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Archive for July, 2014

Of all the many redacted documents released last week by Tower Hamlets council was a fascinating letter from the town hall’s “interim monitoring officer”, the Great Meic Sullivan-Gould (for he is indeed very great).

This dragon-slayer arrived at the council with, according to him, a stellar reputation in local government having served with a long list of the country’s finest councils.

The people of Cheshire West and Chelmsford are no doubt grateful for his Travelling Salesman services but for Meic, such praise wasn’t enough. He wanted a crack at the biggest crackpot of them all: Tower Hamlets.

So when the post became vacant in the New Year, having been vacated by Isabella Freeman and her interim successor Mark Norman, Meic offered to help.

He did his research, of course; he read The Telegraph, this blog and Private Eye’s Rotten Boroughs.

But why don’t we let him tell the story. Here’s his coquettish email to BBC Panorama reporter John Ware, which was released under FoI:

Interviews Interviews2

There are so many nuggets in here, it’s difficult to know where to start. For someone apparently so well regarded, he is a bit careless.

Forget for the moment his admonishment of Mayor Lutfur Rahman for his a “coup de theatre” (that’s a reference to the little game Takki Sulaiman and Lufur played at the outset of the mayor’s interview with John Ware when they handed the BBC thousands of documents requested two months earlier).

And forget his patronising dismissal of the journalism surrounding Tower Hamlets as “politically motivated” pursued by people “anxious to keep an easy but unfounded ‘Byword for sleaze’ story running”.

But do consider his dismissal of opposition councillors who he describes as “bitterly disenfranchised and largely impotent”. How neutral. You’ll remember he went further on the night of the Panorama programme by taking to Facebook to lavish praise on his boss, Lutfur. That little slip saw him banned from any involvement in the Election count, an astonishing state of affairs for the Monitoring Officer.

And another paragraph in that email might have similar consequences for an Overview and Scrutiny Committee meeting on July 22.

At that meeting councillors will be discussing a report by forensic internal auditors on the sale of old Poplar Town Hall.

Andrew Gilligan wrote about it on January 18 here. The building was sold in 2011 for £875,000 to a shell company called Dreamstar, which was established Mujibul Islam, who was a key ally of Lutfur in the 2010 mayoral election. Within months of that sale, the new owners secured under delegated powers a change of use for the building to a hotel.

Peter Golds and many others believed there was a whiff about it and demanded an emergency investigation by internal audit specialists at the accountancy firm, Mazars.

I don’t know why they bothered. Because on their books they already had the world’s best fraud hound.

You see, Andrew’s article a couple of days before Meic started work so he set about investigating it himself. This is what he told John Ware: “I have over the last few weeks reviewed the council’s files on specific property disposals and planning approvals and I have discussed the published concerns…As I told the people who have commissioned your work, I have found nothing to substantiate the concerns.”

Mazars’ final report has just been published here. It’s fascinating and I understand that Team Lutfur, while still of course maintaining clean hands, are furious at the council’s slipshod record keeping on something that was so obviously a hot potato from the outset. Ever so carelessly (ever so), the council has lost key documents and both Lutfur and Aman Dalvi, the council’s director of development, have “no recollection” of allegedly key conversations they are said to have had about the disposal.

The Mazars report should be read in full but as a flavour here’s a summary of their findings.

In March 2008, the council’s then cabinet (led at that time by Labour’s Denise Jones) declares the listed building surplus to requirements and orders officers to examine a possible sale.

In January 2011, three months after he was elected, Lutfur and his cabinet order an “accelerated sale” (between 2008 and 2011, the building had been used by Ian Mikardo school). Bankers from BNP Paribas then estimate it could fetch in those circumstances between £750-£950k. The cabinet decided against waiting for the property market to recover.

In May 2011, the property is marketed by BNP Paribas for six weeks.

In June 2011, 10 sealed bids are received, ranging from £876k in net present value terms to £350k. The Limehouse Project charity had offered £1.2m over 20 years, but that was worth £526k in real terms. All the other bidders were commercial enterprises and one individual. Among them was a £850k bid from Dreamstar.

