Cantillon: Taking an interest in conflicts of interest

The final report of a tribunal in the UK must have taken many in Dublin by surprise

The news that a UK professional services firm can be fined for not managing a conflict of interest must have taken many in Dublin by surprise. Surely the myriad Chinese walls that allow Ireland’s accountants and lawyers to magic away such problems must be as effective in London as they are here?

Apparently not, if the final report of the tribunal set up to look at how Deloitte managed its conflicts in it dealings with the “Phoenix Four” and the MG Rover Group is to be believed.

Problems arose because a partner in Deloitte, Maghsoud Einollahi, was giving tax and corporate finance advice to four MG Rover directors and related firms, while Deloitte was acting as auditor to MG Rover.

The company collapsed with debts of £1.3 billion (€1.54 billion) in 2005 and 6,000 people lost their jobs; but not before the “Phoenix Four” had extracted €40 million from the company. Deloitte will now have to pay a record £14 million fine.


The revelation that professional services firms are often found on both sides of a deal will be no surprise to anyone who has watched Irish corporate life over the past decade or so. The stock response from the firms involved is that their own internal processes – known as Chinese walls – provide adequate protection and that their clients are satisfied with the measures they put in place.

Presumably Deloitte offered similar assurances but it was not until things went so horribly wrong that the issue was taken seriously by regulators. One suspects it will require a similar disaster before Irish firms are forced to take the issue seriously, and even that presupposes that someone will hold the firms in question to account.

A glance around the Irish regulatory landscape does not throw up too many candidates for such a crusading role. Interestingly, the writ of the UK Financial Reporting Council – which held Deloitte to account – runs as far as Ireland. It sets standards for auditors here, although enforcement is the job of the Irish Auditing and Accounting Supervisory Authority. The legal profession will come under the soon-to-be-established Legal Services Regulatory Authority.