Finance

KPMG’s auditors created fake meeting minutes and spreadsheets to mislead Carillion probe, watchdog claims

Auditors at KPMG fabricated meeting minutes and Excel spreadsheets to mislead inspectors asking questions on missing documents regarding its audit of Carillion in 2016, a tribunal was told.

KPMG, former audit partner Peter Meehan, and past employees Alistair Wright, Richard William Kitchen, Adam David Bennett and Pratik Paw are accused of being involved in the creation of phoney documents to try to deceive quality inspectors from audit watchdog the Financial Reporting Council.

The FRC claims the members of the Carillion audit team created documents in response to requests from the quality inspectors in 2017, and misrepresented them as documents that were created at the same time as the 2016 audit.

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Meehan, Wright, Kitchen, Bennett and Paw are accused of being involved in the creation of four sets of minutes that purported to be the contemporaneous recording of meetings held in connection with international aspects of Carillion’s business.

Inspectors from the FRC’s audit quality review team asked why the minutes were missing from Carillion’s audit file, the FRC’s barrister Mark Ellison QC told a 10 January tribunal.

“The straightforward and honest answer was the minutes had not been created at the time of the audit,” he claimed.

“That was not the answer that was given to the AQR,” he added.

Instead, Meehan, Wright, Kitchen, Bennett and Paw are accused of working from handwritten records of the meetings to create documents that they told inspectors were accidentally left off the original audit file.

Wright emailed Paw on 12 October 2017 asking him to create new minutes and paste them into contemporaneous documents, the tribunal heard.

“Paste the words back into Word documents created in February this year. Please find a document on your hard drive from the time of the audit,” the email shown to the remote hearing said.

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Paw used four different documents made at the time of the 2016 audit to assemble the new minutes, Ellison argued.

“His use of four base documents was to give the documents he was creating different metadata, obscuring the fact they had all been created at the same time… in October 2017,” Ellison claimed.

Kitchen emailed the inspectors on 12 October 2017 attaching four sets of minutes. “There was nothing in the final versions of the minutes to indicate they were recent creations,” Ellison said.

“Both their appearance and the metadata… made them look like they had been prepared during the audit,” he added.

“The new minutes were new creations intended to obscure the fact the team had not prepared proper minutes at the time,” he said.

The FRC also alleged the minutes were “misleading”.

They were “newly derived concoctions not faithful to the source material”, Ellison said.

“They selectively added and removed details to suit their purposes,” he claimed.

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Meehan, Wright, Kitchen, Bennett and Paw were also accused of creating a set of Excel spreadsheets that recorded why they had reviewed certain contracts in a group of high-value construction contracts that were part of Carillion Construction Services.

Ellison said a new set of spreadsheets was concocted by the accused on October 2017 and emailed to the inspectors to give the impression that it was a document dating from the period of the audit.

There was “nothing in the final version of that CCS paper to indicate it was a new creation… it had been created as a deliberate deception,” Ellison said.

Staff working for KPMG at the time are also accused of dishonesty and lack of integrity in connection to KPMG’s audit of Regenersis for the year ending 30 June 2014.

Bennett’s solicitor, Dylan Moses of K&L Gates, said in a 10 January emailed statement that he “denies all allegations of misconduct against him”.

“Mr Kitchen strongly denies the allegations of misconduct and he welcomes the opportunity to give his account to the tribunal, in order to rebut the allegations made against him,” Kitchen’s solicitor Jane Howard of Reed Smith said in an emailed statement on 10 January.

“Mr Paw strongly and unreservedly disputes all the allegations against him,” his solicitors at law firm RPC said in a 10 January emailed statement.

Lawyers for Meehan and Wright were approached for comment.

KPMG has acknowledged wrongdoing.

“It is, of course, for the tribunal to reach a conclusion on the allegations as they relate to the individuals concerned. Nevertheless, it is clear to me that misconduct has occurred and that our regulator was misled,” the firm’s chief executive Jon Holt said in a 10 January statement.  

Holt said he was “very sorry” for the misconduct and said “we do not tolerate or condone it in any way”.

The hearing began remotely on 10 January with opening submissions from the FRC. The hearing continues.

To contact the author of this story with feedback or news, email James Booth

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