Tuesday 28 July 2015

Cabinet warned over 'dealing with a convicted fraudster' in Bridge Park development

Cllr Dan Filson, Chair of Scrutiny,  made a dramatic intervention in the discussion of the Bridge Park redevelopment at last night's Cabinet meeting.

He drew attention to a paragraph in the report about the Council's development partners:
General Mediterranean Holdings SA and Harborough Invest Inc are both in overseas ownership and not registered at Companies House, As such the process for carrying out financial checks on these companies cannot be completed in the normal manner and the required financial information in an appropriate format is awaited. Finalisation of negotiations and entering into Heads of Terms with these companies will be subject to confirmation of satisfactory financial standing.
 Filson pointed out that the companies were not registered at Companies House but instead were overseas registered, a Luxembourg Holding Company and the British Virgin islands. This meant that the usual financial checks could not be carried out.

The founder and chairman of General Mediterranean Holdings is Sir Nadhmi Shakir Auchi. In 2003 LINK Auchi was convicted of fraud following his involvement in a $504 million corruption scandal centred on the French oil company Elf Aquitaine which Wikipedia says was described as 'the biggest political and corporate sleaze scandal to hit a western democracy since the second world war.'

Auchi was given a $2.8 million fine and a 15 month suspended jail sentence. Filson warned that the council is dealing with a 'convicted fraudster'.

Earlier Philip Grant had posted this comment on an earlier blog LINK:

As Martin suggests, this article did attract my interest.
When offshore companies are involved, that will always raise suspicions about who is really behind them, and whether tax avoidance may be involved, although in this case you can read a little about GMH on Wikipedia:-
'The General Mediterranean Holding (GMH) is a financial holding company established in 1979 in Luxembourg City, in southern Luxembourg, founded by Anglo-Iraqi businessman Nadhmi Auchi.
GMH is a diverse business group with activities in Banking & Finance, Real Estate & Construction, Hotel & Leisure, Industrial, Trading & Pharmaceuticals, Communications & IT and Aviation.'
The (publicly available) details do not say in which overseas territory Harborough Invest Inc. is incorporated, or resident for tax purposes.
By chance, I have come across GMH's "agent", Nick Shattock, before, when I was an Inspector of Taxes, and he was a director of Quintain Estates and Developments Plc (having previously been a partner in a firm of City solicitors). That information is on public record, and (of course) I cannot disclose anything which happened when I was responsible for dealing with the Quintain group's company tax affairs, because of Civil Service confidentiality.
As a (past) director of Quintain (the developer behind Wembley Park), it is likely that Mr Shattock has already had dealings with Brent's Strategic Director of Regeneration and Growth, Andy Donald. The report to Cabinet proposes that negotiations over the "deal" between Brent and GMH should be left in the hands of Mr Donald (as the "deal" with Galliford Try over the Willesden Green Library Centre redevelopment was).
I have written before about Andy Donald's philosophy LINK but it is worth bearing in mind this particular comment of his:
The decision makers are never going to read all that text. There is a massive disconnect between the decision makers and the officers.
Andy Donald was unwell yesterday but the decision makers, the Cabinet, went ahead and approved the Bridge Park report.

I had pointed out in my earlier posting that the Officer's report made the Appendix on the sliding scale of affordable housing restricted so that the public are unable to see it. Cllr Margaret McClennan said that the developers had offered 10%  (50 homess out of the 500 planned) against the Council's target of 50%. She said that Brent Council wanted at least 30%. Cllr Pavey said the despite the gain of a leisure centre and swimming pool officers should be pushing for a greater amount of affordable housing.

Cllr Mashari said that the Cabinet should not get so caught up in the detail of affordable housing that 'we forget the marvellous facility that Brent would get through the development.'

Questioned about the fear that the housing would be sold abroad as had  happened at the Willesden Green Library development Cllr McClennan said that the Council would demand that the homes be first marketed locally.

The Recommendations adopted by the Cabinet 'delegate authority to the Strategic Director of Regeneration and Growth (Andy Donald) in consulation with the Chief Finance Officer and Chief Operarating Officer to enter into negotiations, finalise and enter into a land sale agreement with General Meditteranean Holdings SA and Harborough Invest Inc.'

Asked about how any issues that might arise from the negotiations and financial checks would be dealt with the Cabinet were told that the lead member, Margaret McClennan, would be consulted.

The fear that several members of the public were left with was that, given the overseas status of the companies involved,  Brent might be able to do little to persuade them on the proportion of affordable housing and marketing front.


claremounties said...

It might be useful to 'Cabinet' to make themselves aware of the following:

Anonymous said...

Sir Nadhmi Shakir Auchi has a history of shadey deals with the Labour Party. ihttp://www.theguardian.com/politics/2001/may/27/election2001.labour1

Nan. said...

You certainly can't accuse the (wide) boys from Brent of lacking in ambition. Pesumably it is time to wrest the title for 'the biggest political and corporate sleaze scandal to hit a western democracy since the second world war.' from General Mediterranean Holdings...... and who more worthy? who better qualified? If the crown fits...........

