Monday 24 November 2014

Those 'allowable expenses' were 'allowable'! Fancy that!

Well well, it must be little known fact that, despite these austere times, Carmarthenshire Council has a 'policy' to pay off third party loans on behalf of private companies. This unbelievable revelation was made to me today in a letter from the Wales Audit Office... 

You may remember that many months ago it emerged, after a lot of digging and a leak or two, that a deal between the council and Scarlets Regional Ltd to sell off a plot of land to Marstons Inns in 2012 had included a deduction of 'allowable expenses' of £260,000 from the sale price. A supposed 50/50 split turned out to be nothing of the sort.

It then transpired that this £260,000 was a loan from Eastgate developers, Henry Davidson Developments (HDD) to the Scarlets for the club to fit out its shop in the Eastgate complex in Llanelli.

The full details, the background of the 'split' and the link to the email thread can be read here; The Council, the Scarlets and the 'Allowable expenses' - a Revelation

Essentially, despite the best efforts of two senior council officers to secure the best deal for the council taxpayer, the rug was pulled from under them at the last minute by the chief executive Mark James who, from the disclosed emails, appeared to be intent on securing the best deal for the Scarlets.

To quote the council's head of corporate property, who was the one actually granted the delegated power to finalise the deal, the £260,000 loan was "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"

According to the Wales Audit Office, quite clearly I, and possibly the delegated officer, were wrong. The council are, it seems, perfectly entitled to pay off third party debts...I wonder how many other private businesses in Carmarthenshire are aware of this? Or perhaps it was just the Scarlets...we'll never know. I suspect that this little known perk will disappear along with the chief executive...I'm speculating of course.

Like the council, the WAO have passed the responsibility for this strange transaction onto the District Valuer, and note that he negotiated the valuation of the land, and the imaginary 50/50 split. It doesn't actually say he decided on the legality or propriety of the deductions.

There is not just an unpleasant whiff about all this, it stinks to high heaven.

An interesting response from the WAO however, and one which I am bearing in mind over the similarly sized 'third party' Court Order I have with the council...they know, I hope, exactly what they can do with their Court Order.

I've copied my complaint, and the WAO response in full below.
Make what you will of their response, and, if you have time have another look at the FOI email thread, have the WAO been looking at a different set of documents?

From me to the Wales Audit Office April 2014;

"Dear Sir,

I am writing to complain about a financial transaction between Carmarthenshire County Council and the Scarlets rugby club over the sale of a car park to Marstons' Inns. The sale was completed in early 2013 but new information has come to light which raises concerns that the arrangement was not in the best interests of the council and the taxpayer.

The council owns the land which is adjacent to the Parc Y Scarlets stadium and is leased to the Scarlets. Marstons paid a purchase price of £850,000. However, there were numerous deductions taken from this figure which eventually left £220,000 for the Scarlets and £200,000 for the council.

It is these deductions, and the way in which the negotiations took place, which are the subject of my concerns. One of the deductions was an 'allowable expense' of £260,000 made available to the Scarlets to pay off a third party loan to Henry Davidson Developments Ltd.

The loan had been provided for the Scarlets to fit out their new shop/restaurant in the Eastgate complex in Llanelli. I am also concerned about other deductions including a 'Finder's fee' of £30,000 and compensation for loss of lease of £76,000.

I made a freedom of information request in January of this year for the District Valuer's report dated January 2013 and correspondence relating to the deductions/expenses between the parties leading up to the conclusion of the sale.
I was initially provided with a copy of the District Valuer's report but refused the correspondence under commercial sensitivity.

Following an internal review, I was then provided with the email correspondence which had initially been refused and also the draft District Valuer's report dated September 2012. This was yesterday, the 16th April.

From this correspondence it is very clear that the officer delegated to finalise the details of the sale, the Council's Head of Corporate Property, and also the Director of Resources were  both very unhappy with the deductions, particularly the 'allowable expenses' referred to above. They clearly felt it was a private matter between the Scarlets and Henry Davidson Developments Ltd.

It also appears that success was assumed with regards to the planning permission throughout the negotiations, and that any conditions would be 'acceptable'.

The final email in the correspondence refers to a phone call made by the Chief Executive of the council to the Head of Corporate Property in which he appears to have given instructions that the deductions referred to above were to be approved.

