Carillion (5? or is it 6?)

[monabri]

https://www.telegraph.co.uk/business/20 ... ss-admits/

(probably paywalled)

"KPMG’s chief executive [J Holt] has admitted that the big four accounting firm misled the accounting watchdog over its audits of Carillion in the years before it collapsed. "

"The admission comes on the first day of a disciplinary tribunal in which the Financial Reporting Council (FRC) has accused KPMG of duping the regulator after its staff gave “false and misleading” information about the state of finances at Carillion and another outsourcer."

"Mr Holt said he was “saddened” that some relatively junior former members of staff were facing “very serious regulatory sanction at an early point in their careers”.He added: “It is of course for the tribunal to reach a conclusion on the allegations as they relate to the individuals concerned. Nevertheless, it is clear to me that misconduct has occurred and that our regulator was misled "

Hmm..I wonder if there will be any action and are the implications, for former shareholders who were misled?

[moorfield]

The Grauniad has the same story here, not paywalled.

https://www.theguardian.com/business/20 ... ion-audits

It will be interesting to see if anything comes out of it, a la the Aviva preference shares fiasco a few years ago, but I'm expecting not.

Perhaps the real lesson for us here is to pay attention to pyad's original and simple selection criteria, ie. stick to the blue chips and not try to "outdo" them by fishing in murkier waters. Had I done that, I am fairly certain CLLN would not have ended up in my portfolio in the first place.

[Rover110]

I rather suspect that those "relatively junior former members of staff" were following the culture and guidance of their line-managers. That or those line-managers were failing in their duty to guide/mentor and monitor those they were supposed to be looking after.
Of course if you apply that argument too carelessly, blame might find its way further up the corporate ladder...
- Rover

[monabri]

"Junior" or otherwise, they still charged for their services. It's up to the senior management to allocate staff sufficiently trained.

[Bouleversee]

"Junior" or otherwise, they still charged for their services. It's up to the senior management to allocate staff sufficiently trained.

Especially when they charge so much for their services.

[monabri]

https://www.telegraph.co.uk/business/20 ... carillion/

"A former junior employee at KPMG has used the firm’s “hierarchical structure” and his “minority ethnicity” status as a defence against allegations that he forged documents to mislead regulators over the audit of Carillion.

Lawyers representing Pratik Paw claimed he was unaware that what he was being asked to do was wrong, saying he was only 25 years old when the alleged forgery took place and not yet a qualified accountant."

"The comments came on the third day of a disciplinary hearing brought by the Financial Reporting Council watchdog (FRC), which has accused six KPMG auditors of creating “forged” and “fabricated” documents in an attempt to mislead inspectors reviewing the firm’s audits of Carillion and Regenersis, another outsourcer."

[moorfield]

https://www.telegraph.co.uk/business/2022/01/12/kpmg-auditor-uses-minority-ethnicity-defence-forged-carillion/

"A former junior employee at KPMG has used the firm’s “hierarchical structure” and his “minority ethnicity” status as a defence against allegations that he forged documents to mislead regulators over the audit of Carillion.

Lawyers representing Pratik Paw claimed he was unaware that what he was being asked to do was wrong, saying he was only 25 years old when the alleged forgery took place and not yet a qualified accountant."

"The comments came on the third day of a disciplinary hearing brought by the Financial Reporting Council watchdog (FRC), which has accused six KPMG auditors of creating “forged” and “fabricated” documents in an attempt to mislead inspectors reviewing the firm’s audits of Carillion and Regenersis, another outsourcer."

It's the senior partners whose necks should be on the line here. It's reprehensible that they should be trying to dump this on a junior employee who has had to put themselves in the position of claiming a "I was only following orders / race card" defence.

Not a good look for KPMG, at all.

[Dod101]

https://www.telegraph.co.uk/business/2022/01/12/kpmg-auditor-uses-minority-ethnicity-defence-forged-carillion/

"A former junior employee at KPMG has used the firm’s “hierarchical structure” and his “minority ethnicity” status as a defence against allegations that he forged documents to mislead regulators over the audit of Carillion.

Lawyers representing Pratik Paw claimed he was unaware that what he was being asked to do was wrong, saying he was only 25 years old when the alleged forgery took place and not yet a qualified accountant."

"The comments came on the third day of a disciplinary hearing brought by the Financial Reporting Council watchdog (FRC), which has accused six KPMG auditors of creating “forged” and “fabricated” documents in an attempt to mislead inspectors reviewing the firm’s audits of Carillion and Regenersis, another outsourcer."

It's the senior partners whose necks should be on the line here. It's reprehensible that they should be trying to dump this on a junior employee who has had to put themselves in the position of claiming a "I was only following orders / race card" defence.

Not a good look for KPMG, at all.

We could have another Arthur Anderson here if we are not careful because as has been said, the firm cannot just blame it on junior employee. They have clearly not been properly trained in the ethics of the firm or maybe they have been but the buck surely stops with the Senior partner of KPMG. That surely will be picked up even by the FRC. The danger to KOMG does not I think come from the FRC but the wider shareholder base because audit reports are surely supposed to be the bedrock of financial reporting.

