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

Protest Against Racist Attacks - Wednesday Jan 11th - Hammersmith

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What do you know about 'Investing 4 Brent'?

It sounds like a credit union but it is in fact a ‘Wholly Owned Investment Company’ (WOC) approved by Brent Cabinet at its November meeting and which had its first meeting just before Christmas.

The Cabinet appointed Cllr George Crane (a former member of the Executive and lead for Regeneration and Major Projects), Phil Porter (Strategic Director of Wellbeing) and Peter Gadson ( Director of Policy, Partnerships and Performance) as directors and former Chief Executive of Ealing Council, Martin Smith, as Chair.

The Resources and Public Realm Scrutiny Committee are due to discuss the Council’s Capital Programme and Investment Programme on January 10^th.  This includes an accout  of the progress of various capital programmes across Brent, including major developemnts and the school expansion prgramme,  and ‘Investing 4 Brent’ is mentioned in the umbrella report only in passing.  However the Cabinet report on the Wholly Owned Investment Company LINK is included in the subsidiary documents and members may think it merits some scrutiny and discussion as a new departure for Brent Council which raises potential issues of democratic accountability beyond Cabinet oversight.

The Report summarises the Council’s intention:

The proposal is for Brent Council to form a Company under its General Fund powers, which will be 100% owned by the Council. Its initial principal aim will be to assist in the delivery of the Council’s ambitious regeneration plans and housing development objectives, but it is envisaged that this aim will be developed over time. 


The rationale for using a WOC, as opposed to developing direct through the General Fund, includes:
.                           Isolation of some financial risks, which would be borne in the first instance by the Company rather than the Council; 

.                          More focused management of these complex risks, such as cash flow, tax, land development and market appraisals, many of which are not typical of most council services; 

.                          Specifically within the initial focus on housing, absolute clarity that any housing properties delivered will not be council HRA properties and thus will not impact on the HRA borrowing cap. Right to Buy (RTB) does not apply to homes developed through a WOC, as the Company forms a distinct legal entity from the Council. 

.                          Strong and onerous personal obligations placed on the Directors of the company, through the Companies Act, to ensure that the activity receives the appropriate management focus; 

.                           Flexibility to act more commercially and at greater speed than the council can, which is essential in acquiring property and striking development deals and hence emphasises why governance and control are so important; and 

.                          Flexibility to develop the company, once established, into another structure, if so required, allowing for example the development of other companies within the Brent umbrella or sharing of the equity in the company with another partner if that becomes desirable. 

It is not intended that the WOC would have a high profile identity separate from the Council, and that, operationally, it would be a “light” organisation with many activities, particularly development, undertaken via consultancy support, contracts and management agreements or via secondment of Council staff. It is expected that by setting up and running the Company in this way the impact on staffing capacity would be low but equally would improve efficiency and maintain employment whilst providing a motivating opportunity for staff to develop new skills. Some direct appointments might be necessary in relation to, for example, management of core functions such as Board papers, audit, insurance, accounting and tax. 


The conclusion of this report is that the WOC has significant potential to support the delivery of housing, infrastructure and regeneration strategies directly (i.e. through site development) and indirectly (providing the catalyst for further private sector investment or maintaining the momentum of change). For example, the potential for the Council to be able to directly deliver housing on land that it owns is of clear benefit to the wider regeneration of Brent as it will provide an alternative route to private sector delivery which has been constrained by prevailing economic conditions. 

