UPDATE 1-UK delays report on Rover pending fraud probe-media

Sun Jul 5, 2009 5:52pm EDT

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(Adds Phoenix Four spokesman's comment)

LONDON, July 5 (Reuters) - The British government is to delay the publication of a report into the collapse of carmaker MG Rover in 2005 pending an investigation by the Serious Fraud Office (SFO), British media reported on Sunday.

The move, which The Sunday Times newspaper said would be announced by Business Secretary Peter Mandelson on Monday, follows a four-year inquiry into the company's demise that led to more than 6,000 job cuts.

A government representative said a statement on the issue would be made to Parliament on Monday, but declined to elaborate.

Opposition politicians accused the government of deliberately delaying the report, which they said would show it wasted millions of pounds of taxpayers' money propping up the car company in the run-up to the 2005 election.

"I welcome the introduction of the fraud squad into what appears to be a major corporate scandal, but it must not be used as a smokescreen to hide what the public needs to know," said Vince Cable, the Liberal Democrat's Treasury spokesman.

MG Rover, Britain's last major independent carmaker, went into administration in April 2005 with debts of more than a billion pounds.

A quartet of executives known as the Phoenix Four took control of the company in May 2000 after buying it for a nominal sum of 10 pounds.

The business came with an interest-free loan from BMW (BMWG.DE), the previous owner.

Ramsay Smith, speaking for the Phoenix Four Group, said there was no basis "whatsoever for an investigation" by the SFO.

"At no time during the (government) investigation has fraudulent activity been raised as a serious prospect," he told the BBC.

"Frankly, people are flabbergasted by the leaks that have emerged over this weekend suggesting that this is going to be referred to the SFO," he said.

"At all times during the last four years, the directors of MG Rover cooperated fully with the investigation by the DTI inspectors and accounted very willingly for their actions," Smith said.

"It now seems quite extraordinary (that) people, and, politicians in particular, are questioning yet another episode of investigation into something that happened four years ago: It's taken 16 million pounds of taxpayers' money to get to this stage," he added.

A public accounts committee criticised the government in 2006 for its lack of dealings with the company's new owners and for not being sufficiently prepared when it collapsed. (Reporting by Christina Fincher and Stefano Ambrogi; Editing by Simon Jessop and Matthew Lewis)

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