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Fri September 20 2019

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MPs side with Qataris over Carillion

28 Feb 18 The parliamentary inquiry into the collapse of Carillion appears to have turned into a game of ‘he said, she said’ as key witnesses provide directly contradictory evidence. And the MPs have decided who to believe.

Richard Howson was cross-examined by the inquiry on 6th Feb. Frank Field has decided he's a 'fantasist'
Richard Howson was cross-examined by the inquiry on 6th Feb. Frank Field has decided he's a 'fantasist'

In the case of whether Qatari client Msheireb Properties owed Carillion £200m, as stated in evidence by former Carillion chief executive Richard  Howson, the MPs leading the inquiry have decided to take the side of Msheireb.

In testimony to a joint inquiry by the House of Commons Work & Pensions and Business, Energy & Industrial Strategy (BEIS) select committees, Msheireb Properties says that in fact it was the one owed millions by Carillion, including £47m in liquidated damages.

On the basis of Msheireb’s statement, they have dismissed Carillion executives as ‘fantasists’.

Richard Howson was among several former Carillion executives to be cross-examined by the joint committee inquiry on 6th February. He told the committees that Msheireb "owed us £200 million" when he was removed as CEO in July 2017, rising from "about £180 or £190 million" in March 2017. Carillion had been working in Qatar in joint venture on the £4bn Msheireb Downtown Doha development.

Mr Howson was kept on by Carillion as chief operating officer for three months after his dismissal from the board in a last ditch bid to get some money out of Msheireb. He told the MPs that he “felt like a bailiff”, making several trips to Doha in attempts to get money owed.

Msheireb "entirely disputes" Mr Howson’s testimony, however, instead stating that he was "misleadingly" referring to "the value of construction work remaining to be completed" plus "the value of claims relating to further delays". On the contrary, Msheireb considers that Carillion owed it "a similar amount of money", comprising:

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  • substantial "good faith overpayments" made "to assist Carillion" "despite these monies not being owed"
  • direct payments that Msheireb made to subcontractors who Carillion had not paid, to "ensure that they continued with the work", despite the fact that "these were often works which we had already paid to Carillion", and which they intended to recover
  • contractual delay damages due because of Carillion's failure to complete work "in a timely manner" and "delays caused by Carillion's resourcing, financial issues and problems with their supply chain"

In a letter to the committee published today, the Qatari client says: “Carillion's performance on the project was generally poor. In particular, the works were not completed in a timely manner and, as a result of delays caused by Carillion's resourcing, financial issues and problems with their supply chain, Carillion became liable to pay substantial liquidated damages for delay under the Contract. The liquidated damages Carillion is due to pay are QAR 237 million (or approximately £47 million) as a result of delays to the progress of the work.”

It adds: “Msheireb Properties are sad to witness the demise of Carillion plc, but their demise was not attributable to monies ‘owed’ on this Project. Msheireb Properties strongly rejects and objects to Mr Howson's response to [inquiry co-chair] Mr Field's question, in which he inferred that the Msheireb project and his failure to settle the final account on that project ‘helped to sink Carillion’. Carillion and its management, and they alone, sank Carillion. The Msheireb project was tendered and administered fairly and openly, and there was nothing intrinsic in the Project or Msheireb Properties' administration of it which ‘helped sink the company’.”

Keith Cochrane, who took over from Mr Howson as Carillion chief executive, told the committees: "We were not paid for 18 months prior to the business failing." But Mshereib states: "this is factually incorrect". Carillion "was paid at regular monthly intervals … without exception, in accordance with the conditions of the contract" until January 2017.  Payments for 2017 reduced due an agreement that Msheireb "would pay its subcontractors directly as Carillion was unable or unwilling to do so".

The co-chairs of the inquiry are siding firmly with the Qataris in this argument, adding to the evidence that their narrative is already written before all questions have been answered.

Work & Pensions Committee chair Frank Field said:  "This extraordinary exchange reinforces the impression that the upper reaches of Carillion was stocked with fantasists. It takes a special kind of optimism…to classify money one hopes to earn in the future, on a challenging project, as money ‘owed’ to you. He cannot tell the difference between money he'd like to be paid, he wishes would be paid, and money that is actually owed to him.”

BEIS committee chair Rachel Reeves said: "The Carillion directors litany of excuses for the collapse of the company is fast unravelling. While spiralling debt problems and failing contracts signalled the alarm to almost everyone but Carillion's directors and auditors, their former chief executive was jet-setting off to Qatar to chase a pot-of-gold that may never have existed. Once again Carillion's directors appear to have shut their eyes and ears to the real problems at the company and failed dismally to take meaningful action to avert its tragic collapse."

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