Brent Cabinet 'thrilled' by land deal with off-shore companies

A Cabinet meeting tonight, which devoted about 3 minutes to each item on the agenda, approved the Council's controversial Stonebridge-Bridge Park land deal with off-shore companies.  The Lead Member for the issue is Muhammed Butt, Leader of the Council, who now appears to be leading on Regeneration, and he spoke glowingly of the project, the removal of the 'eye sore' Unisys and the opportunities it offered to the Council.

In a rushed but stumbling speech Cllr Butt claimed that the off-shore risk was mitigated by  the creation of a UK subsidiary company by the off-shore GMH with off-shore Harborough Invest acting as the second guarantor.

The issue was covered by the Kilburn Times LINK today as well as by Wembley Matters LINK a week ago but this stimulated no questionning by any members of the Cabinet and Deputy Leader Margaret McLennan outdid her leader in euphoria declaring that she was 'thrilled' by the deal. No questions were asked and no discussion took place before the proposal was rubber-stamped.

For 'those who have eyes to see' there were plenty of between the lines reservations in the report from Officers and I have heard the Cabinet's decision described as 'ill-advised rather than illegal'.

All other business went through without any discussion apart from expressions of mutual admiration from  Cabinet members.

The Scrutiny recommendations on the controversial Sustainability and Transformation Plan (a cover for cuts or a brave new integrated world) were about process rather than content and were approved:

1. An update be provided to the committee on the OnePublic Estate, including an update on the Central Middlesex and Willesden Hubs.

2. Efforts be made to engage with health scrutiny across north-west London with regard to the Sustainability and Transformation Plan.

3. Consideration be given to collaborative work with Healthwatch groups to support engagement around the Sustainability and Transformation Plan.

4. A regular progress report on the Sustainability and Transformation Plan be provided to the committee, the first of these to be provided six months from the date of the current meeting.

There was no discussion on the One Public Estate Plan where the position of voluntary organisations being charged market rents for use of NHS Estate's property has caused much consternation in the sector. Muhammed Butt is also the Lead Member on this issue.

The Budget Task Group's recommendations would be 'taken into consideration' and Cllr Southwood promised dialogue but made no promise on the Task Group's opposition to bulk collection charges.

Cllr Mitchell-Murray, lead member for Children and Families sent her apologies to the meeting LINK. Muhammed Butt took over her role in December with the Council stating that she hoped to retrun in January 2017.

New lead member for Regeneration, Cllr Shama Tatler was present and seemed extremely happy to be at the top table but made only a very minor contribution. The demarcation between her role and that of Muhammed Butt, which led to the conflict between Butt and Cllr Mashari, still seems unclear.

Brent Council, tax haven companies and an alleged fraudster - Cabinet business item

Despite warnings about dealing with off-shore companies by the late Cllr Dan Filson and Philip Grant in July 2015 LINK the Cabinet is due to back a deal over the three parcels of land that make up the proposed development at Bridge Park whcih includes a replacement Sports Centre, a hotel and housing.  The companies are General Mediterranean Holdings (GMH) and Harborough Invest Inc.

Filson pointed out that the companies were not registered at Companies House but instead were overseas registered, a Luxembourg Holding Company and in 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'.

The Guardian has alleged that Auchi has links with the Labour Party. LINK

After an account of the Cabinet meeting appeared on Wembley Matters Clr Filson made a comment about the Cabinet discussion, part of which read:

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.

The new Cabinet briefing states LINK: 

The report provides an update and seeks approval to enter into a Conditional Land Sale Agreement (CLSA) with the “Purchaser”, a UK-registered subsidiary company that has General Mediterranean Holdings SA (GMH – a Luxembourg-registered business) as the parent company and Harborough Invest Inc (a British Virgin Islands based business), who already own part of the development site as the second guarantor of the Purchaser’s obligations under this CLSA. 


As detailed in the body of the report, officers from Brent have undertaken detailed negotiations with GMH to establish if the possibility for Brent to take a greater part in the development, and to share in the financial rewards beyond the capital receipt for the land. Unsurprisingly, GMH and their partners would see another equity investor as further complicating a project that has already been in gestation for longer than expected. It is also possible that the partners would see another equity investor as unnecessarily diluting the financial returns that can be made from the development. 


As the Purchaser is a newly-created subsidiary company with no assets, then there are risks to Council if it fails to perform its obligations under the CLSA and associated documents, as there would be no substantive entity against which to take legal proceedings for breach of contract, etc. To mitigate this risk, both GMH and Harborough will be named as “Guarantors” in both the CLSA and the Overage Deed, being the two documents which contain substantive obligations upon the subsidiary company. As such, both GMH and Harborough will guarantee to perform the obligations of the subsidiary under these two documents in full (as if they themselves were named as the main contracting party), should the subsidiary fail to so perform any obligation. Updated financial checks against both companies prior to exchanging the CLSA, will be carried out to ensure that they have sufficient financial strength to perform the obligations under the CLSA and Overage Deed if called upon to do so as a result of the subsidiary’s default

Further, As GMH and Harborough are both foreign-registered companies, GMH’s lawyers will obtain (at GMH’s own cost) formal legal “opinion letters” from reputable law firms qualified in Luxembourg and BVI respectively in favour of the Council, to confirm that these guarantee provisions will be legally binding upon both companies, and that the Council could pursue either or both company through the English courts if they in turn defaulted on these guarantee obligations.

It should be noted that GMH has suggested that it may ask the Council to transfer different parcels of the Council’s Land and the salvage yard to different subsidiaries to be set up later by GMH, in order that a separate subsidiary would hold the land intended for the residential element of their development, the affordable housing element, the hotel element, the retail element, etc. This is permitted under the CLSA, and is not uncommon where developers wish to have different land uses held by different entities, but would not alter the overall extent of land which the Council will transfer or the total amount of monies which the Council receives for that land at completion of the transfer(s). Even in these circumstances, the guarantees provided by GMH and Harborough under the CLSA and Overage Deed (as discussed above) would continue to cover these additional subsidiaries in relation to the obligations in those documents which still remained to be performed

Whether the complex report tabled for the Cabinet amounts to the financial appraisal Cllr Filson thought essential  remains to be seen. Unfortunately Brent Council has restricted documentation that may have revealed more detail of the financial arrangements. LINK