FRC fines KPMG £13 million in Silentnight case



The Financial Reporting Council (FRC) has fined KPMG £13 million for its audits of Silentnight from August 2010 to April 2011.

KPMG’s Glasgow office

The accountancy regulator has announced sanctions against the Big Four firm and David Costley-Wood, formerly a partner and head of KPMG Manchester Restructuring.

This follows a referral from The Pensions Regulator and an investigation undertaken pursuant to the Accountancy Scheme in relation to Mr Costley-Wood’s conduct in respect of the Silentnight group of companies in the period August 2010 to April 2011.

An independent Disciplinary Tribunal made findings of Misconduct following a four-week hearing during November and December 2020 and sanctions were determined following a hearing in June 2021.

Mr Costley-Wood has been fined £500,000, excluded from membership of the ICAEW for 13 years and precluded from holding an insolvency licence for the same period.

Alongside the £13 million fine, KPMG has been “severely reprimanded” and ordered to appoint an independent reviewer to conduct a Root Cause Review. The review will seek to establish why threats to compliance with the fundamental principle of objectivity were not appropriately identified and safeguarded in the period prior to the appointment of office holders in the Silentnight matter.

The review will also seek to establish in a sample of past cases, whether threats to compliance with the fundamental principle of objectivity were appropriately identified and safeguarded in the period prior to the appointment of office holders and if not, the reasons for such failures.

The independent reviewer will also analyse various policies, procedures and training programmes relating to various of KPMG’s advisory services practices in the light of the results of the Root Cause Review.

The Tribunal made findings of Misconduct in respect of breaches of the fundamental principles of Objectivity and Integrity. It described the history of KPMG’s involvement with Silentnight in this case as deeply troubling as KPMG failed to act solely in its client’s interests, acted in fundamental respects contrary to those interests and in those of a party whose interests were diametrically opposed to those of Silentnight. It concluded that the lack of objectivity in this matter went to the core of the relationship between Silentnight and KPMG.

The Tribunal also held that, in addition to the lack of objectivity in relation to his dealings with Silentnight, Mr Costley-Wood acted dishonestly and therefore he and KPMG acted with a lack of integrity including in their dealings with the Pension Protection Fund (PPF) and the Pensions Regulator despite Mr Costley-Wood acknowledging that there was an obligation to act transparently in relation to a regulator.

The Tribunal commented: “Breaches of the principles of integrity and objectivity risk seriously undermining public confidence in the standard of conduct of Members and Member Firms and in the profession generally, all the more so where, as here, the professional has acted dishonestly. Dishonesty is inimical to everything that a profession stands for and especially destructive of public confidence.”



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