Carillion loses bid to get KPMG documents ahead of U.K. lawsuit

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Defunct U.K. contractor Carillion Plc won’t be able to get key KPMG documents to prepare for a 250 million-pound ($314 million) negligence lawsuit against the accounting firm.

A London judge dismissed the request made by the company’s administrators, saying, “Carillion should simply get on with the case in the usual way, by setting out the case in a pleading.”

This will put an end to expensive and undesirable “shadow boxing,” in a case where it’s clear substantial litigation against KPMG will be started, Judge Richard Jacobs said in a ruling Wednesday.

Carillion fell into liquidation in 2018 after the U.K. government refused to bail it out, costing almost 3,000 jobs and leaving 30,000 suppliers and subcontractors with 2 billion pounds in unpaid bills. It was one of the biggest corporate casualties in British history.

Administrators liquidating the company’s assets believe KPMG’s auditing was negligent in relation to its long-term construction contracts and goodwill between 2014 and 2016. Carillion has put KPMG on notice that it may seek even more than the 250 million pounds identified so far, the administrators said in court filings.

“We are pleased that the judge agreed with KPMG that pre-action disclosure is not appropriate in this case,” KPMG said in a statement.

Lawyers for Carillion’s liquidators didn’t immediately respond to a request for comment.

Carillion’s collapse is one of several major scandals to rock the so-called Big Four accounting firms over the last few years. The industry has faced calls to split auditing and consulting operations amid criticism that their work has become sub-standard and riddled with conflicts of interest.

KPMG faces a regulatory probe into its audit of Carillion. The Financial Reporting Council is set to complete the first stage of the investigation this summer.

Bloomberg News
Audits Lawsuits KPMG International accounting
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