Thomas Cook auditors face ‘tough questions’ from MPs over director bonus

EY and PwC, which audited Thomas Cook before 2017, can expect tough questioning at today’s Business, Energy and Industrial Strategy Select Committee hearing.

Chair Rachel Reeves MP said: “I think we should be able to claw back bonuses and salary when directors are culpable for running a company into the ground.

“But you should also have checks and balances, and the checks and balances are the auditors, are the regulators.

“All of them have questions to answer about the extent to which they were asking the tough questions the directors didn’t want to answer,” she told the BBC.

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Reeves was speaking as audit firm EY was accused of writing a report used to award former CEO Manny Fontenla-Novoa a £5 million bonus.

The bonus came a year after the 2007 merger with MyTravel under a “secured synergies bonus plan”.

Thomas Cook’s annual report for the period reportedly showed this was paid following “an independent review of synergy benefits” undertaken by EY in September 2008.

“These additional synergies include improved terms negotiated with accommodation providers and overseas agents together with increased hotel settlement income.

“Such synergies being enhanced as a consequence of a healthier negotiation position post merger,” the annual report said.

EY said last year it had “nothing to report” in respect of claims by Thomas Cook directors that “the entity will be able to continue in operation and meet its liabilities as they fall due”.

Thomas Cook reported a £1.5 billion loss in May for the first half of its financial year and issued the third in a series of profit warnings.

Around £1.1 billion of that loss was caused by the decision to write down the value of MyTravel.

By then, EY warned there was “significant doubt” whether Thomas Cook could continue as a going concern.

Senior EY staff will on appear before the panel of MPs investigating Thomas Cook’s collapse later today.

The audit firm and Fontenla-Novoa, who is due to face the select committee on Wednesday, declined to comment.

Former senior Thomas Cook executives told the BBC the company’s debt problems began with the MyTravel merger.

“We were told we’re carrying this debt from a deal that was done many years ago and now we’ve got this baggage around our necks,” said one former executive, who asked not to be identified.

“What that means is we have to sell about 2,000 holidays to even pay a very piece of that debt back. What we’re doing is essentially working to pay back the interest,” she said.

Pilot Dave Crichton, who joined Thomas Cook from MyTravel in the 2007 merger, said he was “angry” about the company’s collapse “because I think it was resolvable”.

“I fly the planes, I see how many people are on them, I know what the seat prices are. And you think where I was, was an absolute cash cow.”

Internal Thomas Cook documents seen by the BBC show its airlines business was on track to make £129 million in profit this year – but he still lost his job when the wider group collapsed.

“It was a really cash rich company which just spent on businesses that came with debt. That’s… the biggest failing, that no part of it was salvageable,” he said.

The accusations are made in a BBC Radio 4 investigation into the demise of Thomas Cook due to be aired tonight at 8pm.

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