Rover owners deny 'black hole'

Redundancy notices have been sent to 5,000 employees

The owners of MG Rover have strongly denied reports that millions of pounds are missing from company accounts.

The four directors of Phoenix Venture Holdings said suggestions of accounting irregularities were "ridiculous".

The government has ordered a formal investigation into the accounts of MG Rover and its owner, as 5,000 workers await their redundancy notices.

Opposition parties are calling for a full independent inquiry into the car-maker's collapse.

The regulatory Financial Reporting Council will look at how Phoenix Venture Holdings has used £450m left to it when it took over from BMW in 2000.

'Media speculation'

Workers have been angered by the money made from MG Rover by directors.

The end for MG Rover was signalled when China's Shanghai Automotive Industries Corporation pulled out of a possible rescue deal last week.

In a statement, Phoenix Venture Holdings said: "There has been much media speculation surrounding so called accounting irregularities and black holes in the accounts of PVH and MG Rover.

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"The suggestion that a black hole of £400m or any other accounting irregularity could exist in a business which has been the subject of not only annual audit by Deloitte & Touche but over the past years has been examined by a Trade and Industry Select Committee....is ridiculous."

Trade and Industry Secretary Patricia Hewitt said on Saturday she had requested a formal investigation by the independent financial regulator, the Financial Reporting Council.

Ms Hewitt said workers were feeling "pretty sick" that the directors had made a lot of money out of the company.

"Where entrepreneurs take a risk they should be entitled to big rewards for big success. But that is not what we are talking about here.

"They did not put up huge amounts of money, the company has not been a success and it was virtually given to them by BMW."

MG Rover's declining sales

Financial Reporting Council chairman Sir Brian Nicholson, who will lead the inquiry, told BBC News: "It has been alleged these accounts are somewhat convoluted to put it mildly.

"These issues, of course, are not necessarily issues that lead to any breaking of accounting procedures. We shall be looking at whether the processes had been properly followed and will give our views on this."

Tory spokeswoman Caroline Spelman told BBC Radio 4's Today there was a need to understand what had gone on behind the negotiation process aimed at saving the 400-acre site at Longbridge, in the West Midlands, over the past few years.

Chaplain counsels staff

"The Department of Trade and Industry were very supportive of the Phoenix bid over alternatives and also were involved behind the scenes in the negotiations between the Chinese company and Rover," she told BBC Radio 4.

Liberal Democrat spokesman Malcolm Bruce said Phoenix had "squandered" the money.

"The point is why didn't they use the time and money in the early stages to secure the long-term future, rather than fritter it away," he said.

He added: "The difficulty about the government organising an inquiry is that there are questions that need to be asked of government as well, so it needs to be at arm's length."

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