On July 1 2011, Paribas write to bidders asking for ‘best and final offers’ by close of play on July 8 2011.

On July 11 2011, these best and final offers were opened in the presence of three council officers and two Paribas staff. Mazars find that neither the council nor Paribas have kept the official documents relating to the opening of the bids.

On July 11 2011, the best and final offer from Dreamstar arrives. It is three days late. And it has increased from £850k to £875k.  Mazars state: “The offer from Dreamstar was received late and therefore does not comply with the council’s procedures.” Mazars asked why the bid was accepted for consideration and the council said it would have been ‘remiss’ not to have done so. The council claimed Dreamstar had told them they would be submitting a new bid and that they’d posted it on July 8… . Mazars add: “In addition to accepting the late bid from Dreamstar, we would note that the offer from Dreamstar was not the highest received and therefore the council, by not noting the reason for its decision not to accept the highest offer, has not followed its own policy in regard to accepting the highest offer either.”

On July 12, BNP Paribas advise the council to tell Mr X he is the highest bidder with £876,000 (subject to survey). They suggest telling him to prove he has the finance. They also recommend telling Dreamstar “they have been unsuccessful [and] to focus their attention on Limehouse Library”. They advise naming three other parties they are the “underbidders” in case Mr X fails to come up with the goods.

Throughout August a number of emails bounce back and forth within Aman Dalvi’s team. They are concerned that council delays might cause some bidders to withdraw interest.

On August 24, the council’s “head of valuation and estates” emails Aman to say “the range of returns [ie bids] is very narrow, which looks a bit odd to be honest”.

On August 25, the council’s Capital and Asset Management Board meets (although Aman is not present). The minutes state: “..there will be progress on this [Poplar Town Hall] after [Aman] has met with the Mayor today.” Mazars state: “We spoke to [Aman] who said he was not sure what this reference was made to, and reiterated that he was not present at the meeting when this point was minuted and that he had no recollection of speaking to the mayor in regard to this matter.”

On September 8, the council’s head of corporate property emails Aman Dalvi to say because the bids from Mr X and Dreamstar are so close (£876k vs £875k), they should be invited to a “contracts race” to see who can get to exchange of contracts first.

On September 14, Dreamstar is registered and incorporated at Companies House.

On September 15, Aman emails back to agree the approach.

On September 15, a note is placed on the legal file regarding the contracts race. The note is written by the “Council Solicitor”. It is not known whether this is Isabella Freeman, although the word ‘he’ in the following statement suggests not. The note states: “I said ‘My heart sinks’. How can we possibly have a race for property of this type which we are selling off on a long lease? It’s bound to end in dispute and litigation, all that needs to happen is for one of the buyers to say that that [Council Solicitor] in your legal department sent something out to the other side 24 hours before he sent it to us. However, [Asset Manager] is only doing what he is told, this has come from the Mayor. [Head of Asset Management and Valuation] was listening in and obviously volunteered to take over, so I spoke to him and expressed my doubts, which he didn’t really share, saying he had done contract races before when he was at Lewisham. He said he had made it clear in his report that £876 beats £875, and Aman agrees, but it has come from the very top…”.

On September 20, BNP Paribas invite Dreamstar and Mr X to a contracts race.

On September 29, Dreamstar win the race and contracts are exchanged.

On November 11, sale completes.

On December 6 2011, Dreamstar formally asks the council’s planning department for a change of use and listed building consent on the property to make it into a “boutique hotel”.

On July 3 2013, change of use is granted. Mazars are told the decision was made under delegated powers (rather than go through a publicly held committee) because the application didn’t  trigger 20 or more objections and it didn’t meet various other criteria for that to happen.

Mazars in their final report are at pains to stress that the “sole purpose of this report is to assist the council in deciding what further action it may wish to take in this matter”.

In the event they make six recommendations:

1. “The council should locate the original bid opening sheet to examine what comments were made by officers at the time of the opening and identify what consideration was given to the bid from Dreamstar.”

