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Issue106

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Why did it go under? We asked financial journalist Ian Fraser. Was Carillion a ponzi scheme? I do believe Carillion was acting as a sort of ponzi scheme. It was knowingly under pricing its bids for contracts so low that it knew it wasn't going to make any money from them. It was getting in new money, because you get short term advance funding when you get a contract which is help- ing you to pay the wages, and helping you to pay the director bonuses and help- ing you to pay the dividends to the shareholders, but like any ponzi scheme it's not going to be sustainable be- cause at the end of the day the money runs out. There have been compari- sons between Carillion and RBS' demise during the financial crisis. What are the similarities? Carillion had a lot of paral- lels with RBS. It was run by a Scottish Chartered ac- countant. In the case of RBS the accountant's name was Fred Goodwin, in the case of Carillion the accountant's name at the time of the col- lapse was Keith Cochrane. So a bean counter running a company is not always the best idea. The second parallel was it made loads of acquisitions funded by debt, so it didn't issue new shares to fund these acquired companies it just borrowed more and more money to fund these acquisitions. It was growing too fast and it was pay- ing over the odds for the companies it acquired, but borrowing the money to fund those acquisitions. Both RBS and Carillion were wholly trusted by the government. They shouldn't have been – they were built on sand. They were built on very shaky foundations but I think the key thing is the government being asleep. The government in both cases in the build up should have spotted the warning signs, that here was compa- ny that was a form of ponzi scheme and they should have thought 'hey is it safe for us to be so dependent on this to supply so many schools, prisons, hospitals, road projects etc.' 8 ISSUE 106 / 2018 REAL MEDIA Construction firm Carillion went into liquidation on Monday 15th January, despite having public service contracts that involved housing, prisons, transport and the NHS, worth billions. CARILLION – WHY DID IT GO UNDER? JUDGE GRANTS JUDICIAL REVIEW OF 'AMERICANISED' NHS CONTRACTS. ACOs are also referred to as Accountable Care Systems (ACS), and follow the implementation of Sustainability and Transformation Plans (STPs), which divided the NHS into 44 footprints (or areas). Campaigners believe these have been used to pave the way for ACOs and fracture the NHS. The plans also put budget pressures on local areas, which could see losses of services and treatments in different localities in order to meet targets. ACOs are based on the business model used by the USA's Medicare system, and were first brought in under Obamacare. The Judge stated the review will not look at the merits or demerits of the model, but the lawfulness of the contracts alone. The case is brought by campaign group 999 Call for the NHS and will be heard in Leeds High Court after 16 February. A Judge has granted permission for a Judicial Review of NHS England's draft Accountable Care Organisations (ACO) contract. Campaigners say ACOs are imposing an American style system on the NHS, unlawfully.

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