Brent Council is currently in the process of bringing the Brent Housing Partnership back ‘in house’ and although a totally different enterprise ‘Investing 4 Brent’ appears to be a form of out-sourcing with its own risks attached.  6.20 indicates that any financial shortfall could be made up by raising rents or selling off property:

.        6.13.  Initial modelling has presented a sustainable business plan for the company provided that a number of key targets are met, the key ones being:
.        Purchasing a portfolio of properties that generates sufficient income from letting to tenants at sub market rents to cover the costs of operating the company and interest on debt owed to Brent 

.        Properties are managed in such a way as the costs of operation are optimised and the revenues lost through void and bad debts are minimised 

.        6.14.  The premise of this company is that it has been established to provide quality housing options at sub market rents. Key to the sustainability of this company is its ability to operational surpluses. However, the ability to make significant surpluses is restricted through sub market rental income. Section 6 of the business plan gives more detail on the critical and other variables that the directors of the company will need to manage to ensure a sustainable, successful and profitable company. 

.        6.15.  Providing that these key targets are met, the financial profile of the company is that it becomes profitable during the second year, and retains surpluses from which to operate until end of the 30 year business plan period. 

.        6.16.  It should also be noted that incorporation of a company exposes the operation to liability for corporation tax and VAT. Payment of these taxes has been included in the financial modelling exercise. 

.        6.17.  Given the target variables as defined above, the company will require a cash flow / working capital facility of up to £1m during the first 4 years of operation. The need for a working capital facility arises from the time it takes from the acquisition of the property to first let. The financial profile for the company is for the company to make a loss in the first year of operation, turn from profit to loss during the second year and to make accrued profits from year 4 onwards. 

.        6.18.  For the avoidance of doubt, this is a loss within the company. As it forms part of the council’s overall group it is not a loss to the council; indeed, the company will be a part of the council’s plans to reduce its overall costs in managing homelessness. By way of analogy, describing the company as making a loss in its early operation is the same as describing any operational budget as a ‘loss’ which would be meaningless for practical purposes. However, the early loss in the company has a specific meaning within the Companies Act, which is why it is necessary to demonstrate that the company will over time be profitable. 

.        6.19.  From year 4 onwards the company is self-sustaining, with losses made in later years being offset by further profits made in the earlier years. This is detailed in the appended company business case. 
Meeting
.        6.20.  There are risks of setting up a company, the primary one being that due to unforeseen market changes it may become insolvent. This risk should be mitigated by suitable monitoring arrangements as set out above. It is important that the company maintain the flexibility to set rents and if necessary dispose of properties to meet any shortfalls. The company should not be authorised to borrow or incur long-term liabilities without prior Council approval. 

.        6.21.  To support the viability of the company and protect the interests of the company a commercial arm will operate alongside the PRS affordable housing. This commercial element will permit greater opportunity to deliver sub market and commercial housing to create a strong and sustainable business and offer accessible housing products to key workers amongst others. 

'What the Trump Presidency Means for the Anti-War Movement’ Murad Qureshi 7.30pm Monday

Source LINK

  Speaker:  Murad Qureshi (Chair of Stop the War) ‘What the Trump Presidency Means for the Anti-War Movement’

 Monday January 9th 7.30pm Brent Trades Hall, 375 High Road, NW10 2JR

 The talk will be followed by Brent Stop the War AGM

How we should challenge gang culture

In September last year the Brent and Kilburn Times published an article by Cllr Zaffar Van Kalwala (Stonebridge) on gangs. I republish it here as a contribution to the debate taking place LINK on this blog ahead of the Time to Talk About Gangs event to be held at the Roundwood Centre on January 17th.

The immediate challenge is to get the young people directly affected along to the event.

Recently, six people wearing balaclavas began firing gunshots at each other on the streets of Brent. What should have been a quiet Thursday afternoon turned into something resembling a scene out of a Hollywood movie. It was a timely reminder that gangs still cast a dark shadow over our community.

As chair of Brent’s Gangs taskgroup as well as having been born in the borough, I have become all too familiar of the impact gangs have on our area; some of the people I grew up with are either in prison or no longer with us – guns and gangs did that. Current estimates indicate almost one in every ten Brent 11-19 year old is a gang member and according to the Met. Police, gangs are responsible for 16% of the total drug supply, 26% of aggravated burglaries and 14% of all types of rapes. Even international events are adding to the toxic mix. My ward’s Safer Neighbourhood Team Sergeant once remarked that young people arriving from conflicts in Syria and Libya, traumatised by their experiences of violence and death were joining gangs. 

