The committee is today publishing a response from the Insolvency Service (IS) which indicates that would consider re-opening their closed investigation into the former directors of BHS, if the FRC provides any new evidence from its investigation of the 2014 pre-sale audit of BHS by PWC.
The FRC is still taking legal advice on publication of its full report on the audit, following Taveta’s failed attempt to prevent its publication, but the skeleton arguments put forward by Taveta and the FRC’s lawyers in open court in the injunction hearing give a clear indication of the seriousness of the FRC’s criticisms of Taveta management. In the wake of the hearing, Committee Chair Rt Hon Frank Field MP wrote to the IS asking whether, in light of this, is there not “now clear and compelling evidence that the IS should reopen their investigation into Sir Philip Green and his fellow BHS directors in place at the time of the sale in 2015?” The IS’ initial investigation resulted in charges being brought against Dominic Chappell, a director of the company that bought BHS for £1, and two of his colleagues, but found “insufficient evidence to justify disqualification proceedings” against Sir Philip or other Taveta directors.
In attempting to justify supressing parts of the FRC’s report, Taveta’s own public submission said the regulator’s findings contain “serious criticisms of [Taveta], its directors and its employees” publication of which could “give rise to serious and potentially irreparable harm to the Claimant and its directors and employees.” It goes on to describe the “sustained assault” by the FRC on “the approach taken by management in preparing BHS’ 2014 financial statements”, publication of which would have “a very real potential to damage the reputation of the individuals concerned, in particular Paul Budge as Group Director and Ms Hague as Group Financial Controller”.
The FRC’s public submission describes the discredited audit carried out on financial statements prepared by BHS management, and states “after investigation, the Executive Counsel concluded that the basis of the going concern statement was obviously insufficient in the face of the pending sale; the assumptions behind the impairment review were not supported by evidence obtained by PWC and were not reasonable”. In the court hearing Taveta’s QC suggested that description should be toned down to “optimistic”.