Finance

KPMG partner exits firm amid tribunal over Silentnight private equity takeover

A KPMG restructuring partner facing a disciplinary tribunal over the sale of mattress company Silentnight to private equity fund HIG in 2011 has left the firm.

David Costley-Wood was accused by a lawyer for the Financial Reporting Council of being behind a “morally repugnant” scheme to dump the pension liabilities of Silentnight to smooth its sale to HIG.

The tribunal is set to continue on 21 and 22 June having already been part-heard in November. KPMG and Costley-Wood have denied the allegations against them.

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A regulatory filing showed that Costley-Wood was terminated from KPMG UK’s partnership on 5 June.

A spokesperson for the firm said Costley-Wood “retired from KPMG UK on 4 June 2021, and had planned his retirement some time ago”.

Costley-Wood told Financial News that his retirement had been long-planned and said any “insinuation that my exit has anything to do with Silentnight is 100% wrong”.

The FRC’s complaint alleged that KPMG and Costley-Wood advised Silentnight in circumstances where their professional judgement was compromised and their objectivity was impaired.

It also accused them of knowingly or recklessly providing untrue explanations to the Pension Protection Fund (PPF), the Pensions Regulator, Silentnight and the trustees of the Silentnight pension scheme.

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In November, Richard Coleman QC, a barrister for the Financial Reporting Council (FRC), said HIG and some of Silentnight’s management — with the assistance of KPMG and Costley-Wood — had planned to engineer HIG’s takeover of Silentnight, minus its pensions liabilities.

The plan was for HIG to acquire some of Silentnight’s debt to give it the ability to force the company into insolvency, Coleman said during the earlier part of the hearing in November.

The pension scheme would then transfer to the PPF and HIG would be able to buy the company out of administration, shorn of its £100m pension liabilities.

Some of Silentnight’s management had been promised an equity interest in the successor company, representing a conflict of interest with their duties to act in the best interest of Silentnight, Coleman said.

KPMG and Costley-Wood’s conduct “fell significantly short of the standards reasonably expected of them… and also that they have brought discredit upon the profession,” Coleman said.

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Costley-Wood branded the case a “witch hunt” during his cross-examination in November and said it was “frankly outrageous” he was being accused of dishonesty, Law360 reported.

In November, a spokesperson for KPMG and Costley-Wood said: “We do not agree with the FRC’s allegations, which are being defended in full.”

Last month KPMG sold its UK restructuring business in a management buyout backed by HIG. The new business is called Interpath Advisory.

HIG agreed to pay £25m to the Silentnight pension scheme in March as part of a settlement with the Pensions Regulator. HIG settled without admitting liability.

To contact the author of this story with feedback or news, email James Booth

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