Carillion’s former finance director, who was criticised in the joint select committee’s report on the outsourcer’s collapse as the so-called ‘architect of its aggressive accounting approach’, has challenged claims that he was dismissive of the need to address the company’s pension deficit and demanded a rectification
In the joint BEIS/Work and Pensions Committee report on Carillion, published 16 May, the committee said that Richard Adam, who was finance director over a 10-year period, had described upping pension contributions as ‘a waste of time’.
The company’s pension schemes were carrying a £2.6bn liability when the company collapsed a year after his voluntary departure.
Adam has now written to the committee saying this is ‘a mischaracterisation of the evidence’ and should be rectified in the report.
The report says the pension trustee calculated the deficit at £770m and requested annual deficit recovery payments of £65m for 14 years to address it.
Carillion, using more optimistic assumptions, said the deficit was £620m and proposed annual deficit recovery contributions of £33.4m for 15 years.
The trustee’s advisors, Gazelle Corporate Finance, noted in evidence to the inquiry that Carillion had ‘historically prioritised other demands on capital ahead of deficit reduction in order to grow earnings and support the share price’.
Gazelle concluded that Adam had an ‘aversion to pension scheme deficit repair funding’. The scheme actuary, Edwin Topper from Mercer, said Carillion’s ‘primary objective was to minimise the cash payments to the schemes’, while the report quoted Robin Ellison, chair of the trustees, as observing at the time that Adam viewed funding pension schemes as a ‘waste of money’.
In his letter to the committee following publication, Adam stated: ‘The report, in a number of places, states that I considered that payments into Carillion’s pension schemes were a “waste of money”, and appears to directly attribute these words to myself.
‘For the reasons I explain below, this is a mischaracterisation of the evidence and should be rectified in the report.’
Adam maintains there is ‘no objective evidence that supports the contention that I have ever held or expressed these views’, and his letter states ‘these are not my words’.
Adam said the only evidence cited in the report is an attendance note prepared by Sacker and Partners, of a meeting between Carillion’s pension trustee and The Pensions Regulator (TPR) on 29 April 2013, which he did not attend.
According to the attendance note, it was Ellison, as a trustee director of Carillion's pension trust, who stated his opinion that Adam considered funding pension schemes to be a ‘waste of money’.
Adam pointed out: ‘This was Mr Ellison’s opinion of my views, taken in an attendance note by a third party, and not an expression of my views. As I was not present at this meeting I was unable to challenge Mr Ellison’s assertion. The evidence on which the committees rely was not put to me in the oral evidence session I attended.’
In its response the committee said that while it could not assert that Adam said those precise words in 2013, it had accepted the characterisation in the contemporaneous note by the trustees’ lawyer.
Richard Adam’s letter to Committee - Carillion
Report by Pat Sweet
