KPMG fined £ 13million for selling Silentnight to private equity – .

KPMG fined £ 13million for selling Silentnight to private equity – .

KPMG was fined £ 13million and more than £ 2.75million in costs by an independent court for serious misconduct in its role in the sale of bedmaker Silentnight to a private equity fund. investment.

The fine is just short of the £ 15million penalty – a British record – imposed on Deloitte last year for failing to carry out audits of former software company FTSE 100 Autonomy. This is the latest blow to KPMG, which was criticized last month by the British accounting regulator for the “unacceptable” quality of its bank audits.

The Disciplinary Tribunal found in June that KPMG and one of its partners had failed to respect the fundamental principles of objectivity and integrity of the UK accountancy profession when they advised the sale of Silentnight to the capital company – American HIG Capital investment via a pre-packaged administration in 2011.

The findings follow a four-week hearing in which the Financial Reporting Council claimed KPMG helped drag UK-listed Silentnight into insolvency proceedings so the private equity group could acquire the company without the burden of its £ 100million pension scheme.

The court called KPMG’s history of involvement in the case “deeply troubling” and concluded that the accounting firm wanted to have a good relationship with HIG, which it had as a potential client.

KPMG is said to have acted in the best interests of HIG, which were “diametrically opposed” to those of its client Silentnight.

KPMG and David Costley-Wood, the partner who advised Silentnight on the sale, also displayed a lack of integrity due to Costley-Wood’s dishonesty in his dealings with the Pension Protection Fund and UK Pensions Regulator.

In addition to financial penalties, KPMG was severely reprimanded by the court. It was ordered to appoint an independent examiner to investigate the reasons why threats to its objectivity were not identified and to examine a sample of other previous cases to look for similar failures. The examiner will also review the firm’s training policies and programs in light of its findings.

KPMG had argued in court that it should not be forced to review its current procedures or the causes of Silentnight’s misconduct, but said Thursday it welcomed the review process.

The FRC had asked the court to fine KPMG over £ 15million while the Big Four company argued for the fine to be capped at £ 5million.

Costley-Wood, who retired from KPMG in June, was fined £ 500,000, severely reprimanded and banned from holding an insolvency license or being a member of the Institute of Chartered Accountants of England and Wales (ICAEW). KPMG has confirmed that it will pay on behalf of Costley-Wood.

The PPF, the lifeboat for members of bankrupt company pension plans, said on Thursday that the fines, which must be paid to the ICAEW, should be used to fill the Silentnight pension plan’s shortfall. .

The 1,200 members of the scheme, including factory workers and workshop staff, face cuts in their retirement income as they will be transferred to the PPF.

In March, the pension regulator announced a £ 25million settlement against HIG over allegations the group deliberately caused Silentnight’s unnecessary insolvency so that he could buy the company out of the administration while getting rid of its pension obligations.

The settlement went into the Silentnight pension plan, but was not enough to close the funding gap and keep PPF members out.

The ICAEW, which is partly funded by fees from accounting firms, said it had not received any contact from the PPF but that its board declined a request from the pension plan administrators last month to ” use the proceeds of the fine to help its members.

The ICAEW said the fines were “not a boon” to the organization, as professional bodies are required to fund regulatory investigations upfront, including when no fines are ultimately imposed.

HIG then finalized the purchase of KPMG’s restructuring division, which advised the sale of Silentnight, in May this year in a deal worth more than £ 350million.

“We recognize the court’s findings and regret that the professional standards we expect from our partners and colleagues have not been met in this case,” said KPMG UK.

“Mr. David Costley-Wood has retired from the firm and although we no longer provide insolvency services, our broader controls and processes have evolved significantly since this work was performed over a decade ago.” , he added.

KPMG has said it will not appeal the sanctions.

Additional reporting by Joséphine Cumbo


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