Carillion was ‘like a Ponzi scheme’ and inadequately scrutinised by government, top auditor says
Carillion was “like a Ponzi scheme” and was inadequately scrutinised by the government, the UK's longest-serving auditor general has said.
Sir John Bourn said he was “appalled” at the government for continuing to hand the outsourcing giant contracts, such as HS2, despite warnings.
The outsourcing company, which had hundreds of public contracts that ranged from supplying school meals and managing prisons to major road and rail projects, collapsed in January with liabilities of up to £7bn.
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The Cabinet Office said it was aware of warnings regarding Carillion's financial situation but was reassured after meeting with the company's management.
But Sir John, head of the National Audit Office (NAO) for decades up to 2008, said the government's scrutiny of the company was inadequate.
“The government should not have given Carillion so much work and it didn't have to do it,” he told a Channel 4 Dispatches investigation to be broadcast tonight.
“You could see that Carillion was in trouble – it was all rather like a Ponzi scheme because it was taking small contracts as a way of keeping the bigger contracts going.
“I was surprised that the government had gone on giving it contracts.”
The company was handed a key contract on the HS2 project in July last year – less than a week after issuing a profit warning, which saw shares drop 70 per cent.
The government said it made sure Carillion worked with partners who would finish the job if it went bust.
The Dispatches investigation, 'How to Lose Seven Billion Pounds', also spoke to former Carillion employees.
The firm's head of recruitment from 2015 to 2018, Jon Hull, said finance director Richard Adam had created a “culture of fear”, saying: “I think he [Adam] was absolutely, totally responsible for that culture."
He added: “He made the numbers look better without tackling the fundamental issues in the company, which is what a director should [do], right?”
Adam told MPs that he retired in 2016 and that he didn't produce a number that misled his colleagues.
He told Dispatches that all of the company's account during his time there were approved by the board and audited.
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