Slaughters warned Carillion board about accounting disclosures last May, leaked minutes reveal

Slaughter and May warned Carillion’s directors about the implications of failing to disclose accounting issues as far back as last May, newly released board minutes have revealed.

In a meeting which took place on 9 May 2017, Slaughters corporate finance partner William Underhill – a longstanding adviser to Carillion – told the company’s board that a decision not to disclose negative accruals across projects including the construction of Royal Liverpool Hospital and the redevelopment of Battersea Power Station would come under “very close scrutiny”.

According to the board minutes, Underhill told directors that “if, going forward, a decision was taken that the accounts had to be restated, the decision not to announce would come under very close scrutiny”, and that “protecting the share price was not a reason in itself”.

The minutes, which were leaked to the parliamentary inquiry into the collapse by whistleblower and former Carillion finance director Emma Mercer, suggest that the construction company’s directors were well aware of accounting issues that subsequently contributed to its collapse this January.

Company secretary and director of legal services Richard Tapp was also an attendee at the meeting, which was held via telephone and also included representatives from Carillion’s banking advisers at Morgan Stanley.

Slaughters has been approached for evidence by the cross-party inquiry looking into the collapse of the construction giant, with the magic circle firm being asked to provide information relating to the “nature of the advice” it provided to Carillion and the period during which it provided that advice.

Former Carillion chairman Philip Green previously told the inquiry that the board “sought very strongly at Carillion to make sure that we had quality advice”, adding that their advisers, including Slaughters, were “intimately” involved throughout the 12-18 months leading up to the company’s collapse.

Slaughters has been asked if it agrees with Green’s assessment of its involvement and whether the firm agrees that its advice was acted upon. The firm was given until 20 February to respond to the request for information, and it is understood that it replied within that timeframe.

Slaughters has a longstanding relationship with Carillion and is among a raft of firms advising on the fallout from the collapse. Underhill, who has a focus on securities issues and M&A, has been at Slaughters since 1981, and has worked with Carillion for many years, advising on projects such as the £800m British-Chinese joint venture to develop the ‘Airport City’ business district around Manchester Airport.

Slaughters declined to comment.