There is a little mean streak in me, you see, it started with Tesco, and it actually started a little earlier. But the gist is that when it concerns PwC (PricewaterhouseCoopers) I tend to take a swing at them whenever possible, I just roll that way. So there I was looking at ‘PwC charges more than £20m for first eight weeks of Carillion collapse‘ (at https://www.theguardian.com/business/2018/mar/21/pwc-charges-20m-eight-weeks-carillion-collapse-final-bill) when I realised that when I wack those boys I usually have good reason and supporting documentations to test my latest sledgehammer on a member of their board of Directors. In this article, when I saw “MPs have accused the accountancy firm tasked with salvaging money from Carillion on behalf of its creditors and pensioners of charging “superhuman” fees, after it racked up a bill for £20.4m in eight weeks” it took a mere 3.2 seconds from spitting in my hands and getting ready to swing that hammer at Kevin Ellis (yes all the way from Sydney, my arms are that long). I held off and went ‘wait a minute!‘
You see, I always had as I saw it good cause, but who are these MP’s thinking that they have good cause? The first is Rachel Reeves, the Labour MP in charge of the business select committee. So she mentioned that ‘superhuman’ part. What does she know? The Wiki claim states that she is an economist. So how much does one charge for 112 consultants? You see at £199 an hour we get £891K for these people working a mere 40 hours a week. As it is the UK, they are more likely to work 60 hours which gets us at flat rate £1.3 million a week which leaves PwC with an overhead of a mere £100K whilst I have not taking into account any additional expenses and they tend to get high. I reckon that these people are likely to make a lot more than 60 hours a week, that is the result of “£2bn to its 30,000 suppliers” and as the article states “a week to employ 112 staff to keep the company running and to honour government contracts” we do not see the inclusion of any additional staff that was not hired and that is still assigned via PwC. So that took a mere 6 seconds to realise that I was not getting to whack Kevin Ellis. Leave it to a Labour MP to spoil a perfectly lovely Friday morning feeling. Now, let’s also realise that my calculations could be way off, there are so little actual facts in the article (I am not blaming the article here) that there are hidden traps all over the place. I think that Rachel should have gotten up from the right side of the vibrator that morning, as we need to realise what an amazing mess Carillion is. The oversight had fallen short on so many sides, with the mention of pensions and a shortfall that is close to a £1,000,000,000 should be a much larger issue and the fact that this had fallen short implies a level of what I regard to be criminal negligence that is unheard of. We merely need to look at ‘Carillion’s pension crisis defies magic legal cure‘ (at https://www.ft.com/content/5041d10e-1a1c-11e8-aaca-4574d7dabfb6). So when we see “Yet in the seven years before its collapse, Carillion made contributions to the fund of just £280m while paying out dividends worth more than £500m“, my first idea is to look at the auditors and the accountancy firm. So how much overview did Rachel Reeves give regarding KPMG? We get part of this when we see ‘Why didn’t anyone working with Carillion say it was going to fail?‘ (at https://www.independent.co.uk/voices/carillion-kpmg-auditors-audit-hbos-financial-crisis-self-regulation-deloitte-a8185356.html). Here we see: “In March 2017, the giant audit firm KPMG signed off on the annual accounts of the construction giant-cum-outsourced services provider Carillion, saying they gave a “true and fair view” of the state of the company’s affairs. For this work, KPMG received a fee of £1.4m. This followed £1.4m of fees recouped the year before. In fact, KPMG had been Carillion’s auditor every year since it was founded in 1999. You don’t need to be an accountant to work out that that adds up to a very lucrative client relationship” that whilst we get the news that a mere four months later “its contracts to provide services were worth a remarkable £845m less than they had previously been valued on its books” that is an amount that exceeds whatever Richard Branson has in his wallet on his best days, so how was this overlooked? So as Rachel Reeves was kind enough that the value of KPMG is not good enough to audit the contents of her fridge, she should also be aware that this entire audit is not merely the outstanding invoices, there is a decent concern that the audit of KPMG has been unable to correctly assess issues for 17 years. So there is a real need to set up the correct framework to be able to take a long term look to the matters as well as the ability to set the right data dimensionality so that the data does not need to migrate over and over as more is found. I would think that an MP who part of the ‘the business select committee’, as well as a graduated economist would know that. You see as an experienced IT worker and a data analyst, I saw that coming a mile away.
