KPMG's £1m a month to strip Dunfermline

Published on Saturday 21 November 2009 20:00

CONSULTANTS are earning £1 million a month – or up to £500 an hour – while selling off the assets of Scotland's former leading building society, leaked papers have revealed.

On top of its fees, accountancy firm KPMG notched up 121,822 in expenses, including a 42,000 hotel bill, after taking over as administrator of the Dunfermline Building Society in March.

At the same time, clients of the building society, based in the Prime Minister's constituency, claim KPMG is threatening the existence of their businesses as it seeks to get every penny it can for creditors.

One firm which had a commercial loan with Dunfermline said the rate of interest on a loan had trebled, leaving it no option but to put staff out of work.

Last night, there were calls for Gordon Brown to intervene immediately.

At the time, it was claimed the Dunfermline was in such dire financial straits it could not survive, even with an injection of cash from taxpayers. DBS bosses disputed the claims, but it was nevertheless placed in administration.

The details of KPMG's work have emerged in a progress report to creditors, passed to Scotland on Sunday by SNP MEP Alyn Smith, a member of the EC committee inquiry into the financial crisis.

While the bulk of the Dunfermline's business was handed over to Nationwide, the society's loan book and its bonds, worth 1bn, were handed to the accountancy firm for it to sell.

However, the report shows the accountancy firm has so far sold on only a fraction of Dunfermline's assets, because it believes it will not currently get a fair price for what it describes as "high-quality" assets.

On the commercial property loans, which make up the bulk of the assets, it declares: "The current strategy for dealing with these loans is to collect revenue, restructure and work out the loans for the foreseeable future in order to maximise realisations for the benefit of creditors."

The document shows that under "asset realisation", it has charged 540.33 an hour for its services.

On "statutory and compliance", the firm has charged 440.21 an hour. In total, up until the end of September, it has earned 6,102,257 for overseeing the funds.

On top of that, the firm notched up a total of 121,882 in expenses, made up predominantly of 42,857 on expenses, 67,232 on travel and 11,042 on communications.

Last night, Smith said: "The SNP warned Labour six months ago that no-one should benefit from the break up of the Dunfermline. As it turns out there has been a significant beneficiary – KPMG, to the tune of 1m per month."

He added: "This money is being removed from the Dunfermline while countless small businesses with loan facilities coming to an end are being told to take their business elsewhere or face ruinous hikes in interest rates.

"It must rub salt into their wounds when they see that, not content with taking a million pounds a month out of the Dunfermline in fees, KPMG claimed 43,000 in hotel bills and nearly 70,000 in travel despite the fact that they have offices less than 20 miles from Dunfermline HQ in Edinburgh.

"It is a supreme irony that whilst Gordon Brown has taken action to stop RBS, HBOS and the other nationalised banks from taking this kind of heavy-handed action, he has done nothing to stop it happening to business customers of the Dunfermline."

Commercial property firms with money outstanding to the former Dunfermline are reluctant to talk publicly, but privately they are scathing about the way the accountants are handling the deal. One said it had offered to pay back its debts at a discounted rate, but KPMG had refused.

Instead, it claims the accountants have increased their rate of interest."They have decided to speculate on the property market coming back to health, while charging these massive fees. We are having to lay people off."

The revelations over KPMG's earnings come as the Office of Fair Trading launches an investigation into the fees being charged by Britain's big accounting firms.

A KPMG spokesman said the firm was hired to ensure an orderly transfer of assets and to ensure the best recovery of money owed to creditors.

He said: "The fees charged have been approved by the Treasury."

As regards expenses, he said: "We have had to bring up specialists from the rest of the UK." Some had been housed in flats rather than hotels to keep costs down.

He denied claims that customers were being charged unfair rates of interest. "Our rates are lower that anything out there in the market place."