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.
Negreedy: former council CEO Jo Negrini
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.
Highly controversial: the council placed this KC’s advice on its own website
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.
Fairfield fiasco: the award of the refurb contract to Brick by Brick was done without competitive tendering and, according to auditors, probably illegally
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.
‘Better than evens’: Jane Mulcahy KC
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.”
Read more: #PennReport: Negrini staged a power-grab over councillors
Read more: #PennReport wanted police probe into possible misconduct
Read more: #PennReport: Cover-ups and denial over Brick by Brick failure
Read more: #PennReport: Staff speak out about ‘scandalous’ bullying
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I think it’s a matter of concern that the Council, under both Labour and Conservative administrations, is allowing these matters to drift on for years.
Large amounts of money seem to have been expended on lawyers’ and accountants’ fees. Yet the public is no nearer to receiving a full and official explanation of what led to the Council’s bankruptcy. Nor to those responsible being held to account.
Kicked into the long grass…… as the council can no longer afford to cut it.
What is happening over at Slough, where they got into the same sort of mess as Croydon. The Chief Executive was sacked on the spot for gross misconduct, did she ever dare to go after them for a severance package?
Perhaps Croydon can learn a few lessons.
David, they are hoping people will forget and or something else will take the lime light.
As for, “may well be reputationally damaging to the council as a whole”; the councils reputation could not be damaged any further. The council and those at the top table, past and present, are a complete joke.
In January 2016, Croydon Council’s PR team proudly announced, via Councillor Simon Hall, that their corporate anti-fraud team had found one of the council’s employees had fraudulently claimed more than £36,000 in benefits.
She was taken to court, where the judge said she lucky to escape jail. Councillor Hall promised “we’ll be doing all we can, under the Proceeds of Crime Act, to recover the illegally gained sum for the people that need it”.
Fast forward to April 2022, and the same council decides to do nothing about a former employee who waltzed off with nearly half a million quid, the justification being that they would only get about £200 grand back.
This was a cop-out by all those concerned. We should get an explanation from those present at April’s Appointments & Disciplinary Committee: Hamida Ali, Stuart King, Callton Young, Joy Prince, Jason Cummings, Lynne Hale and Katherine Kerswell.
As seems likely that none will volunteer to raise the matter, then the council’s two Green Party Members, Ria Patel and Esther Sutton, and the lone LibDem, Claire Bonham, should do the right think and ask awkward questions at the next full Council meeting.
No more cover ups!
Ms Mulcahy KC (I believe from Blackstone) is spot on. Yes there are caveats as only one side of the argument is becoming apparent.
A difficulty with English law in Civil courts is that it only really seeks to address detriment with financial recompense alone. Despite wrongdoing if there is no proven detriment then there is no financial recompense.
To have a penalty fitting the act requires criminal law.
The simple reality is that a fraud perpetuated by a person can be a criminal act but until there is a criminal investigation into what went on the matter will not go away.
This Borough is and will be suffering for decades and children in the Borough will be disadvantaged for at least a decade. That will mar their whole lives. Services that in effect save peoples lives and support them in being safe will no longer be there – leading to more preventable deaths.
One has to ask again why the Local Government Act and all the regulations purported to be in place to prevent this happening, failed.
“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”
Can someone explain to me why the government pays it’s Civil Servants these ludicrous sums when statutory redundancy pay is capped at about £24000?
Yep
First
Redundancy relate to the post not the person. When a post is no longer needed the persons contract of employment is broken and therefore compensation for loss of employment comes into effect for the employer or the state if the Employer is unable to meet its commitments and is bankrupt.
Statutory Redundancy paid directly from the Public Purse is based on age length of service up to 20 years and is capped at a weekly rate of £571 (£17,130pa) to defray costs to the public purse.
Company Redundancy pay is on a contractual basis and linked to your contract of employment so may not be capped the same. The tax free element is the same.
It is extremely difficult to state that a Council CEO post is redundant in itself as you can imagine unless we get rid of councils.
But for example
.
If a CEO like Ms Negrini was made redundant today it could not be redundancy – as the post still exists. Therefore she would leave with a settlement in lieu of contract and what is termed a compromise agreement for loss of office and pay. In effect she is being unfairly dismissed without disciplinary action or a hearing to put forward her case denied the right to appeal etc and being compensated for that loss of rights.
So take again Ms Negrini’s salary at the weekly amount and multiply that by 1.5 or even up to 2 times if contract states so. Add compensation for loss of office and unfair dismissal compensation and you are now in the 6 figure territory.
She could have been expected to stay till retirement thence the payment into her pension.Same for salary etc. The Pension scheme has regulations on that also.
When you compare this to packages of CEOs responsible for billions (as a Council CEO on paper is) of private companies who receive millions and share option rights, it is in reality quite cheap.
