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Mazars to pay £2m in fines and costs over pension fund advice failings

One of the UK’s largest accountancy firms Mazars and one of its partners will pay fines and costs totalling £2m after the Financial Reporting Council ruled it fell short of standards in respect to advice it gave trustees of the First Quench Pension Fund.

This included not meeting professional standards, sharing confidential information and being influenced by other commercial interests.

As part of the settlement, Mazars partner Richard Karmel is to pay a £50,000 fine and £80,000 in costs. Mazars was charged £750,000 and will pay £1.12m in costs. The fines were reduced after both Karmel, the main partner in the case, and Mazars admitted their liabilities and settled.

Mazars and Karmel were appointed as advisers to the pension fund in August 2007 as one of the scheme’s sponsors – specialist insurer Pension Corporation – set in motion plans to transfer sponsorship of the scheme to another Pension Corporation entity, Newco.

As part of the proposal £32m was to be put in an escrow account – the scheme had a funding deficit of around £25m – to clear the deficit over the next ten years. At the same time Karmel was appointed to the role of adviser to the scheme by Pension Corporation.

The Pensions Regulator called a halt to all activity in December 2007 after concerns were raised over Mazars’s work, including its assessment on the strength of both First Quench and Newco, and the resulting risk to the pension scheme.

In January 2009, TPR referred the case to the FRC’s predecessor, the Accountancy and Actuarial Discipline Board.

The FRC says Mazars and Karmel overstated the case for the change of sponsorship of the scheme. It was found to have failed to produce reports for the trustee board that met technical and professional standards, as well allowing their “judgement to be overridden by the commercial interests of Pension Corporation” and sharing confidential information with Pension Corporation.

FRC executive director of conduct Paul George says: “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 result in this case demonstrates our commitment to ensure the standards of the profession are upheld so that it can justifiably secure public confidence.”

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