Although there are some very good examples of work being done in Brent. Initiatives carried out by the youth offending service, the police and the voluntary sector such as Stonebridge Boxing Club, which worked closely with ex-gang members to develop mentoring and physical routines to help change their lives around. 

The efforts of those working with some of the most hard to reach young people have not gone unnoticed – these are committed people genuinely trying to make a difference. But the truth is that many of the responses have at times been uncoordinated and fragmented. This is further exacerbated by the closure of youth facilities such as the Brent Adventure Playground, youth unemployment and the erosion of ‘community spirit’.

Gangs are also leveraging in brand new Nike trainers and designer clothes for gang members who have more often than not experienced family breakdowns and live chaotic lifestyles. A lack of positive role models, poor educational attainment, mental health and lack of aspirations are just some of the factors that lure young people to this violent subterranean street culture. Young women are also at risk from gangs whether it’s sexual exploitation, violence or becoming involved in criminality.   

Our solution to gang culture needs to move away from a one-dimensional approach, which focuses solely on increasing resources. Although this is important, increased investment in young people will achieve nothing without paying attention to other factors such as housing, education, family support and tackling social deprivation.

We need a more inclusive approach, which empowers the local community to develop youth-led initiatives. Local models can respond to local dynamics, and can be specific to the communities in which gangs operate. This should also be extended nationally and locally where we encourage young people to use their skills positively. Perversely, gang members can possess an entrepreneurial drive namely, building up their ‘gang business through clever branding and slick You Tube music videos. 

We should develop innovative schemes to provide business ‘start-up’ funding for young people who could be at risk of joining gangs to help them achieve their real potential. Moreover, we should have wider apprenticeship opportunities whereby those that display the ‘entrepreneurial spirit’ are given opportunities to work in sectors such as banking and finance to make better use of their abilities. 

Brent is home to the largest industrial estate in Europe, Park Royal. Our young people should be given the opportunities to be apprentices at some of the largest companies in the world. And with Brent collecting £15m from the community infrastructure levy (CIL) from developers building new homes, maybe some that funding should go towards building the future of our young people. 

We are at a tipping point, do we accept gangs and gang culture or do we together as a community say enough is enough?

WANTED: Councils to take the lead in campaigning against cruel cuts to local government

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Just over a year ago Labour leaders Jeremy Corbyn and John McDonnell issued their instruction to Labour councillors that in the face of cuts to government funding of local authorities that they should set legal budgets - in effect implement cuts.   This was accompanied by talk of leading a mass movement of councillors against austerity and the cuts.    At the same time many independent activists and some from smaller left parties, including the Greens, had joined Labour or Momentum seeing it as the only way to oppose austerity.

The campaign never materialised but the 'legal budget' edict disarmed critics of Labour council cuts. The impact of cuts can be clearly seen in terms of  closure of  youth provision, closure of libraries, the increase in pot-holed roads in many city areas as well as the crisis in social care and the out-sourcing and privatisation of services.  Many activists who would have been in the forefront of campaigns are now involved in the debilitating  internal Labour and Momentum struggles.

At the time a Green Left colleague wrote LINK

No doubt JC & JM feel that they “have no choice” as 95%+ of their councillors support this approach. But it does undermine those trade unionists and campaigners actively arguing for them to stand up to the Tories. It implies there is no choice, when of course there is a choice. Labour has over 100 Councils. If Labour nationally opposed the cuts and organised some or all of its councils to refuse to implement them, there is absolutely no way the Government could send in Commissioners to run them all. It would provoke a huge national debate on the cuts and local democracy, and have the potential to force the Government to back down partly or wholly. As it is, right-wing Labour councillors are tweeting the letter to attack anyone on the Left campaigning against the cuts.  

