The accounting regulator has decided against Deloitte and its former partner Maghsoud Einollahi in the case concerning failed car manufacturer MG Rover - formerly advisers to the MG Rover Group - saying that they failed to consider the public interest at the time of their contract, and acted only in the interest of the controversial 'Phoenix Four', executive directors of Phoenix Venture Holdings who acquired the company for a nominal £10.
In all 13 allegations, the Tribunal found against Deloitte and Einollahi.
The Tribunal said that Deloitte and 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 and Einollahi fell short of the standards reasonably to be expected of, respectively, a member firm and a member of the ICAEW.
In relation to the sale by BMW of a profitable loan book, Deloitte Einollahi failed to consider the public interest as corporate advisers to the Phoenix Four; did not 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 Four Failed to make it clear to MG Rover Group that Deloitte did not represent them or act in their interests; and failed to put in place safeguards between MG Rover Group and the Phoenix Four, including advising MG Rover Group to seek independent advice.
Deloitte and Einollahi were also found to have held themselves out as advising MG Rover Group when in fact they were advising the Phoenix Four.
In addition, they did not 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 and Einollahi disregarded 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.
Deloitte and Einollahi were also found to have wrongly used an old letter of engagement from another project and failed to identify, consider and safeguard against the self-interest threat of earning a large contingent fee.
Paul George, executive director conduct said that the outcome of the 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,' said George.
The Tribunal will hear submissions on the sanctions today. However it is not yet clear when details of the sanctions will be made available. Previously, the case had been delayed due to members of the tribunal being on holiday and taking ill.