2. The council should examine what legal advice it sought about accepting Dreamstar’s late bid.

3. The council should consider further interviews with staff and/or members to investigate the matter.

4. Council should consider whether another internal audit of its fixed asset sale processes is needed.

5. The council should consider whether potential buyers of council assets should be provided to make a declaration about any relationships with council members or staff.

6. Council should review the processes for deciding whether such change of use matters should be carried out under delegated powers.

All in all a murky mess.

Dreamstar’s original bid was below the highest bid of £876k. A council officer says the “narrow range” of bids looks “odd”. Dreamstar’s revised bid (after the original bids are opened) increases from £850k to £875k, but it is received late…against the council’s strict rules. Yet it was accepted. The council says it had a duty to secure value for taxpayers.

Crucial paperwork is missing. A council lawyer reports being told that a decision to trigger a contracts race between Dreamstar and Mr X came from Lutfur. Neither Lutfur nor Aman “recall” having any such discussion.

There may well be a series of cock-ups in here that give the perception of conspiracy. But it certainly doesn’t look good and it seems a council lawyer was so concerned they left a potential bombshell of a note on the legal file. That lawyer no longer works for the council but they might be called back to explain themselves.

But then again, we all know that would be a waste of time because Meic has already determined there’s nothing to worry about.

 

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It’s probably a legacy from my days as a member of the “accountants’ union”, but I’ve always had a respect for the worker bees in Tower Hamlets council’s over-stretched finance department. They do a difficult job in very tricky circumstances and they have to deal with all manner of politics from members and senior officers.

But they probably  won’t thank me for highlighting this piece of legislation that may well add to their workload.

Under the Audit Commission Act, every council must for a four week period throw open its books for public inspection. It’s a fabulous piece of legislation that pre-dates the Coalition’s equally excellent transparency agenda. But curiously enough you won’t find any feature about it in the £1.5m pages of East End Life.

Tower Hamlets council, like most other authorities, aren’t that keen for people to know about. However, they are required by law to place a public notice in a local paper advertising the dates when the inspection takes place in a particular year. This year’s advert, for the financial period April 2013 to March 2014, was placed in the back pages of East End Life on June 9…nine pages after that week’s restaurant review, for which a council worker was handed £40 for a nice meal.

Here’s the advert:

Inspection Advert 2013-14

Under this legislation, anyone can ask to see the details of any transaction during the financial year in question. This includes seeing copies of any contract, purchase order or invoice or other supporting documents.

So, if you were so inclined you could ask to see all transactions made for restaurant reviews in East End Life during 2013/14. You could ask for a list of all payments made for these reviews and view all invoices submitted by external contributors or expense claims submitted by staff.

Some issues might still be subject to confidentiality clauses. For example, you won’t be able to ask for individuals’ salaries. You can ask for all salaries in a particular area but you won’t see names attached to them. The Data Protection Act still applies.

However, this legislation allows for far more transparency than the both the Freedom of Information Act and the lists of payments to suppliers that councils must now publicise. So it gives us all a chance to have a look under those redacting pens.

For example, you’ll remember from this post here that when I asked under the FoI Act recently for the invoices submitted by the Champollion PR agency for its work combatting the Panorama programme, the council sent me this:

Panorama Champollion Invoices3

 

 

Under the Audit Commission Act, those black pen marks will have to be removed.

The Act is a potential gold mine of information, but you only have until July 28 to submit questions and follow ups. If you ask for information before then, the council must answer it even if that answer comes after July 28. However, the earlier you ask the questions the better.

And a plea (for the sake of the accountants), be wise and judicious in what you ask for. Fishing expeditions are of course allowed but try to narrow your searches and questions. Think about what you want. For example, you might want to see a summary of all expenses submitted by officers and councillors for “entertaining” (councillors rarely submit such claims by the way). From that summary you might want to drill down into something by asking for copies of receipts for a particular meal. Which restaurant, what did they eat and who did they entertain?

You might want to ask for copies of invoices submitted by a particular consultant or contractor.

It might be a good idea to discuss on this blog what you or someone else might ask. Let’s co-ordinate questions.

