MG Rover investigated for fraud

An inquiry by the Government Department for Trade and Industry (DTI) into the collapse of MG Rover has been concluded, at a cost of £16m to the British taxpayer. However, Business Secretary Peter Mandelson was given the DTI's findings last month, and is expected to call for a criminal investigation by the Serious Fraud Office (SFO) today as a result.

The investigation will centre around the actions of the directors in charge of MG Rover when it went bust - namely Nick Stephenson, Peter Beale, John Edwards and John Towers. The 'Phoenix Four', as they came to be known, were accused of asset stripping the maker at the time, taking over £42m for themselves in salary, pensions and other assets.

The Phoenix Four - so named because they collectively owned Phoenix Venture Holdings, the company that bought Rover from BMW for just £10 in 2000 - vehemently deny any allegations of wrongdoing, with a spokesman today (Monday 6th July) saying each is "flabbergasted" that the case will be referred to the SFO. Speaking on behalf of the directors, Ramsay Smith told the BBC that, "at all times during the last four years the directors of MG Rover cooperated fully with the investigation by the DTI inspectors."

When the Phoenix Four bought MG Rover from BMW, it also took a £427m loan from the German maker. The British company survived for five years thereafter, though when it finally collapsed in 2005 it had debts estimated at over £1bn and the Rover pension scheme was £470m in the red. More than 6,000 people lost their jobs, with a further 9,000 estimated from various suppliers and dealerships too.

Mark Nichol