Accountant fined £2m over poor pension advice

5th September 2014

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Leading accountancy firm Mazars and one of its partners have been fined £2 million for failures over pension advice given to the trustees of the First Quench pension fund.

The Financial Reporting Council (FRC) fined Mazars £750,000 – a record amount for a case settled outside a tribunal – and charged the company £1.12 million in costs. Mazars’ partner Richard Karmel was also personally fined £50,000 and charged £80,000 in costs.

The fines were levied over the poor advice given to the trustee of the First Quench pension in 2007. First Quench was the main trading business of Threshers off licences, which went bust in 2009 and also owned other businesses including Wine Rack and Bottoms Up.

The First Quench pension fund had a deficit of £28 million in 2006 and in 2007 when three quarters of Threshers’ ownership was transferred to a private equity company and the rest was put in the hands of specialist insurer Pension Corporation.

Pension Corporation subsequently proposed transferring the assets and liabilities of the pension fund away from Thresher and into another of its funds. At this point Mazars was brought in to advise the trustees on whether to transfer the fund or not and the FRC found Karmel presented an exaggerated case for transferring the pension away from First Quench.

However, in doing this Karmel had failed to take into account concerns from the regulator about companies abandoning their pension liabilities. In his advice, Karmel was found to have acted in the best interest of Pension Corporation instead of First Quench and was found to have breach client confidentiality by providing Pension Corporation with information about the drinks retailer.

FRC executive director Paul George said: ‘Accountants must not allow undue influence of others to override their professional judgements and they must have a clear understanding of who their client actually is.’

The fines incurred by Mazars and Karmel were reduced as both admitted their conduct had fallen short Mazars’ fine was reduced from £850,000 and Karmel’s from £57,000. Karmel will remain a partner at the firm.

A spokesman for the firm said Mazars regretted ‘that our conduct fell below our usual high standards’ and that the failings were ‘neither dishonest nor deliberate’ and have caused no loss to the beneficiaries of the pension fund.

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