Trial by Jeory

One of the first documents leaked to me at the East London Advertiser was a report that Tower Hamlets council, then led by Michael Keith, had deemed too confidential and sensitive to be scrutinised in public. It was a discussion paper that was to be debated in cabinet only behind closed doors because it allegedly contained matters of a “commercial nature”. The subject? Rich Mix.

I reported its contents in this article for the ELA in January 2006, four months before Rich Mix was due to open [legal note: the family mentioned in the other story contained on that page was later cleared of benefit fraud]. I’m also pasting the article below:

SERIOUS concerns have been raised about the financial viability of a major new national arts centre that is due to open in the East End later this year.

The Advertiser has obtained a secret report revealing that the Rich Mix Cultural Centre, which is being built in Bethnal Green Road, needs extra taxpayers’ help to meet soaring costs. Tower Hamlets councillors have been asked to top up loans to the project and some are now deeply worried the borough’s £3.5m investment in the £26m centre is at risk.

They are angry that costs have spiralled and are concerned more money is being sucked into what could become a huge white elephant draining the public purse for years to come. One councillor has branded the project ‘scandalous’ and a ‘bottomless pit with no proper business plan’. But his claims have been angrily rejected by the centre’s bosses.

The prestigious arts complex, whose board members include former Bethnal Green and Bow MP Oona King, is seen as crucial for the regeneration of the deprived area around Brick Lane. Concentrating on ethnic cultural projects, it will house BBC London, a three-screen cinema, art galleries, a Sunday market place and music and dance studios.

Ms King dubbed it the East End’s ‘very own Tate Modern’ and it is Mayor Ken Livingstone’s flagship arts project.

With most of the six-storey structure completed, designers are currently working on the internal fittings with the centre due to open in the spring. However, the project, run by the Rich Mix Cultural Foundation and funded by backers including Tower Hamlets council, the Arts Council, the London Development Agency and the Millennium Commission, has been dogged by delays and cash problems.

A new management team was put in place last year and since then cost controls have improved markedly, but some councillors still fear a future financial crisis.

It is expected that by the time the centre opens, Tower Hamlets taxpayers will have paid into it some £3.6m. The council has also pledged a further £300,000 to contribute towards the annual £4.6m running costs in the first three years of operation.

Bosses at the centre are currently trying to attract sponsors but if crucial income from the centre’s cinemas fails to materialise, a council loan of £850,000 could be at risk.

In a confidential report for last week’s council cabinet meeting, Chris Holme, head of resources, wrote: “It will take robust cost and income management to prevent the centre falling into deficit on an annual basis.

“Failure to generate levels of income identified will have a significant impact on the sustainability of the centre.”

However, Lib Dem councillor John Griffiths said: “The whole thing makes me want to cry. Because the foundation itself is the accountable body for the project, there’s no proper scrutiny of the spending. They keep coming back to us asking for more money, but I’m really worried we’re walking right into a debt trap here.”

But Nick Kilby, chief operating officer for the centre, described the councillor’s remarks as political posturing. “There are no substance to them at all. This is a well-run project, costs aren’t out of control and there is no crisis. This is a terrifically exciting project and we look forward to persuading the councillor how it will benefit the East End.”

Note the language: “it’s a well-run project, costs aren’t out of control”…and Oona King’s modest description of Rich Mix as the East End’s “very own Tate Modern”. And note the prescient warnings from a certain John Griffiths.

Four months later, Oona invited me for a tour of the centre on the day it opened (or rather, part-openened because only a third had been completed) in May 2006. One of the photographers with us noticed something odd about the wallpaper: among its patterns were a series of sketches of a black gangster pointing a gun at a white woman’s head. When I pointed this out to Oona, her face was a picture worthy of its own wallpaper: she was mortified. This wasn’t appropriate, she said; this was not the message she wanted the centre, a celebration of diversity, to be sending out.

But why was it there? Because Keith Khan, an artist who had been involved in the opening ceremony of the Commonwealth Games in Manchester, had been appointed chief executive by the Rich Mix board, of which Oona was chair. Oona told me she and Keith were personal friends. That night, Keith phoned me. He was in tears and begged us not to run the wallpaper story. I told him that Oona wanted the paper removed and it was a matter of public interest. After all, the centre had been built with some £26million of public money and that thousands of that cash had gone on buying trendy wallpaper from luxury designers Timorous Beasties.