For my side, I’ve submitted an early batch of questions on Champollion, the lawyers Taylor Wessing and East End Life’s accounts. I’ve also asked for copies of invoices for Mayor Lutfur Rahman’s chauffeured Mercedes in the period.

And I’ve also asked for any payments made to The Society of the Golden Keys during the year. What’s that, you ask? In March 2012 (I saw this some time ago, but had forgotten about it), the council’s communications department paid the Society £800 for membership fees. I was told it was on behalf of Takki Sulaiman, the £100,000 a year head of communications. I was told he attended dinners/events with the society.

Here’s more about the Society, which is a membership group for hotel concierges in Britain.

The Society of the Golden Keys in Great Britain is thriving. With strict conditions of membership requiring proof of professional relationships with guests and work colleagues, approximately three hundred and thirty concierges in Great Britain now proudly wear the symbol of their status: the Golden Keys lapel pin. Each is revered for his or her professional gravitas, integrity, local knowledge and impeccable recommendations. The Society encourages friendship and camaraderie and the members meet formally each month. The Ladies’ Night Dinner and Dance and the Anniversary Cocktail Party are the social highlights of the year for many of the leading figures in the hospitality industry, as well there are many other events which the society of the Golden Keys help to promote.

The council told me it was important to have membership to boost tourism in Tower Hamlets. Perhaps it does. But it’s only fair that taxpayers know, and that’s what the Act allows.

 

 

 

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There is an argument that the presence of Ukip on the mayoral ballot paper in May helped secure a victory for Lutfur Rahman. Their candidate, Nick McQueen polled some 4,400 votes, a significant proportion of which might otherwise have gone to Labour’s John Biggs.

I don’t really buy that argument but I think even Lutfur’s camp are glad he ran.

What I do think is more likely is that Ukip’s presence in yesterday’s by-election cost the Tories two of their three seats in Blackwall & Cubitt Town.

Here are the results:

LBTH BCT results

The turnout was low and some remarked there were more police and observers from the Electoral Commission than voters at the polling stations yesterday. The count at Anchorage House was, by all accounts, far more controlled than last time, which isn’t saying much.

And it finished at 3am, after two recounts. After a fair amount of confident boasting by some in Lutfur’s camp, his Tower Hamlets First candidates came nowhere close.

The recounts centred on two of Labour’s candidates and Chris Chapman from the Tories. As you can see, only five votes separated second from fourth. At various points, Labour’s Candida Ronald was ahead of party colleague Anisur Rahman, then fortunes switched and finally settled on Candida.

Congratulations to the three winners and particular commiserations to Gloria Thienel who was regarded well as a councillor in the last term. I’m fairly sure that the 200 odd votes picked up each by the Ukip slate cost her a seat.

But that’s democracy. Whether Ukip continue to challenge and engage in council meetings from the public gallery remains to be seen.

And this is how the chamber now looks: Labour 22 seats; Tower Hamlets First 18; Tories 5.

Labour needed 23 for a controlling majority in the chamber and that would have been significant. As things stand, unless Labour are able to persuade Tory boss Peter Golds to defect., we’re probably in for four more years of dysfunctional politics and council business.

I think it’s unlikely Lutfur will be able to entice five Labour councillors to defect. And I think it’s likely that the Tories will join Labour on various votes, but probably not as many as the last time.

Significant matters to resolve include what to do about the vacant chief executive’s position. That’s down to vote of the full council. Team Lutfur will not have their way on that.

And as I’ve said before, having a strong chief executive in place is going to be key in stabilising the council. I think Eric Pickles and co also believe this. And I wouldn’t be surprised if that’s what PwC recommend.

 

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By Sadia Ahmed, 13, of Swanlea School in Whitechapel (and formerly of that other great incubator of current talent, Hermitage Primary School in Wapping)

This is the blurb on YouTube:

SLAMbassadors UK is the Poetry Society’s national youth slam championships, and the longest running youth slam in the country. Students work with top spoken word artists to create their own pieces around the theme of ‘identity’.

