CROYDON IN CRISIS: The Kroll Report, which this week had its release delayed because of legal threats on behalf of a former council director, might be seen as a waste of another £310,000 of public money. But for former director Richard Simpson, it makes for a most uncomfortable read.
EXCLUSIVE by DAVE BURTON and STEVEN DOWNES
Wednesday’s long overdue release of the Kroll Report, the investigation into the £73million Fairfield fiasco, was further delayed by several hours on the day because of a lengthy letter threatening possible legal action against Croydon Council on behalf of a former executive director who was at the centre of the Brick by Brick scandal.
Senior sources have suggested that the legal threats were made on behalf of Richard Simpson, the ex-employee of Croydon Council who, potentially, has most to lose from any action which might arise from the Kroll Report’s findings.
Prior to his arrival at Sutton Council in early 2019 as “Strategic Director of Resources and Section 151 Officer”, Simpson had held a similar post as the finance chief at Croydon Council, where he oversaw the creation of Brick by Brick, the council-owned housebuilding company that never made a penny profit.
Simpson was an established and widely respected figure at Croydon Council, having joined the organisation in 2005, rising through a variety of mid-ranking financial roles and working under four different council chief execs. In 2015, Simpson was promoted to “A
Long-term staffer: Richard Simpson worked at Croydon Council from 2005 to 2018
In 2015, Simpson became the first ever company director of Brick by Brick, and soon afterwards he would oversee the company he’d helped establish be handed the £30million budget for the refurbishment of the Fairfield Halls – using a licence as a ploy to get around regulations requiring local authorities to conduct proper competitive tendering on all major contracts.
It was Inside Croydon in 2020 who first highlighted that the council had evaded one of the principle checks and value-for-money controls over the bungled Fairfield Halls refurbishment that somehow ended up costing the borough’s Council Tax-payers £73million, helping to bankrupt the borough.
Referring to the June 2016 cabinet meeting were the key decision was pushed through by then council leader Tony Newman and his cabal, we reported: “At that point, Brick by Brick had not even built a garden shed, never mind supervised a complex multi-million-pound project to modernise and upgrade one of the council’s most valuable assets.”
Years later (and for a fee of £310,000), Kroll arrived at a similar conclusion: “At the time of the decision to grant [Brick by Brick] this project, the company had only just become operational (in January 2016) and had not yet built a single property.
Entry point: the Fairfield Halls refurbishment cost £73m – but councillors weren’t told of the cost over-runs until it was much too late
“It had no track record of delivering any projects, and did not have any experience delivering any projects with the specialist nature of refurbishment of an entertainment venue.”
As it was, the Fairfield Halls refurbishment project was already late to be completed and horrendously over-budget when Simpson abruptly resigned his senior role at Croydon Council late in 2018. That debrief meeting with council chief exec Jo Negrini must have been fun… though we’re unlikely ever to find out the nitty gritty, not least because the Kroll “investigation” never got round to interviewing Negrini or Simpson in-person.
As Section 151 officer (a position required at every local authority by law), Simpson was at the heart of Croydon’s projects and contracts. He had the power to authorise spending and loans to the council-owned company. At the time of Simpson’s Croydon exit, little detail of what was going on with Brick by Brick was in the public domain.
No tendering: how Inside Croydon broke the news of the absence of any competitive tender four years ago
According to Kroll, most of Croydon’s elected councillors didn’t know either, as they weren’t told things they should have been told by Simpson and his team.
Under Section 3.6.1 of the Kroll Report (“Failure to escalate known risks and overspend”), Simpson’s role is explained: “He was under a statutory obligation contained in Section 151 of the Local Government Act 1972 whereby he was responsible for the ‘proper administration’ of LBC’s financial affairs.” Kroll’s italics.
The report goes on to detail a series of examples, around the refurbishment of the arts complex and the proposed housing development on an adjoining site, College Green, where they found that Simpson may have not fulfilled those responsibilities.
“Mr Simpson was aware of risks and issues relating to profits from the College Green scheme from December 2017, when he received a report from [BxB] detailing projected losses on the wider scheme… which were not reported to members [meaning councillors].
