-profile partners of financial giants, Deloitte, to ICAEW, which holds regulatory powers permitting them to remove accounting licences and impose weighty fines for misconduct.
It is speculated the ICAEW exploration into the matter will focus on two areas whereby the accused violated accounting regulations.
The first contravention involves Deloitte’s dual role as Comet’s administrator and then insolvency practitioners, which can be construed as a conflict of interest, affecting the manner in which proceedings were conducted. Although not unheard of and in the past, hardly frowned upon, this dual role of insolvency on the back of alternate financial work for a company has become tetchier in recent times.
The second, of more interest to the wider public, was the Deloitte’ partners’ botching of employee communications prior to their sacking. This has been an ongoing issue since the end of Comet’s liquidation procedures, with former staff having rallied and demanded what they believe they are due in redundancy payments.
This viewpoint was affirmed by an employment tribunal, which adjudged that over 2, 000 staff were shafted out of a combined £10m. Court hearings are ongoing as to whether compensation should be extended to an extra 4, 000 former employees, which would cost the taxpayer £15m. As such, public interest in the issue has been very high, due to the costs they face due to no fault of their own.
Past Glory & Subsequent Shadiness
Once one of the UK’s leading electronic retailers, Comet essentially buckled under the competition, failing to combat the new generation of sales brought about by online rivals and hypermarket electronics.
Brought by OpCapita, a private investment firm, for £2 in November 2011, Comet failed to obtain a sufficient level of supply to generate enough profits to keep afloat. Yet, it managed to wire hefty bundles of cash to shareholder-related companies.
These somewhat suspect transactions were at the heart of the entire liquidation process it has transpired, as recently discovered documents show a £117m payout raked in by OpCapita and hedge fund, Elliott Advisors – a stakeholder in Comet – prior to its demise.
Other parties to benefit from the manner in which the liquidation process was conducted include Deloitte, GA Europe and the insolvency & administrative practitioners, who pocketed in excess of £10m in fees for their efforts.
The handling of Comet’s liquidation was labelled “an old-fashioned corporate raid” by lawyers at the tribunal hearing, going on to dub it “one of the more regrettable episodes of British corporate history.”
Such derisive claims will do nothing to assuage public angst as the sum the electorate stands to lose is certainly substantial given their complete lack of responsibility for the corruption which looms over the winding-up of Comet-like some ghastly shadow.
Those accused include Nick Edwards, Neville Kahn and Christopher Farrington. These men are considered some of the most respected players in the field of accountancy, and insolvency practice, and have collectively worked on some of the century’s most significant administrations, including the handling of the high street music store, HMV.
However, their reputations are now firmly in the balance following their indictment in this case, and if found guilty, they stand to lose everything.
Speaking after the employment tribunal ruling in June, the three liquidators said: “It is disappointing that the tribunal has found against the company.
“The Comet management team, administrators from Deloitte and our advisors worked tremendously hard under very challenging circumstances to provide the best possible consultation to the employees.
“Comet Group Limited made significant efforts to consult with its nearly 7,000 employees across more than 250 sites during the administration, whilst a purchaser for the business was sought. Regrettably, it proved impossible to find a purchaser willing to save the business and all the employees ultimately had to be made redundant.”
The proceedings against the Comet Group come after Vince Cable’s promise in April to impose tougher sanctions on greedy, irresponsible company bigwigs. Indeed he has, but should liquidators’ fecklessness mean taxpayers have to pay the brunt?