The Rover factory in Longbridge, Birmingham in April, 2005, prior to its collapse later that year.

Business Secretary Peter Mandelson asked the UK’s Serious Fraud Office to investigate the collapse of MG Rover Group Ltd., which went into bankruptcy in 2005 with 1.3 billion pounds (US$2.1 billion) in debt.

The request follows a four-year investigation into the company’s collapse, which cost 6,000 jobs. MG Rover at the time was owned by Phoenix Venture Holdings, which bought it for a nominal sum in May 2000 from Bayerische Motoren Werke AG.

“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,” Mandelson said in a written statement to Parliament today. “The SFO must now see if there are grounds for prosecution.”

The probe will delay publication of the government’s own study into the company, which collapsed three weeks before the 2005 general election even after ministers from the ruling Labor Party offered support to save it.

In 2006, the National Audit Office criticized the government’s decision to give the company a 6 million pound loan to hold off collapse for a week, saying it was poor value for money.

MG Rover’s former directors, John Towers, Peter Beale, John Edwards and Nick Stephenson, said a further inquiry was “frankly ridiculous,” the Sunday Times reported Sunday, citing a joint statement. “There has never been any suggestion of improper conduct by the directors,” the statement added.

The government investigation was conducted by outside lawyers, Guy Newey of Maitland Chambers and Gervase MacGregor of BDO Stoy Hayward.

SFO position

“We’re looking to see whether or not there is sufficient evidence to launch an investigation,” SFO spokeswoman Jina Roe said. “It’s a matter under assessment. We’re considering the referral, but it’s too early to say whether or not we’ll launch an investigation.”

Nanjing Automobile Group Corp., a state-owned Chinese Company, bought the assets of MG Rover in July 2005 for about $97 million.

At its peak in the 1960s, the carmaker employed 250,000 and Longbridge was one of the biggest car factories in the world. The company produced 40 percent of the cars bought in the UK, including Triumph, Austin, Land Rover and Morris brands. MG Rover has less than 3 percent of the UK market when it folded.

Source: Bloomberg