KPMG has been fined £13 million by the accounting watchdog after misconduct was found relating to its role in the sale of Silentnight, the mattress company, to HIG, a private equity firm.
In addition to the fine, the Financial Reporting Council severely reprimanded the professional services group and ordered it to appoint an independent reviewer to establish the “root causes” of its failings.
David Costley-Wood, former partner and head of KPMG Manchester Restructuring, was fined £500,000, severely reprimanded and banned from the insolvency industry for 13 years.
The regulator said that there had been breaches of “fundamental principles of objectivity and integrity” in the “deeply troubling” history of KPMG’s involvement with Silentnight. The firm and its former partner had shown “egregious” dishonesty as it put factory workers’ pension savings and tens of millions of pounds of creditors’ money at risk.
A disciplinary tribunal made the findings of misconduct after a four-week hearing in November and December last year. The sanctions announced yesterday were determined after a hearing in June.
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HIG acquired Silentnight in 2011 through a pre-pack administration. The tribunal was told that KPMG and Costley-Wood, 55, had lost their objectivity by favouring HIG as a buyer for the struggling mattress company and had helped the private equity firm in its plan to “drive Silentnight” to the wall and dump the £100 million pension scheme on the Pension Protection Fund, the government-backed lifeboat.
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”. KPMG was ordered to pay an additional £2.8 million in costs.
A KPMG spokeswoman said: “We regret that the professional standards we expect of our partners and colleagues were not met in this case. Mr David Costley-Wood has retired from the firm and, while we no longer provide insolvency services, our broader controls and processes have evolved significantly since this work was performed.”