However – Leave all that aside, -you are right in principle – they perhaps should not be compensated so much for failure.
The remuneration package for many Public servants in general is actually poor. but there are many highly paid personnel that when considering performance and results – one can argue are overpaid and substantially.
That, therefore is a performance matter – not a compromise agreement.
One can agree or disagree but that is the compensation set and no different to many employed privately in a public and private arena.
What is the issue is really is when large sums are paid for the wrong reasons, which may be the case here.
The Directly Elected Mayoral system allowed for a stronger direct voice for residents in a rebalancing of power between officials, indirectly elected political structures and voters.
The Mayor told a residents’ association last week that he awaits the Kroll report on Fairfield before taking action but also confided in official advice that there are few options for action. Residents were supportive of the Mayor’s remarks.
Of course, the Mayor should act only after taking close consideration of officer advice but residents should look to the Mayor to use their directly elected office to take action to recoup at least some of the £193 million lost monies, if necessary, through the courts.
The new system put the Mayor in charge with almost all powers in the Mayor’s hands. There is a risk that precedent is being created in Croydon that this will not be the case here.
Perhaps the question that should be asked is why Mr Perry is not exercising Mayoral authority.
Perhaps Mr Perry is not understanding what Mayoral authority actually is?
Or is Mr Perry still mired in behaving in a manner like the discredited strong (silent) leader?
Perhaps he is thinking that he only has to satisfy the south side DEMOC conservative voters thinking they were the only ones who voted for the post in the Referendum?
Mr Perry is perhaps following the party line and has political ambitions.?
Whatever his reasons for failing to act on not just this matter but many more, the fundamental issue for voters Borough wide is that heis not only failing to act he IS just failing.
That is not something that should be happening 6 months into the post even with Croydons difficulties.
Yes Mr Perry should take advice before acting however when not acting he should explain why and bring the electorate with him.
There are other legal remedies available. Unbelievable wrong doing has occurred and here is this incompetent and seemingly wrong dong person not being pursued at the slightest level because of it not being cost effective. Small claims proceedings has been raised to £5,000 now and at the very least the Council could undertake to some form of recovery with the much less lenient requirement of proof in small claims to attempt to get some charge on Negrini and have something on the record regarding her conduct. Since if they don’t, why shouldn’t it happen all over again.
Derek has a very good point – but justice is not about monetary value gained or recouped.
There should always be a consistency to Justice.
We as a nation have laws that should be upheld and no person or body should be or appear to be above the Law of the Country and Crown. Yet all involved in the Croydon Saga (from Fisher to Newman and Negrini along with Central Government) are avoiding answering to the Electorate
I have no idea who is actually culpable in part or whole in the Councils disreputable sorry saga. Evidence suggests that the environment was created by a poor Local Government Act. Council process controls being avoided or subverted and poor (perhaps cavalier?) acts of senior elected (both parties) officers along with very risky decisions and strategy (again with effective controls) being taken and perhaps outright subversion of protocols by individuals.
Perhaps The CEOs treated Councillors and the leaders like children and did not advise them properly or at all. Perhaps vice versa.
In all of this the laws and regulations pertaining to Local Government Administration have been held up as being unfit for purpose as implemented within Croydon for many years.
The continued failure to act at this stage really brings into question the Laws of society itself and social justice.
Millions if not Billions of our (taxpayers money) has been spent and the CEO responsible is not being held to account in any manner at all.
On the ”advice” of a senior and respected KC there is no real legal recourse via Civil Law to deal with the matter
Is it time that everyone ensures that ”lessons are learned” and actually fix the broken system?
Whomever is responsible, there are people who profited from this and under criminal law the proceeds of crime comes into effect and Justice can be seen to be done and deterrence of future incidents will be strengthened. Even if it fails to secure some convictions, the public will know and have trust that the laws of the Country are being upheld for Justice and Public Good and perpetrators are not being given a free pass to repeatedly denude the Public purse for their own purposes
This whole saga most definitely falls under the Prosecution in the Public Interest and that should outweigh the cost.Or has out Countries laws fallen so far into disrepute that we are unable to even begin an investigation?
Holding a Criminal investigation may have difficulties but the selective and expedient use of King’s Evidence – Immunities, Undertakings and Agreements under the Serious Organised Crime and Police Act 2005 there are section 71 – 74 that could assist in bringing some offenders (if any) into court.
Perhaps there may be argument that the activities of miscreants in Croydon would not meet the requirements of that Act.
Perhaps perverting power in Public office and authorising ”loans” in concert with others does meet the definition of organised and a crime. It most definitely is Serious.
One could even offer a CEO or Strong Leader type levels of immunity where appropriate and required to secure convictions. That may enable the truth and nothing but the truth to come out and for Justice to takes its proper course.
This Borough needs an end and to be able to move on knowing the system is no longer broken.