CROYDON IN CRISIS: After doing their utmost for almost two years to suppress the findings and recommendations of the Penn Report investigation into the council’s financial collapse, Katherine Kerswell’s blundering local authority managed to publish two confidential legal reports on its own website last week. EXCLUSIVE by STEVEN DOWNES
Katherine Kerswell, the council chief exec, has been in possession of legal advice since April this year that recommended the publication, at least in part, of the Penn Report and also the implementation of Local Government Association official Richard Penn’s recommendations – none of which have been done.
Inside Croydon came into possession of two “highly confidential and exempt” documents after they were published by the council on its own website last week.
The reports were only removed on Sunday after a concerned local councillor alerted officials. “I can’t believe that this is just sitting there,” the exasperated councillor told Inside Croydon.
And while one senior barrister suggests that the council might win a legal case brought against the discredited former CEO Jo “Negreedy” Negrini, she also argued against “throwing good money after bad”, since only a fraction of the £437,000 golden handshake given to Negrini could ever be recovered.
The legal advice was provided by senior barrister Jane Mulcahy KC, and was included as an appendix to the minutes of a meeting of the council’s appointments and disciplinary committee held on April 27 this year.
The meeting, held in the Town Hall Chamber at 9am, was chaired by Hamida Ali, the then council leader, and attended by Labour councillors Stuart King, Callton Young and Joy Prince, with Conservative councillors Jason Cummings and Lynne Hale. Kerswell and two members of council staff were also in attendance.
This particular discussion was in the “Part B” section of the meeting, when the press and public are excluded.
Mulcahy had given the council advice before, in 2021, but this latest 14-page appraisal of the legal position over the pay-off to Negrini considered whether the council’s former CEO had acted in breach of contract and, if so, what the prospects might be of recovering any of her pay-out. In considering this latest advice, Mulcahy now referred to auditors Grant Thornton’s second Report In The Public Interest, over the £67million fiasco which was Brick by Brick’s “refurbishment” of the Fairfield Halls.
Mulchay notes in her report that previously “it did not seem to me… that there was anywhere near sufficient information from [Grant Thornton] to hold [Jo Negrini] personally to account concerning matters surrounding the Fairfield Halls refurbishment. However, that has changed following the publication of the RIPI2”.
At the end of her report, Mulcahy concludes, “On the basis of the information in the [Grant Thornton] draft audit report and RIPI2, the council’s prospects of success are better than evens.”
In Richard Penn’s report, handed to Kerswell in February 2021 but withheld from the majority of the borough’s elected councillors and the public until Inside Croydon began publishing parts of it last month, the LGA official had recommended that the full council – all 70 elected councillors – should be given the opportunity to consider pursuing Negrini for some of the money because of breach of contract.
As might be expected from a senior lawyer, Mulcahy’s advice is full of caveats and balancing statements. Even her concluding remark says that her “better than evens” assessment “may change drastically once JN [Jo Negrini] sets out her response”.
But while Mulcahy’s advice suggests that the council might win any legal case against Negrini, she strongly suggests that, with the bulk of the payment to Negrini – £284,000 to her pension fund – being effectively untouchable, “My concern is that the council will be throwing good money after bad, since any victory in money terms will be for only a fraction of the full value of JN’s settlement package… Further, even if the council is successful, it is most unlikely to be awarded all its costs.”
A Katharine Street source, after being shown the report, told Inside Croydon, “That’s a perfectly reasonable position to take, based on advice from a respected legal expert. Why no one at the council, whether the chief executive or the recently elected Mayor, has bothered to communicate that position to the borough’s residents is baffling. It would put an end to this matter, at least.”
In her report, Mulcahy quotes from the RIPI2 extensively, as well as from the contract signed by Negrini in August 2020 to secure her pay-off – business that was tied up just a matter of a few weeks before the auditors raised the warning signal and published their first RIPI into the council’s financial problems.
It was on November 11, 2020, that Croydon became the second council this century to issue a Section 114 notice, the effective admission that it was bankrupt.
In their RIPI on the Fairfield Halls, the auditors had written, “Throughout the project there have been examples of a failure to discharge duties from a small group of senior officers (the then senior statutory officers and the then executive director of place).”
And Mulchay adds: “In the case of the CEO, as head of paid service, one of her duties was to effectively manage senior officers.”
And she quotes from RIPI2 where it states that Negrini and her senior officials – including finance director Lisa Taylor and exec director of place, Shifa Mustafa – “…did not ensure there was an appropriate legal basis for the engagement of [Brick by Brick] to carry out the works (by the licence and proposed land transfer) which would avoid legal challenge and enable proper scrutiny and oversight of the project and its costs; did not properly advise members about the independent expert legal advice received or act on that advice; did not secure adequate financial governance for the loans; did not formally and publicly advise members of the risks and changes to the project; and did not seek out proper formal authority from members for the expenditure.”
It is a litany of failures that ended up costing the people of Croydon many millions of pounds.
Mulcahy considers whether Negrini knew or could have known she had committed a repudiatory breach of her contract of employment at the time of signing her exit agreement. “There also seems to me to be an alternative basis for a material breach of the contract,” Mulcahy writes, “which is that JN, who promised she had fully disclosed all matters which might reasonably have affected the willingness of the council to enter into the contract, in fact failed to do so.”
But overall, Mulcahy’s view is that pursuing the self-proclaimed “regeneration practitioner” for less than £100,000 would be counter-productive, in a number of ways.
“Should the council proceed with action for breach of the agreement it is likely that protracted legal action will follow as it is most unlikely that JN will accept any wrongdoing.
“Allegations which JN may potentially make in her defence (eg that members well knew/condoned what was happening), as well as generally airing all the issues around the Fairfield Halls refurbishment in a public forum, may well be reputationally damaging to the council as a whole.”
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