Swanlea School in Tower Hamlets worked with poet Joelle Taylor as part of the Tower Hamlets programme, supported by the Tower Hamlets Schools Library Services.

The national finals will be held on October 31 in the Clore Ballroom of the Royal Festival Hall, and feature Kate Tempest. http://slam.poetrysociety.org.uk

 

[Normal service resumes tomorrow with the results of the Blackwall & Cubitt Town by-elections.]

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SEE UPDATE BELOW FOR EXTRA LETTER FROM PwC to DCLG

You’ll probably have heard by now (as I predicted here eight days ago) that Tower Hamlets council is filing for a High Court judicial review of Eric Pickles’ decision to send in PwC to inspect their accounts.

They announced their move yesterday, the day after Eric stood up in the Commons to tell MPs the council had caused a “considerable delay” in the inspection by failing to provide documents.

The full grounds for the council’s court action aren’t (as far as I’m aware) yet publicly available. Lutfur Rahman’s team (advised and encouraged by interim/consultant monitoring officer Meic Sullivan-Gould) believe they have a good case, although they haven’t yet laid it out.

The writ will become publicly available soon enough, but all we have to go on at the moment is a letter written by the Mayor to Eric Pickles yesterday. And that seems to focus on the costs of the audit, which the Government has estimated at about £1million.

That £1million will be borne by Tower Hamlets council, presumably regardless of the outcome.

So you can see there is a game of very high stakes poker here…and it’s not just limited to the politicians. Remember who wrote to the council’s Macavity Cat head of paid service Stephen Halsey in the first place? Answer…Sir Bob Kerslake, who is not only the permanent secretary in the Department for Communities and Local Government, but also the Head of the Civil Service itself.

If LexLutfur/Super Rahman wins, both Eric and Sir Bob will have some pretty serious explaining to do to Parliament. Which is partly why the DCLG said it would “robustly” contest the judicial review yesterday. Another simpler reason might be, of course, that Sir Bob strongly believes the decision was correct.

That said, I thought it would be useful to highlight here in one place all the publicly available correspondence on this issue.

Here are the letters from April 4 from Sir Bob to Halsey and from the DCLG’s Helen Edwards (in charge of the Localism section) to Will Kenyon, the partner at PwC:

bob kerslake, tower hamlets BK to SH 4 April2 PWC - Appoint finalPWC - Appoint final2These letters outline the scope. They say DCLG has received documents suggesting poor governance and suggesting possible fraud. They say PwC has had an initial review and further investigations are recommended. They say a file has been passed to the police and that the Panorama programme on March 31 has also raised further concerns. They say the inspection’s scope will relate to grants, transfers of fixed assets, the council’s publicity, and the way the council enters into contracts.

On the file to the police. We know the Met announced in May that it found “no new credible evidence of fraud”. But those files in DCLG’s possession did contain evidence of possible fraud in relation to the council’s dealings with the Brady Youth Forum. We also know that the council was aware of that alleged fraud in January (following a report by internal auditors Deloitte) but that was only reported to the police TWO months later AFTER Panorama started asking the council questions about it. It’s a good bet that PwC are asking why.

On the Panorama programme. I’m not sure Sir Bob is right to say that Panorama in its broadcast alleged “possible fraud”. It didn’t mention fraud at all. It questioned Lutfur’s governance.

On the scope of the audit, the areas look fairly clear to me, although I can see why the council might be arguing vagueness in relation to the way into enters into contracts. That said, without the keys to those doors, PwC would be pretty hampered.

On costs. Sir Bob tells the council it must pay PwC’s “reasonable fees”. Reasonable is a term loved by judges and lawyers and it means what it is. PwC isn’t allowed to lengthen the investigation merely to inflate its fees. And would it be reasonable to (as the council suggests) place a cap on PwC’s costs? PwC will go where the evidence takes them so this might well explain the frustration felt by council officers at having to produce yet more files as well as overseeing the “excellent” everyday services the council carries out.

Which brings us to the next set of letters.