To put it bluntly it seems that despite the best efforts of the two senior officers to act in the public interest and safeguard public funds, they were overruled at the last minute by the Chief Executive and the sale was agreed in which the Scarlets, rather than the public, were favoured.

I think my complaint is best illustrated by the Freedom of Information response itself which is publicly available on the What Do They Know website, the final responses are to be found at the end of the page;

If you require further information I am happy to help.

I am also copying in this complaint to Mr Anthony Barrett, the Appointed Auditor and my Assembly Member, Rhodri Glyn Thomas as I believe it is of importance.

I'd be very grateful if you could briefly acknowledge safe receipt of this complaint,

Your sincerely

Mrs Jacqui Thompson"

Response from the Wales Audit Office to me November 2014;

"Dear Mrs Thompson

I refer to your email to Huw Thomas, the Auditor General, dated 17 April 2014 in which you raise concerns about a financial transaction between Carmarthenshire County Council and Scarlets Regional Rugby over the sale of a car park to Marstons' Inns.

Your email sets out your concerns about a number of deductions that had been made from the sale proceeds in favour of the Scarlets, in particular one which enabled them to repay a third party loan they had. You also raised concerns about the role of officers in reaching the settlement.

I have examined your concerns and considered the key documentation in relation to the disposal. My staff have also held meetings with key officers in the Council, as well as a meeting with the District Valuer, who was responsible for establishing the final apportionment of the proceeds of the disposal between the Council and the Scarlets.

I can understand the concerns that you raised, as it did appear that the council had received an insufficient proportion of the sale proceeds. However, having examined all the information outlined above, I am satisfied that the council acted properly and reached a settlement which was based on an independent valuation and apportionment of proceeds which was negotiated by the District Valuer, who was acting completely independently of the Council.

Based on the information we have seen, I do not have any significant concerns about the internal processes that the council followed, in particular the role of its officers, in finalising the settlement.

Finally, there has been a delay in us responding to you on this matter as the EU Commission took some time to make a decision on whether the Scarlets had received unlawful State Aid from the Council. On 2 October 2014 the EU Commission confirmed that they had looked into the complaint and they would not be pursuing the matter further.

On the basis of the above, I do not propose taking any formal audit action against the council. Thank you for bringing this issue to my attention,

Richard Harris
Engagement Lead, Wales Audit Office."


Anonymous said...

All I can say is the W.A.O. got it wrong and have undermined their credibility. Accounting sleight of hand trumps public service ethics, common sense and fairness. To me, the decision to accept this state of affairs makes the Audit Office look very weak.

Anonymous said...

Anon, we can only assume the Welsh Audit Office saw all of the evidence and found nothing illegal.

caebrwyn said...

Anon 19:02
A quote for County Hall; "You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time".

Anonymous said...

From past experience with the WAO - the pre-Anthony Barrett times - I suspect this is the old way of doing things, i.e. with the minimum of boat-rocking/confrontation, and clutching at any argument that says "everything's fine". Jacqui - you have previously posted Mark James's quote regarding his/CCC's "persuasion" of WAO that all was well on earlier issues. A link or re-quote would be good. Whatever readers' opinions are of the aforementioned individual, I doubt that there can be any disagreement that he has an incredibly strong, probably frightening, character - and a will of iron. I believe he exhibits the "psychopathic" traits of a modern and successful boss. He certainly appears to have a Svengali influence over councillors, if not colleagues. We can only guess at what happened with the original briefing (instruction?) of the District Valuer by CCC. For the WAO's opinion to be propped up by the fact this individual was "acting completely independently of the Council" smacks to me of a fear of creating a further CCC backlash.

caebrwyn said...

Anon 12:57 Thanks for your comment, I agree entirely.
The quote you refer to was at the September 2013 full council meeting. Mr James said that if there was a disagreement with the Wales Audit Office, once they'd had a word, they (the WAO) usually changed their minds. Says it all.

Anonymous said...

- perhaps you can ask the Chairman/Chief Exec of Marston Pubs - why did he not obtain a better deal for his shareholders if the council were willing to part fund a commercial company [scarlets] but not another [marstons] - discrimination by the Council surely - one for Private Eye to look into under "Rotten Boroughs"?