The Council, the Scarlets and the 'Allowable expenses' - a Revelation

(Update; please also see later post, 23rd April;' Carmarthenshire Council and the Scarlets land deal - the Western Mail reports')

In a curious turn of events, a decision to refuse part of a Freedom of Information request has been overturned via an internal council review. In my experience, this is a first.

I had requested the District Valuers' Report (DV) and inter-party correspondence leading up to the deal between the Scarlets' and the Council over the sale of a car park to Marston's Inns, adjacent to the Parc y Scarlets Stadium in Llanelli. The land is owned by the council and leased to the Scarlets.

I was given the final DV Report (dated January 2013) but not the correspondence.

I have now been given the email correspondence as well as an earlier draft DV report. I have provided links to the responses at the end of this post.

Last year the Executive Board Member for Finance, Cllr Jeff Edmunds revealed the details of the deductions prior to the split of the proceeds. Previous requests as to how the council taxpayer ended up with £200,000 from a pot of £850,000 in a supposedly 50/50 split had been repeatedly refused.

The figures 'spilled' by Cllr Edmunds last year were;
Fees to agents and architects                      £50k
Allowable expenses to Scarlets                  £280k
Finders fee for buyer  to Scarlets                £30k
Compensation to club for loss of lease        £76k
Share of remainder :-             Scarlets  -      £220k
        Carmarthenshire County Council  -     £200k

The figures revealed that among the deductions was £280,000 in 'allowable expenses' made available to the Scarlets to pay off a third party loan to the developers of the Eastgate complex, Henry Davidson Developments Ltd (HDD Ltd) for fitting out the Scarlets shop/restaurant within the new complex, The Red Room.

This seemed to me to be an entirely inappropriate 'deduction'. The council had made noises about it being a contribution to improve footfall in the town centre, I don't think even they believed what they were saying.

The matter came up at a full council meeting last year and the buck was passed around the Chamber until it came to the Director of Resources, Roger Jones, who seemed to put the responsibility onto the District Valuer. He made it quite clear that Jonathan Fearn, the Council's Head of Corporate Property, who had been delegated to finalise the details of the deal, was in the clear.

The newly released information contains the draft District Valuer's report (September 2012) with a list of deductions put forward by the DV, the Scarlets, and the council.

Click to enlarge

What is very clear from the email correspondence is that Jonathan Fearn and Roger Jones were adamant that there should be no payment to HDD Ltd.

The two parties put forward their submissions which were considered by the DV prior to his draft report. The DV then put his suggested deductions alongside those put forward by Jonathan Fearn and the Scarlets' agents (As in the table above).

The DV suggested a payment to HDD Ltd of £82,000 although it is not clear why any of it should have been paid.
The Scarlets were insisting HDD should have £175,000 + VAT, plus their legal costs of £50,000, this amounted to £260,000.

Mr Fearn said that payments to HDD Ltd were "a private matter for the Scarlets from their share of the proceeds..and is nothing to do with the Council. The Council would happily wait for a few years for the disposal of the site rather than have to pay HDD anything"

The Scarlets, via their agents were saying that if HDD Ltd weren't paid in full, they wouldn't be able to go ahead with the Marston's deal.

In fact the Scarlets wanted an 80/20 split, including £80,000 'profit', with a mere £74,000 ending up with the council.
Mr Fearn, on the other hand, put the total deductions at £20,000 which would have left £830,000 and a 50/50 split, with over £400,000 coming to the council.

There was clearly intense disagreement between the two parties and this is illustrated in the email correspondence.

Both parties then put forward their views on the DV draft report, including the deductions.

Mr Fearn questioned nearly all of it. Interestingly he queried the £27,250 agent's fee (Finder's fee which was eventually £30,000) to the Scarlets for 'finding' Marstons.
He said; "My agreement to these being included would require disclosure and verification of the fee arrangements. To back up my point, Marstons' have subsequently advertised in the Estates Gazette that they will pay £30k introduction fees to agents"

Incidentally, HDD Ltd have had previous relations with Marstons and have sited them in their other mixed use developments around the UK.

As for the payment of £82,000 suggested by the DV to HDD Ltd, it seemed to defy logic. Mr Fearn also questioned why on earth the Scarlets should 'profit' from the deal any more than the council.

At this point the views of Roger Jones, the Council's Director of Resources are also made very clear. He said, in an email to Mr Fearn and Mr James that;
 "I cannot accept that the club gets any cost recovery and certainly no 'profit' from introducing the scheme. In fact I cannot support any of the deductions put forward"

There was clearly no agreement reached and a meeting took place between the parties in November 2012, the day after planning permission had been granted for the pub.
In fact, throughout the correspondence there is a repeated assumption that 'acceptable' planning permission would be forthcoming.

Just prior to that meeting, Mr James got in touch with Mr Fearn. Mr Fearn then emailed Roger Jones;
"Roger, the Chief rang me earlier to ensure I was able to reach agreement on the basis that he has instructed ie £200k to CCC. Perhaps we can discuss again tomorrow morning before I meet with Nigel" [Nigel Short, Scarlets representative]

So there we have it. Somehow the Scarlets more or less got what they wanted, despite the protestations of the senior officer delegated to finalise the deal, and despite the grave misgivings of the Director of Resources. Remember, Mr Fearn initially recommended a deduction of only £20,000 from the whole of the proceeds.

There will always be 'negotiations' in any business deal of course but somehow the Council ended up with £200,000 and the Scarlets £650,000 an 'agreement' which appears, given the information which has been released, to have been on the "instructions" of the chief executive, Mark James.

Why the council have decided to release this information is odd. I think, on balance, it was released to make it clear that both Mr Fearn and Mr Jones were not happy with the deal.

They seem to have fought the council's corner only to have the rug pulled from under them at the last minute. Who pulled the rug? It doesn't appear to be the District Valuer. Were the final instructions, which clearly were not in the best interests of the council or the taxpayer, the responsibility of Mr James?

It is not clear from any of this whether correct procedure was followed or not, but there is a strong smell of something and this whole matter deserves further investigation.

While I'm pleased that this information has been released it begs the question why my similar request for correspondence between the council and the Towy Community Church was refused. In fact, I was classed as 'vexatious' in that request, they even managed to convince the Information Commissioner of this.

This was no different to the Scarlets' request, the only difference I can possibly think of is that, at the moment, Mr James is not at his desk.
.
Today's response from CCC solicitor detailing reasons for overturning original FOI refusal here.
New information released today here
Full thread of Freedom of Information request here
Earlier blog post; Allowable expenses from November 2013