Zafar Khan, who joined Carillion in 2011 as finance director for its Middle East and North Africa business, has been credited as the person who first exposed the huge problems facing the failed construction company
Former executive ‘unearthed major problems at Carillion’
Amid the fallout over collapsed British construction giant Carillion, a former company executive is being credited as the man who first unearthed the major problems facing the group.
Zafar Khan, who joined Carillion in 2011 as finance director for its Middle East and North Africa business, was promoted to group finance controller and then group financial director in January 2017.
Just nine months later, he was axed from the company. It came after an internal review was launched under his watch, which, last July, revealed the firm had spiralling levels of debt and had taken a £845 million (Dh4.2 billion) hit on problem contracts.
The massive profit warning sparked doubts over the company’s long-term future, as it also said it was exiting key markets in the Middle East. It was the first in a series of profit warnings to hit the 200-year-old firm, which finally collapsed on Monday having built up £900 million of debt and a £587 million pension deficit. Its lenders refused to provide it any further financial support, forcing it to enter compulsory liquidation.
Some within the industry view Mr Khan as a whistleblower-style figure, given the hand he played in exposing the huge black hole in the company. The previous incumbent, Richard Adam, held the role for the best part of a decade but the problems were not revealed until Mr Khan replaced him, sources have pointed out.
At the time of Mr Khan’s sudden departure, Carillion gave no explanation, but said his dismissal was effective immediately.
It is believed his exit was agreed with Keith Cochrane, who stepped in as Carillion's interim chief executive in July after the departure of Richard Howson. Mr Khan was replaced by Emma Mercer, who previously worked as the finance director of Carillion's construction services arm.
Carillion's liquidators PwC said the company is not able to comment now that it is in compulsory liquidation.
Prior to joining Carillion, Mr Khan worked at Associated British Ports Holdings and other industrial groups.
On Tuesday, the UK government ordered a fast-track investigation into the directors' past and present of the failed construction firm.
Their conduct will be probed to discover if they "caused detriment to those owed money", business secretary Greg Clark declared.
"Any evidence of misconduct will be taken very seriously," Mr Clark said.
Industry experts speaking to The National said that Mr Khan is one of the “good guys” due in large part to his efforts to conduct a thorough review into the group’s finances.
However, some are more sceptical.
“It may be internally that he blew the whistle,” said one source familiar with the matter. “But he didn’t blow it loud enough.
“If they knew the full extent of the problems a year ago, they should’ve been made public and they weren’t. The company still paid dividends, and still traded as a going concern.”
Laith Khalaf, a senior analyst at Hargreaves Lansdowne, said that the review of the company’s finances last year was less a case of “whistleblowing”, and more “a function of management – and in this case, a belated function of management”.
“We don’t know who was ultimately responsible for the review taking place, but the fact that it did take place obviously had a lot of nasty consequences for Carillion,” he said.
Mr Khalaf added that playing the blame game is less important for the government at this stage than trying to find the funds to maintain the public services carried out by Carillion’s staff.
“At the end of the day, we don’t really have much visibility about what happened within Carillion, and who pushed for what,” he said. “That’s now for the government to decide.”
“We can say that management as a whole did try belatedly to get to grips with the problems. But ultimately it turned out to be too late to stop the rot that eventually claimed the company.”