“Mr Simpson was aware of the internally reported project overspend, but failed to ensure that this was publicly reported. Based on documentation available for review, he first became aware of the overspend of the project when he attended the April 2018 Growth Board meeting.
Cover-up: according to the Kroll Report, the overspend on the Fairfield Halls was not reported to elected councillors until February 2020 – more than a year after the S151 officer, Simpson, had left his job at Croydon Council
“The papers for this meeting showed the estimated total project cost at £39.9million. Between September 2018 and November 2018, Mr Simpson and Mr Lacey [Colm Lacey, managing director of BxB] exchanged a series of letters discussing the project overspend and its impact on [BxB]. At this point, he was made aware that the project overspend resulted in the College Green scheme profits being fully allocated against it, with an overall profit from the scheme to [BxB] being estimated at £0.
“Mr Simpson provided an update to the October 2018 Growth Board meeting around the contents of these letters but did not ensure the issue was reported to cabinet.
“Although Mr Simpson did take steps to improve the governance structures of [BxB]… he failed to ensure that the project overspend or the impact thereof on [BxB] was publicly disclosed to Members prior to his stepping down ection 151 Officer in January 2019…
“… As Section 151 Officer, Mr Simpson would have been aware of his statutory duties to report matters of risk and budgetary overspend to members…
“Mr Simpson was responsible for ensuring that members were advised of the financial implications of all proposals contained in reports to cabinet. Mr Simpson was the lead officer on the June 2016 cabinet report… which failed to adequately highlight the risks and implications of the project to members. This might potentially be considered a failure of his obligation in terms of the constitution to provide the financial implications of cabinet decisions to members.
“In summary, Mr Simpson was aware of a number of risks and issues relating to the project, including the overspend, and did not report these to cabinet or to members, despite being under obligations to do so.”
All of this has been kept under wraps by Croydon Council while they awaited news of a police investigation. It now turns out that the Met decided not to bother investigating the goings on at Croydon Council almost as soon as Katherine Kerswell, Croydon’s CEO, called them in – though investigating cases of misconduct in public office always looked like being a dead end (the council had received legal advice telling them so).
Nothing seems to have come from the four areas of serious concern, and potential fraud, outlined by Grant Thornton in their 2021 Report In The Public Interest – investigating financial details in fraud cases requires investigatory powers, such as access to bank accounts, or warrants to search private residences – that Kroll doesn’t have.
Now, four years after Croydon’s financial collapse and almost a decade after some of the dodgy-looking events examined by Kroll’s investigators, Kerswell and Croydon have abandoned any prospect of legal action. The councillors on the appointments and disciplinary committee, in the Part B, secret section of their meeting on Monday, agreed to not take any civil action against former employees or councillors.
Jolly good fellow: Simpson pays £100 per year to have the FCPFA initials after his name
But the council has been sitting on other recommendations since they received the Penn Report in February 2021, and these included submitting formal complaints to some former employees’ professional bodies.
In the case of Richard Simpson FCPFA – a Fellow Chartered Public Finance Accountant, annual sub 100 knicker – this involves a sternly worded letter to CIPFA, the Chartered Institute of Public Finance and Accountancy.
Simpson is mentioned 178 times in the 260-page Kroll Report, as its authors pored over the creation, management, culture and governance of Brick by Brick. The report suggests that Brick by Brick was “appointed” to the Fairfield Halls job well before it received cabinet approval.
The whole project, including the housing on College Green that never happened (at least, not by Brick by Brick), was given a drawdown limit of £95million, but the facility agreement was never actually executed, which meant “the value of drawdowns against this facility to the value of circa £60million were made without a signed loan agreement”. Those are our italics. How could an experienced and expert chief finance official at a local authority really agree to provide a £60million loan to a separate company without a signed agreement?
The report also noted audited accounts were not always presented to members. No changes to the expected dividend from Brick by Brick to the council nor interest payments on its £200million loans were made until the 2019 budget papers, around the time Simpson left Croydon, though Simpson claimed he was not involved in the production of the budget papers as he had put in his resignation in October 2018.
Beech Tree Place: with each flat now costing £500,000 to build, Richard Simpson’s judgement is being questioned over the award of a contract to company with no trading history
And it was not until November 2018 that Simpson finally made some recommendations about improving the governance structure of Croydon Council.
