Trial by Jeory

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:

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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