Police to investigate MG Rover

The collapse of MG Rover will be investigated by the Serious Fraud Office (SFO).

A near four year enquiry into the collapse of the company - produced at a cost to the tax payer of £16 million - was handed to business secretary Peter Mandelson last month.

He has now confirmed that there are grounds for a criminal investigation.

Lord Mandelson said in a statement: “There has been a comprehensive and thorough investigation into the events which led to the company failing, workers losing their jobs and creditors not getting paid. The SFO must now see if there are grounds for prosecution.”

Richard Alderman, SFO director, said the group planned to make a speedy decision on whether to launch a criminal investigation into the MG Rover collapse. He said that he had set up a team of four to investigate the report sent by the Department of Business and would reach an initial decision as to whether to take the case on for investigation within 20 days.

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Any subsequent criminal investigation could be lengthy, because of the complexity of the allegations.

MG Rover was one of Britain’s largest private companies when it went into administration four years ago. About 6000 people lost their jobs directly, with an estimated additional 9000 other workers at suppliers and dealers also losing their jobs.

The company owners - known in the press as the Phoenix Four, were John Towers, Peter Beale, John Edwards and Nick Stephenson. At the time of the collapse they were accused of asset-stripping MG Rover.

The quartet bought the company from BMW for £10 in 2000, a price that included a £427 million loan from the German car group, and a stock of thousands of unsold cars. In the following years they took out an estimated £40m in salaries, pensions and other assets.

Their behaviour prompted the head of BMW in Britain to call them “the unacceptable face of capitalism” and led to the launch of an inquiry by the Department for Trade and Industry (DTI), now the Department for Business

The decision to call in the Serious Fraud Office will mean that the report into the company's collapse will not be made public yet.

The Times newspaper cites senior motor industry executives familiar with the Rover collapse as saying that the government might not want the report made public, citing ministers’ public support for the Phoenix Four when they bought the company, and the government’s ill-fated interventions late on in an attempt to keep the company afloat. A £6m state loan was advanced to Rover while a fruitless effort to resurrect a deal with Chinese company was made.