The Financial Reporting Council (FRC) punished the “big four” accountant for failing to spot conflicts of interest in its advice to the company and directors who bought it before its collapse.
The FRC announced its ruling yesterday after a tribunal in July found against Deloitte on all of 13 allegations, including failing to properly consider the public interest. It said two flawed deals in 2001 and 2002 benefited the Phoenix Four rather than MG Rover, and also earned Deloitte hefty fees, thought to be in the region of £9m.
FRC had asked for a fine of between £15m and £20m. But the penalty is still ten times higher than a previous record of £1.4m imposed on PwC over its auditing of JP Morgan in 2011.
The tribunal also agreed to a fine of £250,000 for Maghsoud Einollahi, a partner with Deloitte at the time. The FRC has also banned him from the profession for three years.
The carmaker was put into administration in 2005 with debts of £1.4 billion and the loss of 6,000 jobs. Four of its directors, dubbed the “Phoenix Four”, had set up Phoenix to buy the loss-making carmaker for a token £10 five years earlier.
Deloitte and Einollahi had acted as corporate finance advisers on the takeover, as well as providing tax advice to the Phoenix Four while also acting as auditor to MG Rover.
A Deloitte spokeswoman said: “We are disappointed that the efforts we and others made did not successfully secure the long-term future of the MG Rover Group.”
She added the tribunal did not criticise the quality of its work, but still found against it, and warned this could have negative implications for the advice firms and members can provide.
The fine will be paid to the UK Consultative Committee of Accounting Bodies which pays the costs of FRC disciplinary cases. Deloitte has 28 days in which to decide whether to launch an appeal.