The British government on Saturday ordered a formal investigation into the accounts of collapsed carmaker MG Rover, amid claims directors stripped money from the stricken company.
Rover's administrators announced Friday that they planned to break up the only major British-owned auto manufacturer after a lifesaving deal with a Chinese firm fell through. More than 5,000 of Rover's 6,000 employees will lose their jobs.
Trade and Industry Secretary Patricia Hewitt said Saturday that the independent Financial Reporting Council would look into the accounts of the company and its owners, Phoenix Venture Holdings.
Hewitt said she believed Phoenix chairman John Towers and other directors had taken too much money out of the business.
"I hope they will make a personal contribution toward supporting the work force," Hewitt told British Broadcasting Corp radio.
"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."
German car maker BMW AG sold the struggling MG Rover to Phoenix in 2000 for a token 10 British pounds.
Phoenix failed to turn Rover's fortunes around. The company, which turned out 40 percent of the cars bought in Britain in the 1960s, has not produced a new model since 1998 and now holds only a 3 percent share of the market.
The directors of Phoenix have been criticized for paying themselves significant salaries and pensions as the company was falling into the red. The so-called "Phoenix Four" earlier this week offered assets of up to ?30 million pounds (US$56.8 million) to assist Rover as it tried to resuscitate talks with China's state-owned Shanghai Automotive Industry Corp (SAIC) about a joint venture, but acknowledged that the assets on offer were subject to attack from creditors.
Phoenix denied suggestions of financial irregularities.
"The suggestion that a black hole ... 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 (parliamentary) Trade and Industry Select Committee, finance experts ... and most of the large accounting firms in the UK is ridiculous," they said.
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