Cable To Launch Probe Into Comet Liquidators
The liquidators who oversaw the closure of Comet are to be referred to the accounting watchdog more than 18 months after the electrical goods retailer collapsed with the loss of almost 7,000 jobs, Vince Cable is to announce on Friday.
Sky News has learnt that the Business Secretary will say that the Insolvency Service, a Government agency, is referring three partners of Deloitte, the professional services firm, to ICAEW, which has the power to impose substantial fines or strip accountants of their licence to operate.
The news, which will attract significant attention in the City, will form part of a broader review of the UK's insolvency regime, which Mr Cable launched after Comet fell into administration, leaving taxpayers with a bill of approximately £50m.
Insiders said on Thursday night that the ICAEW probe was expected to outline two areas in which it will examine whether the three men breached accounting profession guidelines: a possible conflict of interest which arose because Deloitte acted for Comet before its insolvency as well as undertaking a role as the company's administrator; and because they failed to consult the chain's employees properly before they were made redundant.
The latter issue has been the subject of a bitter legal battle in recent months, with an employment tribunal ruling that more than 2,000 former Comet staff should receive around £10m in redundancy payments.
A judge is due to rule shortly on whether such payments should be extended to a further 4,000 ex-employees of the chain, generating an additional £15m bill, which would be footed by taxpayers.
The partners that Mr Cable will announce are being referred to the ICAEW - Nick Edwards, Christopher Farrington and Neville Kahn - are among the most experienced insolvency practitioners in Britain, and have between them overseen scores of administrations, including chains such as HMV and Blockbuster.
At last month's employment tribunal ruling, lawyers acting for the complainants described the collapse of Comet as "an old-fashioned corporate raid" and "one of the more regrettable episodes of British corporate history".
Comet was once the UK's second-biggest electrical goods retailer, vying with Dixons and other stores on high streets across the country.
The growing encroachment of supermarkets and online rivals left Comet in a weakened state, however, and the chain was sold by Kesa Electricals, a listed company, to OpCapita, a private investment firm, for £2 in November 2011.
It ran out of cash just a year later as it sought to acquire stock for the crucial Christmas trading period - but not before substantial sums of cash had been transferred to corporate entities connected to the shareholders.
Comet's ownership was the subject of a complex web of inter-company arrangements, but documents filed at Companies House have indicated that OpCapita and hedge fund Elliott Advisors - which also held a stake in Comet before its collapse - collected almost £117m from the demise of the retailer.
Deloitte, the administrators, and GA Europe, the insolvency adviser, are reported to have collected more than £10m in fees from their involvement.
One source said that deals overseen by the three Deloitte partners had collectively saved thousands of UK-based jobs during the last decade.
It is not unusual for an accountancy firm to have undertaken work for a client before overseeing an insolvency procedure involving the same company, although the practice has become more contentious with the recent proliferation of so-called pre-pack administrations involving companies such as Game Group and JJB Sports.
In a statement issued after the employment tribunal ruling in June, the three liquidators said: "It is disappointing that the tribunal has found against the company.
"The Comet management team, administrators from Deloitte and our advisors worked tremendously hard under very challenging circumstances to provide the best possible consultation to the employees.
"Comet Group Limited made significant efforts to consult with its nearly 7,000 employees across more than 250 sites during the administration, whilst a purchaser for the business was sought.
"Regrettably, it proved impossible to find a purchaser willing to save the business and all the employees ultimately had to be made redundant."
The ICAEW probe is separate to an examination of whether there are grounds to disqualify former directors of Comet, including Henry Jackson, the OpCapita founder.
Mr Cable announced in April that he wanted to introduce tougher penalties against reckless company directors.
The Deloitte partners could not be reached for comment on Thursday, while the Insolvency Service declined to comment.