*UPDATE: Thanks to Mark Baynes of the Love Wapping blog for highlighting this next letter, which I missed from the original post here. It’s a letter from Will Kenyon at PwC to Paul Rowsell, a senior director at the DCLG. In it, Mr Kenyon outlines the delays and gives examples of missing information. It’s a very useful insight into the kinds of questions being asked and paperwork sought. It’s a mind-numbing task and helps explain why auditors are paid so well… . One of the questions appears to relate to an advert placed with five Bengali TV stations, including Channel S, which was later censured by broadcasting regulator Ofcom.

 

140630_-_PwC_to_PR_final

140630_-_PwC_to_PR_final2

140630_-_PwC_to_PR_final3

140630_-_PwC_to_PR_final4

[No doubt, the auditors will also have come across this other example of procurement in Takki Sulaiman’s communications department, ie when in 2012 a botched deal to put up banners of the Mayor was given to Fortuna Associates, a consultancy run by Chris Payne who had a few months earlier been a mate of Takki’s as the head of advertising for East End Life.] /END UPDATE.

Here’s the letter from Paul Rowsell at DCLG to Stephen Halsey on Monday, June 30.

140630_-_Paul_Rowsell_to_SH_-_final_Page_1

140630_-_Paul_Rowsell_to_SH_-_final_Page_2

This expresses disappointment at the delays caused by the council. It also uses some alarmingly strong language about “material” affects on the “future circumstances at Tower Hamlets council? Is this a first indication/warning that some central government intervention and control is being planned? (The Mr Holme referred to is Chris Holme, the director of finance at the council.)

And this is Lutfur’s letter to Eric Pickles in response yesterday:

Letter to Rt Hon Eric Pickles - 1 July 2014_Page_1

Letter to Rt Hon Eric Pickles - 1 July 2014_Page_2

Just as Eric Pickles may have tried to make some political capital out of the delay to the audit in the Commons on Monday (by triggering suggestions the council was withholding documents, when the reality could well be they just can’t find them quickly enough, or they don’t exist), Lutfur, too, goes down that route.

From his letter we learn there has been a series of other unpublished letters in which the council has been complaining about justification, scope and costs. The great champion of public scrutiny and transparency that is Tower Hamlets council and its mayor say DCLG hasn’t been transparent and that it has failed to answer questions. I think that may have caused one or two ironic giggles at DCLG.

However, on the substance…Lutfur is entitled to ask about costs and cost controls. It would seem unfair if Tower Hamlets council taxpayers were to pick up the tab for any failed governance by its politicians and officers, or none at all. If the PwC report gives a clean bill of health, then surely there must be a clawback from Whitehall. If the report is damning, Pickles would be wise to say DCLG is picking up the tab as he installs emergency measures at the council. Either way, the residents in “one of the most deprived communities” in the UK (as Lutfur says) should not be penalised.

I’m also puzzled why Lutfur has been persuaded to insert into his letter absurd references to “10 million” items of data requested by the PwC. It sounds like a cheap line concocted by interim officers and communication chiefs. Maybe someone should FoI how they calculated 10 million and how long that exercise took them. As Cllr Andrew Wood, an accountant, pointed out here yesterday:

As a qualified acceptant who has been audited many times by PWC, I agree the 10 million separate data items is complete rubbish. There might be one request to provide all invoices paid by the council over the last year which might generate one spreadsheet with millions of cells but downloading it from any normal system only takes maybe a few hours or maybe an overnight batch run.

Takki and co may think this is a headline grabbing line for some press outlets, but it makes the council and the mayor look stupid.

As for what happens next…the council’s writ will be lodged and heard before a judge imminently.

And in the meantime, DCLG will continue its contingency planning. One thought: Tower Hamlets council is still without a chief executive; if the PwC report does come back with major failings, it would seem a perfect opportunity for him to install one. The last time he did that was in 2011 when he approved no-nonsense Jo Miller to run failing Doncaster Council.

Granted, there were much bigger service failures at Doncaster but there were similar dysfunctional politics to Tower Hamlets. Jo is highly regarded in Whitehall and many think she has turned the council around. When her job is done there, might Tower Hamlets be her next challenge?

 

 

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