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Last Updated: Thursday, 26 May, 2005, 15:45 GMT 16:45 UK
Watchdog questions Rover's books
A Union Jack flown outside MG Rover's Longbridge plant
The FRC has not given any details of its findings
A financial watchdog that has reviewed the accounts of collapsed carmaker MG Rover said its investigations had raised "a number of questions".

The Financial Reporting Council (FRC) said it has passed on its report to the Department of Trade and Industry (DTI).

The FRC said it was now up to Trade Secretary Alan Johnson to decide whether the DTI conducts its own probe.

A number of reports have suggested that there might be irregularities or a "black hole" in MG Rover's accounts.

Chinese blow

The carmaker collapsed in April with the loss of more than 5,000 jobs at the firm's Longbridge factory in the West Midlands.

It also jeopardised the jobs of thousands more at suppliers and dealerships.

The end came when talks to secure its future through a joint venture with China's largest car maker Shanghai Automotive Industry Corp (SAIC) fell through.

The inquiry by the FRC, the regulator for corporate reporting and governance, was commissioned by the DTI in the aftermath of MG Rover's demise and allegations 400m was unaccounted for in company accounts.

The FRC looked at the accounts of MG Rover and parent company Phoenix Venture Holdings over the five years to 31 December 2003, the most recent available.

Questions asked

However trade unions have criticised the FRC's remit as too narrow.

The inquiry has not been able to look at financial figures since the start of 2004, or at how the pensions situation has developed since then.

Another criticism has been that the FRC has not had enough time to thoroughly examine the complex web of MG Rover companies, including property vehicles, or the way they were separated from one another.

Rover workers leaving Longbridge
Thousands of workers have lost their jobs

With its remit being restricted to the accuracy of the published accounts, neither has the FRC been able to get to the bottom of what happened to the 450m left to MG Rover when it was bought from BMW for 10 in 2000.

Four Midlands businessmen - known as the Phoenix Four - were left the handsome financial "dowry" as part of the BMW deal, but have always said there was no need for a probe into company accounts.

When the inquiry was launched MG Rover chairman, John Towers, dismissed talk of a 400m financial black hole in the accounts as "ridiculous" and said he was the victim of a "character assassination".

He also said other company bosses received more than his 200,000 annual salary and 105,000 pension.

'Respond shortly'

The FRC did not give details of its findings, but said it would be happy to "provide the DTI with any appropriate assistance within its powers that it may request".

MG Rover's trade unions have called for the DTI to publish the report.

Meanwhile the DTI now has to decide whether to progress with a full-scale inquiry under the Companies Act.

If it does so it will have to decide whether to make it an internal or external inquiry.

"The Secretary of State Alan Johnson has received a copy of the report and will respond shortly, after considering its contents," a DTI spokeswoman said.

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