The article we ran, which contains a photo of the wallpaper, is available to see here. But here’s how Keith defended his decision at the time:

“I passed the wallpaper by the board and they were OK with it. I will not bow to McCarthyism. I do not condone the violence in its imagery, but people have to deal with London. It reflects London and not a sanitised version of it. I want to promote the independence of young designers. What I like about it is that they’ve created a very white working class appeal. There’s aggression in the design, but we turn on the television every day and see far worse images. The design is the voice of young people. I’m interested in that working class / middle class crossover and it appeals on that level.”

Was his the voice of an artist given the dream job of spending other people’s money, or the one of a stringent cost-controller? The dire state of the centre’s finances suggested very much the former. Within a few months, he and board member Michael Keith had fallen out and Khan went on long term sick leave with stress. He finally negotiated his departure in February 2007 and three months later, seemingly fully recovered, he was hired as ‘head of culture’ for the 2012 Olympic Games! Private Eye reported on it at the time, I seem to recall.

With a lovely symmetry that his artistic designs are famed for, Keith is now a board member of Arts Council England. The Arts Council, you see, is the Rich Mix’s biggest funder, having put in £6.3m as capital and hundreds of thousands more to keep it running.

In fact, soon after Keith left in early 2007, the Arts Council was so concerned about its investment that it sent in a special hit squad of investigators to assess whether to award more emergency funding or just simply pull the plug and call it a day.

Its eventual decision to carry on came as the following report was collectively agreed by the council’s cabinet in March 2007. [By this time, Michael Keith had lost his seat on the council and the town hall was being led by his close friend Denise Jones, who is also a Rich Mix board member. But look who else was in the cabinet…Lutfur Rahman (as the lead member for Culture, no less), Sirajul Islam and Helal Abbas! All three of them, along with Michael, candidates on the Labour shortlist for mayor.]

Here’s a couple of extracts from the report they all agreed that day:

Following a re-modeling of business plans by the Foundation, officers are assured that the financial position for this year has been stabilized. Business projections have been produced to show how the Centre could achieve a break-even position within three years.

Rich Mix have updated their business plans and developed a new model taking account of the first six months of operation, reduced costs and amended its development programme accordingly. It will take ongoing robust cash-flow, cost and income management to ensure sustainability.

Note the words “robust”, “break-even”, “stabilised”.

By October 2007, when Rich Mix came begging to the council for more help to shore up its position, Abbas and Lutfur Rahman had left the cabinet – and now Shiria Khatun (yes, another candidate for mayor!) was lead member for Culture.

Here are a couple of extracts from the report which that cabinet agreed:

Rigorous project management arrangements have helped mitigate risks of project and cost overruns.

All major funders are in agreement that the revised business strategy provides a firm base for Rich Mix’s development.

Well, the upshot of that “firm base” and “rigorous” cost control and revised business strategy was, as we know, near financial meltdown. Here’s a couple of extracts from the report passed by the council’s strategic development committee on Monday night when only Labour councillor Shahed Ali voted against handing the centre £500,000 of free money:

Rigorous income monitoring processes are now in place, setting weekly targets for a range of operations, including cinema, catering and events. These processes allow for greater levels of accountability and enable management to target areas of underperformance. Monitoring for the first two months of the current financial year suggests that target setting is robust and achievable.

Loss-making catering operations have been restructured significantly and elements of the food offer have been stopped. This allows the catering operation to focus on those elements that are generating a surplus. The changes to the catering operations are expected to generate a greater level of surplus in 2010/11.

All sound a bit familiar?

Yes, councillors were in a tricky position on Monday night: without the cash, Rich Mix might well have gone under and the council would have been at risk of losing much of its £3.6million investment. But it has been the total lack of proper scrutiny by Labour councillors which caused the mess in the first place.

Remember the name John Griffiths? Until 2006, he was a councillor and deputy leader of the Lib Dem group. He warned against the folly of Rich Mix from the outset. He’s also likely to be the Lib Dem candidate for Tower Hamlets mayor in October. Unlike most of the Labour lot (except John Biggs and Rozna Mortuza), he seems to have a pretty good track record on this…exactly the sort of person capable of running our borough perhaps?

Over the next few days, I’m going to post more on Rich Mix, particularly about the £500k gift, the £850k loan the council forgot about and the possibility of a legal challenge to Monday night’s decision.

I have a feeling that Rich Mix will be an election issue for October.