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European Edition
13th May 2022
KPMG fined £14.4m for misleading regulators over Carillion audit
A tribunal ruled on Thursday that five KPMG auditors were guilty of misconduct after forging documents in an effort to mislead regulators over botched audits at the collapsed outsourcer Carillion. A sixth auditor, Stuart Smith, settled with the accounting regulator before the tribunal began in January. He accepted a £150,000 fine and a three-year ban as a qualified accountant. Peter Meehan, the partner responsible for auditing Carillion; senior managers Alistair Wright, Richard Kitchen and Adam Bennett; and junior auditor Pratik Paw - were found to have created false spreadsheets and records of meetings in response to questions from quality inspectors about work on Carillion and Regenersis, another outsourcer, between 2015 and 2017. Mark Ellison QC, representing the Financial Reporting Council, said the tribunal found that the four senior KPMG auditors “acted deliberately and dishonestly in the creation of false documents and the making of false representations” to the watchdog. Mr Paw, the junior auditor, acted without integrity but not dishonestly, the tribunal found. Individual penalties, which could run to hundreds of thousands of pounds, will be formally decided in the coming months. The FRC recommended partner Peter Meehan be banned from the profession for 15 years and face a fine of at least £400,000. KPMG UK itself was fined £20m reduced to £14.4m to reflect the firm’s cooperation and willingness to admit guilt. The penalty marks the biggest in KPMG’s history and the second largest levied on any accountant. The firm will also face a “severe reprimand” over the “extremely serious” misconduct. Commenting on the settlement with the FRC, KPMG’s chief executive, Jon Holt, said KPMG was “deeply sorry that such serious misconduct occurred in our firm. It was unjustifiable and wrong. It was a violation of our processes and a betrayal of our values. The FRC is running separate investigations into possible failings by KPMG in the Carillion audits.
Chancellor’s tax raids risk triggering recession
The head of economics at the British Chamber of Commerce has warned there is a “real chance the UK could be in recession by the third quarter of this year” due to cost pressures and the national insurance rise squeezing consumer spending and business investment. Suren Thiru called on the Chancellor to scrap the extra tax for at least the rest of this financial year. The increase pushed NICs up for households and businesses by 1.25 percentage points at a time when energy bills jumped by 54%. Barret Kupelian at PwC said the NI rise and the freeze to tax thresholds “amplified” the pressure on households, while Kitty Ussher at the Institute of Directors said the bills add to “the huge shock to economic confidence stemming from Russia’s invasion of Ukraine”.
BoE censured by senior Tories over soaring inflation
Conservative MP and former cabinet minister Liam Fox has called for the Treasury select committee to launch an investigation into the Bank of England’s handling of inflation amid rising anger among lawmakers about the Bank’s loss of control of prices. Speaking in Parliament, Dr Fox said: "I believe it is fundamentally wrong for Governments to engage in structural profligacy, spending excessively across the economic cycle and passing ever-larger amounts of debt on to the next generation.” He went on: "I also believe it is the duty of central banks to safeguard the value of our money and our savings. The Bank of England persisted beyond any rational interpretation of the data to tell us that inflation was transient, then that it would peak at 5%. It has consistently underestimated the threat."
Business investment declines over first quarter of 2022
Business investment fell 0.5% in the first quarter and was 9.1% below its pre-pandemic level, reflecting high business uncertainty. Investment levels were 8% below that of the first quarter of 2016 before the Brexit referendum, despite a two-year tax break on investment - the Government’s super-deduction policy - which has been in place since April 2021. Sandra Horsfield, economist at Investec, said: “Boosting productivity through higher investment will be a crucial ingredient in containing cost pressures for businesses in light of surging wage bills. So, a further shortfall in this regard is a concerning signal.”
Leading pension funds turn attention to emerging market net zero transition
Some of the UK’s top pension funds have been persuaded by the Church of England Pensions Board to draw up a plan to help fuel a net zero transition in emerging economies. The commitment comes amid growing scrutiny of pension investments with schemes scrambling to decarbonise their portfolios and back greener investments. Pensions Minister Guy Opperman welcomed the move today. “I look forward to working closely together to assess how we can further unleash the productive power of UK pensions in support of the climate transition in emerging economies, while also delivering sustainable returns for members,” he said.
Shareholders support BP’s climate strategy
BP has easily survived a shareholder vote on its climate strategy with fewer investors than last year backing a resolution filed by activist group Follow This urging faster action to battle climate change.
MPs want dodgy bosses to go to jail
A group of MPs including Kevin Hollinrake and Dame Margaret Hodge have said bankers and accountants should be held responsible for failings in their checks and balances and go to jail if they fail to prevent economic crime. Dame Margaret said: “It is tragic that it has taken the war in Ukraine to bring the dirty money crisis to a head. We must act in a determined and effective way.” The lawmakers have published a manifesto on economic crime urging the Government to step up the fight against fraud and money laundering. The group praised the Government for pushing ahead with its Economic Crime Bill but urged ministers to strengthen it in the four key areas of transparency, enforcement, accountability and regulation.
Unpredictable windfall taxes would put energy security at risk – BP chief
BP CEO Bernard Looney has warned that Britain's energy security will be put at risk if Rishi Sunak imposes a windfall tax on oil companies. “A stable and competitive fiscal environment is an important element in any investment decision. – and that is what we have in Britain today,” Looney explained. The Chancellor is understood to be increasingly tempted to mount a raid on the industry after weeks of pressure from Labour and the Liberal Democrats. BP is committed to investing £18bn in the UK by the end of 2030, windfall tax or not, but further spending may be affected. Looney said: “By definition, windfall taxes are unpredictable – and so would challenge investment in home-grown energy. We know that from past experience for the whole of the North Sea sector and supply chain.”
Toyota warns of ‘unprecedented’ rise in raw material prices
Toyota has warned that its profits could fall by a fifth this year due to cost increases. The news sent the Japanese company’s shares down 4.4% on Wednesday.
Government plans new rules for regulating tech giants
The Digital Markets Unit (DMU), which operates within the Competition and Markets Authority (CMA), will enforce new codes of conduct for the biggest technology firms operating within the UK and will be given the power to impose multi-billion-pound fines on major firms if they breach rules designed to protect consumers and businesses. The Department for Digital, Culture, Media and Sport said ministers would introduce legislation to underpin the DMU’s powers in “due course”. But it is understood that it will first appear in the form of a draft legislative bill and will not be introduced until the Queen’s speech next year, meaning it will not become law until 2024. The unit will also be given the power to resolve disputes between tech platforms and news providers, so that publishers are paid fairly for their content.
Moderna's finance chief earns $700,000 in one day after abruptly quitting
Jorge Gomez quit as Moderna CFO after just one day after his former employer launched an investigation into financial reporting. Dentsply Sirona disclosed that it had been made aware of “allegations regarding certain financial reporting matters” by current and former employees but Mr Gomez was not referred to in the filing. Following his resignation, Mr Gomez will be entitled to take home one year’s salary, equal to around $700,000 (£570,000). However, Moderna said he had forfeited his signing bonus, bonus eligibility and eligibility for new hire equity awards. David Meline, who had just retired as Moderna’s finance chief after a two-year stint, will retake the post while the company reopens its search for a successor, the company said.
Carlyle merges energy and infrastructure units ahead of investment push
Carlyle Group is merging its energy and infrastructure investment operations in preparation for a renewed push into businesses including fossil fuels.

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