UPDATE 1-UK govt seeks to bar directors over MG Rover demise

* UK publishes long-awaited report into demise of MG Rover

* Government seeks to bar "Phoenix Four" from directorships

* Former owners accuse government of whitewash

(Adds comments from Mandelson, Phoenix Four on Brown role)

By Keith Weir

LONDON, Sept 11 (Reuters) - The British government is looking to bar executives from failed carmaker MG Rover from running other companies following the publication of a report into the collapse of the business in 2005.

After purchasing Rover from BMW (BMWG.DE) for a nominal 10 pounds in May 2000, the management team known as the "Phoenix Four" tried to revive Britain's last major independent carmaker but the company went into insolvency in 2005 with debts of nearly 1.3 billion pounds ($2.18 billion).

"Based on this report, work has been commissioned to start legal proceedings to seek to declare relevant directors unfit to hold office and to disqualify them from management of any company in future," Business Secretary Peter Mandelson said in a statement on Friday.

The action targets Peter Beale, John Edwards, Nick Stephenson and John Towers, known as the Phoenix Four.

The men said they were the victims of a witch hunt. They questioned why the report had not looked into the role Prime Minister Gordon Brown, finance minister at the time, had played in the failure to provide a 100 million-pound bridging loan.

Written by two government-appointed inspectors, the report says the owners and former chief executive, Kevin Howe, got pay and benefits totalling some 42 million pounds.

"During the five-year period, the members of the Phoenix Consortium and Mr Howe obtained large, and we say unreasonably large, financial rewards totalling tens of millions of pounds," the report said in its conclusion.

Britain's Serious Fraud Office (SFO) last month ruled out a criminal investigation into the affair.

GOVERNMENT ROLE

While critical of the Phoenix Four, there was also criticism of government officials for briefing the press in April 2005 that talks on a joint venture with China's SAIC had stalled.