In the end, the problem with the JC letter is that it completely understates the scale of the attack on local government and local democracy. This is not “business as usual”, a few nasty cuts etc.  This is a once in a lifetime, permanent dismantling and shrinkage of the local state, a huge extension of privatisation of local services and an undermining of local democracy itself - there is little point in having locally elected councillors if their job is (from Nicholas Ridley’s famous quote): “to meet once a year to hand out the contracts”.  

The only silver lining in the letter is its appeal for councillors to support local campaigners (even if this is clearly contradictory to their councillors supporting cuts budgets!) and to be organising mass campaigns against local government cuts. This gives an opportunity to campaigners to point out that Labour councillors are only doing one half of the message from the JC letter, and not the other.

Michael Calderbank, of Brent Central Labour Party and a Momentum supporter responded:

Well, yes, I tend to agree with your Green Left colleague. But in order to have dictated terms to local councillors, JC and JMc would have need there to be a mass campaign against local cuts. At long last they are trying to kick the Labour LGA into actually running a political campaign - all too often it's as though Labour councillors have forgotten they are members of a political party and just presented themselves as competent and compassionate administrators, powerless to do better in the circumstances. Frankly it's no good claiming to be an anti-austerity party in opposition whilst going along with it where we're in power.

Soon Brent Labour will be selecting candidates to stand in the 2018 local election and the candidate's stance on cuts will be a test for those who joined Labour in the Corbyn. One current anti-Corbyn councillor has already announced that he will not stand again and will move out of Brent. Those elected will have been left a legacy of cuts to be implemented in their first year:

Source Brent Budget Scrutiny Report

Bristol Green Party, in a city facing damaging cuts again this year, yesterday returned to the need for a national campaign LINK:

As January blues begin to kick in and the grim extent of the cuts to Bristol City Council becomes even clearer, Green councillors have responded to the Mayor’s Corporate Strategy consultation 2017-2022  calling for bold opposition and creative alternatives to the downward spiral of austerity. 

Greens are warning that the £92 million cuts forced on the Council by the Tory austerity programme will devastate public services across Bristol. The Greens are calling upon Bristol’s Mayor to take a leading role in opposing national austerity alongside other cities, networks, unions and progressive parties. They have also put forward an alternative vision for local government financing, including calls for a return of unallocated business rates to local government and for Bristol to receive its fair share of infrastructure spending. 

Leader of the Green Councillor Group, Charlie Bolton said:

Further cuts to the council will destroy many of the public services we all rely on. Services for older people, those with disabilities, our young people and children will all be slashed. Local traffic schemes that keep our children safe as they walk to school, well-loved library services and the parks that provide the ‘green lungs’ for our city will all be affected.

But it doesn’t have to be like this. These cruel cuts to our services are a choice that is being made by this Tory Government – to dismantle our public services instead of raising money by closing tax loopholes, reforming our finance system, bringing good growth to our economy or increasing tax for the top 1%. Essential public services are being abandoned, yet Government remains committed to the soaring costs of replacing Trident, building a new nuclear power station at Hinkley Point and developing the HS2 vanity project.  

Molly Scott Cato, MEP, Green Party Economics Spokesperson and Green Parliamentary Candidate for Bristol West said:

We know austerity is a downward spiral. As you cut the state you reduce job quality and tax revenue, leading to less money available for investment, which in turn cuts the state still further. It’s time to say loud and clear that austerity has failed and that we value our public services and believe they should be properly funded. 

Tony Dyer, Green Party Local Government Spokesperson and Green Parliamentary candidate for Bristol South added: 

Many of our cities are being disproportionally affected by Tory cuts. Bristol has already suffered three times more cuts than neighbouring authorities. The 10 Core Cities outside London are all run by Labour. They are home to almost 19 million people and contribute more than a quarter of the combined wealth of England, Wales and Scotland – so why aren’t we seeing more vocal opposition to this latest unjust assault on our services? We call upon Bristol’s Mayor to take the leading role in opposing national austerity alongside other cities, networks, unions and progressive parties.