Alison Hopkins said...

I think they're competing with Barnet for who can be the most bent. After all the word can be made from both Barnet and Brent, hm?

Anonymous said...

Even if the holding company for this international group (GMH) is a Luxembourg "SA" (that is, in translation, an "anonymous society", rather than a public company), surely you would register the subsidiary company for a property development in the country where that development was being built (that is, England)?

Unless, of course, you wanted to avoid proper financial scrutiny of the company, and possibly pay less tax than you should on the profits from that development; in which case you would register the subsidiary company in a small offshore tax haven, such as the British Virgin Islands.

In Article 2 of Brent's Constitution it says that 'All councillors will ... maintain the highest standards of conduct and ethics.' Is it ethical for the councillors on Brent's Cabinet to have authorised its senior officers to enter into negotiations to sell Council land to a company registered in an offshore tax haven?

Philip Grant.

Nan. said...

I think the briefing paper to councillors might have mentioned that a bit of reputational damage could be salvaged if they were seen to be dealing with a person who has conviction.........

Anonymous said...

Regular readers of "Wembley Matters" will know that I often share the views I hold with Council officers and councillors, as I believe that dialogue can be a useful thing (even if some of those I write to don't seem to agree with me!).

I sent my comment of 29 July at 19:59, asking whether it is ethical for Brent Council to be dealing with a company in a tax haven, to Cllr. Michael Pavey, the Deputy Leader who chaired the Cabinet meeting on Monday 27 July. Unlike some of his colleagues, Cllr. Pavey is willing to engage in dialogue, and (with his permission) here is his reply:

‘The article on Wembley Matters doesn't give a full account of the discussion. Cllr Filson made a series of excellent points. I imagine you've read the Cabinet report, so you'll know that section 4.6 states that "Finalisation of negotiations and entering into Heads of Terms with these companies will be subject to confirmation of satisfactory financial standing."

At the Cabinet meeting I sought specific legal advice on whether this point provided sufficient protection against the concerns raised by Cllr Filson. The legal representative stated that in his view, it did. Myself and my colleagues certainly had concerns on this front, but the legal advice was categorical. We will certainly keep an eye on this moving forward.

Martin quotes Andy Donald's somewhat derogatory comments about the decision makers not reading the papers. I certainly always read every single page of Cabinet papers and I know colleagues also prepare comprehensively. We have discussed Bridge Park in detail on many occasions and had a full discussion on Monday evening about issues such as trying to limit foreign ownership of the flats, the proportion of affordable housing and the sustainability of the new leisure centre.

I take your point on ethics and I for one am not comfortable dealing with companies registered in tax havens. Realistically though this is a much wider issue than this development. When you have companies like Starbucks, Amazon and Next routinely avoiding tax, it becomes difficult to hold this against any single company. We need national Government to lead a crackdown on legal tax avoidance and to insist on clearer transparency requirements. I don’t like dealing with companies registered in tax havens, but considering the size of the problem, I think the solution must come from the Government.’

If you wish to comment on Cllr. Pavey's reply, please set out your views in a reasoned and reasonable way - even if we disagree with councillors or Council officers, there is no point in abusing them. Thank you.

Philip Grant.

Dan Filson said...

I must say I was surprised that whilst mentioning the two companies involved were neither incorporated nor registered in the UK, the Cabinet paper did not mention that they were registered in tax havens namely Luxembourg and the BVI, nor that the leading shareholder in the holding company was a convicted fraudster. A quick Google search revealed this.

Possibly the council officers preparing the report felt these issues did not matter given the safeguarding phrase that the decision of Cabinet would be subject to meeting financial scrutiny (quite how these financial checks would succeed given that they had not succeeded in the months leading up to Cabinet was not made clear!).

The wider issue of the ethics of dealing with tax haven companies wasn't touched upon at all nor the fraudster angle. I understand Councillor Pavey's position that it needs government action to deal with tax haven companies (to say nothing of persons being company directors of overseas companies who, by my book, should be disqualified from holding any positions of trust in any company trading or owning land in this country).

However Brent can have its own policies; but what should they be here? The land south of the North Circular Road at Stonebridge Park has been a derelict eyesore for a couple of decades. Brent can engineer development here by intervention using such land as it has as a bargaining tool. If we take the ethical route and don't treat with tax haven companies will we get better or worse terms from other companies? Conceivably could Councillors be surcharged for not getting "best value" in a deal? Will any action happen on this site at all for another decade?

I don't know how I would respond on these issues. My disappointment was that no attempt has been made to address them before this particular decision came to Cabinet despite the identity of these 2 companies being known for some time, years even. So the Cabinet was obliged to agree to a deal involving these two companies without a financial appraisal in front if it and without a stated policy on dealing with tax haven companies. It leaves an unpleasant taste.

Councillor Dan Filson