Tribunal verdict

KPMG fined £13m over Silentnight sale misconduct


KPMG ‘regrets standards were not met’

Big four accountant KPMG has been fined £13m and ordered to pay more than £2.75m in costs, for serious misconduct in the sale of bed retailer Silentnight to a US private equity group.

An independent tribunal found that KPMG and one of its partners did not comply with the UK professional accounting principles of objectivity and integrity in the advice it provided.

Silentnight was sold to HIG Capital through a pre-pack administration in 2011 and the tribunal determined that one of KPMG’s partners helped push Silentnight, which was a client of the blue chip accounting firm, towards insolvency.

This meant that HIG could buy the business out of administration and dump the costly defined pension scheme for Silentnight’s 1,200 staff on taxpayers.

The Pension Protection Fund (PPF) is now calling for the fine proceeds to be used to make good any shortfall for Silentnight pension holders who have been in limbo for a decade while investigations relating to the sale were carried out.

KPMG’s penalty is close to the UK record for a fine imposed by the accounting and audit regulator the Financial Reporting Council (FRC).

The FRC tribunal, which ordered KPMG to pay £2.8m in costs on top of the fine, found the firm and its former partner David Costley-Wood had a conflict of interest because they were acting for both HIG and Silentnight during the period in question.

The tribunal ruled that Costley-Wood, the head of restructuring in Manchester at the time, should be fined £500,000, severely reprimanded and barred from holding an insolvency licence or membership of the accountants’ professional body for 13 years.

Elizabeth Barrett, the executive director of enforcement at the FRC, said: “The scale and range of the sanctions imposed by the tribunal mark the gravity of the misconduct in this matter.

“The decision serves as an important reminder of the need for all members of the profession to act with integrity and objectivity and of the serious consequences when they fail to do so.”

KPMG has also been ordered to carry out an independent review to assess its policies, procedures and training programmes, and determine whether similar breaches might be found in a sample of past cases.

Commenting on the ruling, KPMG said it acknowledged the tribunal’s findings and regrets that standards were not met. While it no longer provides insolvency services, KPMG said its “broader controls and processes have evolved significantly since this work was performed over a decade ago”

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