So here I am partially standing up for PwC (so how fucked up will my day become?), news at 23:00. So when we get back to the Financial Times article and we see “As a House of Commons report has noted, Carillion’s growing borrowings were not used to invest in the company. In fact, while the group’s debt rose 297 per cent between 2009 and 2017, the value of its long-term assets grew just 14 per cent“, can we agree that there is a side that is terribly wrong here? These matters should have been clear in the KPMG reports, which now clearly overthrows the statement “they gave a “true and fair view” of the state of the company’s affairs“, I think that we can all agree that this part has been debunked in 30 seconds flat. In addition the Independent gives us “Moreover, KPMG was not the only auditor of Carillion’s numbers. Its 2016 report relates that it had a special “internal” auditor too, in Deloitte, with which it worked even more closely than with KPMG. So why didn’t Deloitte pick up on the dodgy contract numbers?” For me that is an interesting side as I have never seen anything dodgy in Deloitte. The fact that they might be part of the mess (unlikely though) is also cause for concern. More important, as I personally see it, it will be up to PwC to get that part out in the open. What was the exact assignment of the internal auditor, what data was presented, what data was accessed and used and who was part of the entire reporting stage of this internal audit? It would show more players in all this and could optionally give a better path in seeing the navigations that the decision makers in Carillion were involved in.
That is a part that we need to realise and consider.
There is another concern that the Independent brought to light. With: “Previous probes by the FRC have produced nothing but clean bills of health for auditors. “In nearly every major financial scandal we’ve had since the financial crisis, the FRC decides none of its charges have done anything wrong,” notes Jim Armitage, city editor of the Evening Standard. Worse, these rulings come with no reports or published evidence, making a mockery of the FRC’s claims to “promote transparency”” we might think that it is merely the FRC, yet what Wall Street taught us is that the entire 2008 joke gave rise to an 8 trillion write off, whilst no actual laws were broken, or at least none that could be proven, so in that regard, if that happens again now, we can clearly look at the House of Lords, point fingers and tell them to improve laws immediately and hold any MP and minister accountable for naming and public shaming. It might work, but I doubt it. You see, until there are large and unforgiving prison sentences, whilst also remove all the rights of ownership to those involved in Carillion, nothing will change. I have seen people setting the ownership of their large estates to their wives and then deny that they had any outstanding financial responsibilities in more than one country. Until these matters are settled this game will continue because greed will always win in the end.
So when we get back to the initial article we get “Kelly, who said his personal rate was £865 an hour, said PwC’s costs would gradually fall as more parts of Carillion were sold and staff from the accounting firm stopped working on the project. He said the firm initially had 257 people working on Carillion, with a bill for about £3m for their services in the first week after its collapse“, we see where part of the costs went to, so as my calculations was based on smaller settings we see how easily these costs were attained and the end of it is not in sight. Rachel Reeves should have seen this clearly as she had access to data I still have not seen. I think it is much more interesting to look at “Finance director Richard Adam, who retired in December 2016 after nine years at Carillion received almost £1.1m in salary and bonuses in 2016“, which we get from the BBC. So if we get to see the wrongdoings of Richard Adams, this is a reasonable speculation as the entire mess goes back a lot further than 2016, will we see these same MPs demand the auctioning of the goods of Richard Adams to make up for the losses of Carillion? You see the article stated MPs, not singular. Rachel Reeves might have been the visible one, but I want to see all those names, because when we consider the BBC news (at http://www.bbc.com/news/business-42703549) as it gives us:
- The £350m Midland Metropolitan Hospital in Sandwell: opening delayed to 2019 due to construction problems.
- The £335m Royal Liverpool Hospital: completion date repeatedly pushed back amid reports of cracks in the building.
- The £745m Aberdeen bypass: delayed because of slow progress in completing initial earthworks.
We need to ask questions on several MPs all over the field, all over the UK apparently. These three alone show a £1.3 billion issue are so out in the open that these three alone will constitute evidence of a much deeper required accountancy dig. Three issues shown last January and these three alone gives rise for me to think that PwC will be able to charge a lot more and in addition, the entire settling and selling could take a lot longer than some expect it to take. So these elements are the setting for additional costs, so those MPs might claim that there is a case of ‘milking the Carillion cow dry‘, but they better be ready for me to take a look at more than these three projects, because I will ask openly on their failings to get a handle on matters, because I am 99% certain that these three projects alone will lead to a dozen others all over the UK and if there are no clear memo’s from those MPs in regards to Carillion, they will be named openly to give rise to their shortcomings (perhaps also what was between their legs), because if you do not have the balls to go against the larger players, you should not be in office at all. Yet, that might be merely my warped expectation of elected officials.
Carillion is a clear mess that had been going on for a much longer time than some expect. You see, that part is seen in ‘cracks in the building‘, ‘construction problems‘ and ‘slow progress in completing initial earthworks‘ it implies optional failings going all the way back to the foundation of the works that were possibly never correctly done in the first place.
So I might still end up treating the bosses of PwC UK as piñatas, but at present there are plenty of other targets and so far (remember I say ‘so far’), in this particular case PwC seems to be in the clear (darn!).