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A logo is seen in front of cranes standing on a Carillion construction site in central London
Image: A logo is seen in front of cranes standing on a Carillion construction site in central London. REUTERS/Simon Dawson

Top Carillion Shareholder had Intentions to Sue the Firm

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Image: A logo is seen in front of cranes standing on a Carillion construction site in central London. REUTERS/Simon Dawson

One of the largest Carillion shareholders revealed it had intentions to file a lawsuit against the firm.

The intention had been to sue to sue the group for having caused the investor to lose its clients’ money.

Carillion Collapsed

Before the investor could file the lawsuit for the loss of its clients’ money, Carillion collapsed. The company fell apart as investors stated that its board was not effective in changing adequately.

Murdoch Murchison, chief executive officer from the Kiltearn Partners, issued a letter to the House of Commons select committee. It led an inquiry into the Carillion collapse, stating that if the group had not gone into liquidation, the investment firm would have “considered participation in civil legal action against Carillion with a view to recovering a proportion of its clients’ crystallised losses.”

Kiltearn Partners had already communicated with Innsworth, a firm funding shareholder litigations. The purpose of that communication had been to launch its intention to file a lawsuit against Carillion. This occurred just as Carillion was liquidated on January 15.

Kiltearn Partners’ Strategy

By May 2017, Kiltearn held about 10 percent of Carillion’s shares. It expressed that some doubt in the group was there, but it didn’t realize that the problem had grown to be as large as it was.

Kiltearn voted all its shares against the remuneration report for Carillion at that time. The reason given was that it had “concerns about [former chief executive Richard] Howson’s level of remuneration relative to the company’s level of net income,” according to the letter to the House of Commons select committee.

That said, it pointed out that Carillion hadn’t made any indication in its March 2017 annual report that would suggest the group was headed toward a catastrophic £845 million write-down in coming months.

The Letter’s Response

Business committee chair, Rachel Reeves, responded to Kiltearn’s letter, stating that the annual reports published by Carillion were “worthless as a guide to the true financial health of the company.”

Interim chief executive officer at Carillion at the time, Keith Cochrane, met with Kiltearn and a handful of other investors last autumn after the writedown that resulted in Howson’s resignation and caused the group’s value to nosedive by 70 percent. However, Kiltearn said that at that time, Cochrane was able to provide only “limited and vague” evidence as a response to “fundamental” questions. As a result, Kiltearn had sold all its Carillion shares by January 4, 2018.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.