Dod

[Dod101]

The Grauniad has the same story here, not paywalled.

https://www.theguardian.com/business/20 ... ion-audits

It will be interesting to see if anything comes out of it, a la the Aviva preference shares fiasco a few years ago, but I'm expecting not.

Perhaps the real lesson for us here is to pay attention to pyad's original and simple selection criteria, ie. stick to the blue chips and not try to "outdo" them by fishing in murkier waters. Had I done that, I am fairly certain CLLN would not have ended up in my portfolio in the first place.

No The real lesson as I said at the time is to avoid contractors under any circumstances.

Dod

[jackdaww]

The Grauniad has the same story here, not paywalled.

https://www.theguardian.com/business/20 ... ion-audits

It will be interesting to see if anything comes out of it, a la the Aviva preference shares fiasco a few years ago, but I'm expecting not.

Perhaps the real lesson for us here is to pay attention to pyad's original and simple selection criteria, ie. stick to the blue chips and not try to "outdo" them by fishing in murkier waters. Had I done that, I am fairly certain CLLN would not have ended up in my portfolio in the first place.

No The real lesson as I said at the time is to avoid contractors under any circumstances.

Dod

=========================

spot on , so i did , luckily getting out before the crash , at a useful profit .

[moorfield]

The Grauniad has the same story here, not paywalled.

https://www.theguardian.com/business/20 ... ion-audits

It will be interesting to see if anything comes out of it, a la the Aviva preference shares fiasco a few years ago, but I'm expecting not.

Perhaps the real lesson for us here is to pay attention to pyad's original and simple selection criteria, ie. stick to the blue chips and not try to "outdo" them by fishing in murkier waters. Had I done that, I am fairly certain CLLN would not have ended up in my portfolio in the first place.

No The real lesson as I said at the time is to avoid contractors under any circumstances.

Dod

Well to keep this thread on HYP topic I was referring to pyad's market cap filter. I think it was always a mid-FTSE250 firm and someone following pyad's original selection criteria, ie selection from the FTSE100 first, would arguably never have reached it as a candidate for consideration into an HYP.

As a result of the CLLN collapse I have thought of two selection adjustments for HYP. (1) select candidates working upwards from the FTSE100 yield, not working downwards from the very highest yield, and (2) don't select candidates above a too high yield (I use 2*CTY, ymmv). Applying that today (using dividenddata.co.uk) I would likely avoid selecting the likes of Evraz, BHP, RIO, Persimmon, Ferrexpo, Hammerson into an HYP, whereas new HYPsters starting from the top may easily be tempted to choose them first.

[Dod101]

I have never paid much attention to payday and his criteria. I prefer to use my own common sense. Never touched Crillion or for that matter RBS.

Dod

[daveh]

Well to keep this thread on HYP topic I was referring to pyad's market cap filter. I think it was always a mid-FTSE250 firm and someone following pyad's original selection criteria, ie selection from the FTSE100 first, would arguably never have reached it as a candidate for consideration into an HYP.

As a result of the CLLN collapse I have thought of two selection adjustments for HYP. (1) select candidates working upwards from the FTSE100 yield, not working downwards from the very highest yield, and (2) don't select candidates above a too high yield (I use 2*CTY, ymmv). Applying that today (using dividenddata.co.uk) I would likely avoid selecting the likes of Evraz, BHP, RIO, Persimmon, Ferrexpo, Hammerson into an HYP, whereas new HYPsters starting from the top may easily be tempted to choose them first.

Persimmon and BHP are a couple of my better performers. A gain of 499% on PSN and it has paid almost twice what I paid for the shares back in dividends, plus large gains in the share price.

A gain of just 97% on BHP with about half the gain from dividends.

No plans to top up either PSN or BHP at the moment as they both sit at too high a % of the portfolio in terms of capital values at the moment. I might be tempted to add RIO if it were not for the fact that I already have 41 holdings and don't really want to add more.

[monabri]

There is a very significant difference between the likes of CLLN and RIO....the operating margins at RIO are impressive.

http://financials.morningstar.com/ratio ... region=GBR

and Carillion's weren't

http://financials.morningstar.com/ratio ... region=GBR

Another high operating margin business, Diageo

http://financials.morningstar.com/ratio ... region=GBR

Or, Schroders

http://financials.morningstar.com/ratio ... region=GBR

[Bouleversee]

PSN is one of my best performing holdings, too, though it remains to be seen what Gove's initiative will do for the profits and s.p. Hopefully not too much of a dent since they have already coughed up or committed quite a significant sum. They should be going after the huge bonuses paid to Fairbairn (?) and others as well as shareholders. Very pleased that flat owners are being relieved of the unaffordable burden of repairs, however.

[Dod101]

Certainly in restrospect house builders should have been held anyone interested in income as should have at least some of the miners. I did not hold either and that cost me dearly last year.

Dod