KPMG to face FRC misconduct hearing over Silentnight
22 Nov 2018
The Financial Reporting Council (FRC) is to hear a formal complaint against KPMG and partner David Costley-Wood over allegations of misconduct related to work in 2011 with the UK’s largest bed and mattress manufacturer, Silentnight
22 Nov 2018
The formal complaint, made under the FRC’s accountancy scheme, concerns an engagement carried out by the firm and Costley-Wood, who is an ICAEW member, between January 2011 and April 2011. It alleges that KPMG and Costley-Wood accepted and performed an engagement for Silentnight in circumstances where their professional judgment was compromised (or was likely to be compromised) and their objectivity was impaired (or was likely to be impaired), contrary to the fundamental principle of objectivity in the ICAEW code of ethics.
The regulator also alleges KPMG and Costley-Wood knowingly or recklessly assisted with the provision of untrue and/or misleading and/or materially incomplete explanations to the Pension Protection Fund (PPF), the Pensions Regulator, Silentnight and the trustees of the Silentnight pension scheme in relation to Silentnight, in breach of the fundamental principle of integrity in the code.
The FRC’s investigation was opened in October 2015 following a referral from the Pensions Regulator. A disciplinary tribunal will now be convened, with a hearing at a date to be announced in due course.
Founded in 1946, Lancashire-based Silentnight went into administration in 2011 and was bought by private equity firm HIG Europe Capital Partners in a pre-pack deal handled by administrators from KPMG.
Silentnight had earlier proposed a company voluntary arrangement (CVA) which, while it was backed by the company’s suppliers, employees and HMRC, failed to win the support of the PPF, its largest creditor.
Under the terms of the pre-pack sale PPF took over Silentnight’s pension fund, which had a shortfall of around £100m at the time.
A spokesperson for KPMG said: 'We believe the FRC’s allegations to be wholly without merit. Given the matter is now subject to formal consideration by a tribunal, we will not be commenting further.'
KPMG said it had been appointed by the company’s management team to advise them on the options available, manage key stakeholders and assist with implementation of options as required, in the face of financial difficulties resulting from the significant pension scheme deficit and cash flow pressure.
Silentnight was unable to reach an agreement with the Pension Regulator and the PPF to support the proposed CVA. KPMG partners were then appointed administrators of the company and the business was sold to its financier based on the result of the competitive bid process.
Report by Pat Sweet