New evidence from a BHS auditing report by the Financial Reporting Council could prompt the Insolvency Service to reopen its investigation into the former directors of the collapsed retailer.
According to The Times, the Insolvency Service’s chief executive Sarah Albon has written to the FRC to request more information on the findings within its report, as its initial investigations led to the conclusion that there was “insufficient evidence of directorial misconduct to justify disqualification proceedings”.
The FRC’s report is thought to be critical of the audit carried out by PwC on BHS’s financial statements and the conduct of directors of Taveta Investments, the holding company for Sir Philip Green’s Arcadia Group retail empire of which BHS was a part for 15 years.
“We will examine what they provide in order to determine whether there is any new evidence that may give us cause to review our decision to conclude the investigation,” Albon wrote in a letter to work and pensions committee chairman Frank Field MP.
She added: “I can confirm that we have written to the FRC in light of their report, requesting they make available to the Insolvency Service any material they hold relating to the conduct of directors of the Taveta group that we were not previously aware of.”
While the details of FRC’s inquiry has not been made public yet, it recently sparked a legal challenge from Taveta Investments which wanted to restrict the publication of the full report.
Taveta’s lawyers had argued that it was not seeking a “blanket prohibition” but wanted the FRC to redact parts of its report which “contain criticisms of the claimant, its directors and employees”.
High Court judge Justice Nicklin said there were serious issues that needed to be taken into account in relation to the report, including whether the FRC’s report was defamatory and if it had breached its “duty of fairness” by not providing Taveta enough time to respond to “implied criticisms” of Taveta staff.
However, Nicklin said these reservations were not sufficient to justify an injunction to block publication of a report by a public body, and that much of what was included in the report was in the public interest.
The ruling came after the FRC handed record fines to the auditors of BHS and Taveta.
PwC was fined £10 million for its audit of BHS, when it gave it a clean bill of health for the year ending August 30, 2014.
PwC audit partner Steve Denison also signed off the BHS accounts as a “going concern” days before Green sold it to former bankrupt Dominic Chappell for just £1 in March 2015.
PwC stepped down as BHS’s auditor after the sale.
The FRC also sanctioned Denison and fined him £325,000, and he also voluntarily gave an undertaking to remove his name from the register of statutory auditors.
Meanwhile, PwC’s historic fine was reduced to £6.5 million for early settlement.
When BHS collapsed 13 months after Chappell acquired it, it left behind a £571 million pensions black hole which affected 22,000 employees and former employees.
It also triggered a parliamentary inquiry and investigations by the Serious Fraud Office.