Figures from the Institute of Fiscal Studies demonstrate that cuts have not been shared equally across the country LINK  

LATEST: Global warming near 1.5 degrees in 2016 - warmest on record

 From Copernicus Climate Change Service LINK

The first global analysis of the whole of 2016 has confirmed last year as the warmest on record and saw the planet near a 1.5°Cwarming, according to the Copernicus Climate Change Service (C3S). 

The latest figures from C3S, part of the EU's Copernicus earth observation programme, LINK show that 2016's global temperature exceeded 14.8°C, and was around 1.3°C higher than typical for the middle years of the 18th century. 2016 was close to 0.2°C warmer than 2015, which was previously the warmest year on record.

Countries agreed in Paris in 2015 to holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change.

A more dangerous climate 

Global warming increases the likelihood of extreme weather events such as heatwaves, droughts and floods. Future warming could cause billions of euro of damage each year and affect the availability of fresh water and crop yields in the most vulnerable countries.

Director of ECMWF's Copernicus Services Juan Garcés de Marcilla said:

We are already seeing around the globe the impacts of a changing climate. Land and sea temperatures are rising along with sea-levels, while the world's sea-ice extent, glacier volume and snow cover are decreasing; rainfall patterns are changing and climate-related extremes such as heatwaves, floods and droughts are increasing in frequency and intensity for many regions. The future impact of climate change will depend on the effort we make now, in part achieved by better sharing of climate knowledge and information. 

To help decision-makers develop effective adaptation and mitigation solutions we make the data from Copernicus Climate Change Service (C3S) and the Copernicus Atmosphere Monitoring Service (CAMS) freely and openly available. By mainstreaming the information that the Copernicus Services hold into climate policy and strategy, governments, the private sector and society can identify and unite around opportunities to tackle further climate change and reduce vulnerability where its effects are unavoidable.

C3S found that global temperatures in February 2016 already touched the 1.5°C limit, though under the influence of a strong El Niño, an intermittent event involving a period of warming. Global temperatures still remained well above average in the second half of 2016, associated partly with exceptionally low sea-ice cover in both the Arctic and Antarctic.

C3S found that most regions around the world experienced above-average temperatures during 2016. The largest differences in regional average temperatures were found in the Arctic but conditions were also extreme over southern Africa early in the year, over southern and south-eastern Asia prior to the summer monsoon, over the Middle East later in summer, and over parts of North America in summer and autumn.

In addition to record temperatures, ECMWF's Copernicus Services monitored other extremes occurring in 2016, including significant global wildfires and the growth of CO₂ in the atmosphere. Destructive fires were observed around Fort McMurray, Canada in May and then extensive wildfires across Siberia, associated with the year's high surface temperatures, during June and July.

For the first year CO₂ levels did not return below 400 ppm as summer turned to autumn in the Northern Hemisphere. In previous years, take-up of CO₂ by vegetation during the summer growing season has typically seen September mark the lowest point for CO₂levels.

Note on data

Copernicus temperature data are based on millions of diverse daily measurements analysed by the European Centre for Medium-Range Weather Forecasts (ECMWF) using methods developed for weather forecasting.

Annual global temperature variations derived from Copernicus data and from other widely used sets of data typically agree to better than 0.1°C for recent years. The spread in values is likely to be larger than 0.1°C for 2016 due to differences in the extent to which datasets represent the warm conditions associated with exceptionally low sea-ice cover.

The estimate used here is that the climatological average temperature around the start of the Industrial Revolution is estimated to have been 0.7°C lower than that for 1981-2010.

From Fire to Fountain - Film & Television at Wembley Park - 20th January

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Philip Grant posted a well-received article about the closure of Fountain Studios in Wembley Park recently LINK and mentioned the above presentation that he was planning. 

For more  information you can also contact Philip directly Philgrant69@aol.com