The report highlights many instances where Simpson, as Section 151 Officer, is alleged to have failed to follow correct governance procedures.
One serious failure of good governance related to the council’s management of serious conflicts of interest within Brick by Brick. When Simpson lodged the company registration documents with Companies House, with his name on them as director, it was a matter of administrative convenience, to bring the company into existence. Other directors would be appointed in 2016 who would not have any conflict as Simpson might as the council’s Section 151 officer.
However, between 2016 and 2019, Lisa Taylor, Simpson’s deputy, was a director of Brick by Brick. For Taylor, this “resulted in a lack of segregation of duties between Croydon Council and [Brick by Brick]”. Taylor was in a position to sign off on Croydon Council’s financial risks in respect of Brick by Brick, but was also legally obliged to work in Brick by Brick’s best interests. These conflicts were duly declared to the council’s Monitoring Officer.
In correspondence, Simpson told Kroll that he had significantly diverted his attention to the crisis within Croydon’s children’s services department, following the disastrous Ofsted inspection in 2017. He said he relied on Taylor to “lead the finance team and ensure operational finance processes were fit for purpose”.
This is sometimes known as the “I was there, but not present” defence.
Taylor claimed that when Simpson left Croydon and she replaced him as the Section 151 officer, she did not receive a proper handover from Simpson – something Simpson denied in his response to Kroll.
This could all become a serious issue for Richard Simpson’s current employers, Sutton Council.
Just a year ago, Inside Sutton looked at some of the major capital projects in Sutton that are overseen by Simpson. Anyone familiar with the saga of Brick by Brick, the £200million-worth of loans, failed housing schemes and botched refurbs of arts centres that go two-and-a-half times over budget, might notice a certain familiarity around the way recent Sutton schemes have been structured or funded.
When he came to Sutton, Simpson created a £100million capital investment fund for the council through a clever use of the bond markets.
Investment vehicles: the company behind this Sutton cinema, backed with council money, has run into financial problems elsewhere
In 2021, the council spent £26million buying the St Nicholas Shopping Centre, which is now part of a wider town centre regeneration project, worth up to £500million.
But there are strains showing in many of Simpson’s pet projects.
Sutton Council awarded a £44million contract to build 93 flats at Beech Tree Place, the work being handed to a company with no established track record, but with directors with historic links to companies that supplied cladding materials to the Grenfell Tower. Despite warnings from opposition councillors, the company, Real LSE Ltd, went spectacularly bust. Simpson defended Sutton Council’s procurement strategy while quietly changing it to avoid the same thing happening again.
It is now reckoned that each of Sutton Council’s new flats at Beech Tree Place will cost £500,000 to build.
Sutton this year agreed to buy a number of properties for council use in the Elm Grove regeneration in central Sutton, where Lovell Land will build around 300 homes to replace the existing 73. These homes are costing the council more than £100,000 per unit less than the properties at Beech Tree Place. Maybe council tenants don’t deserve the same build quality?
Confidence issue: Simpson (right) with his Sutton boss, Helen Bailey and the council’s senior lawyer, Tim Martin
Under Simpson, Sutton Council has also spent around £60million buying 186 mixed-sized flats off-plan in the Berkeley Homes redevelopment of the B&Q site – £320,000 each.
Last month a council committee recommended the purchase of a further 31 additional one-bedroomed flats in the development, but this time at a cost of upwards of £400,000 each. What seems like an overpayment or poor value is, insiders claim, a backdoor method by the council to rescue a flagship local development that was teetering on the edge of viability.
Sutton was also keen to invest some of its own money into schemes now run by Oru Space and The Really Local Group, developments largely funded by the Future High Streets Fund. Oru is a coworking space that also has a restaurant and offers yoga classes. It has received many extra payments from Sutton Council that were not in original budgets, and, Inside Sutton understands, has been somewhat slow in paying its rent following an initial free period.
The Really Local Group redeveloped the old Chicagos nightclub site on Throwley Way, with significant council investment, to create the Throwley Yard cinema and arts complex. In the last few months, however, two similar developments in the group, at Catford and in Ealing, have closed with large debts, and another venture called Peckham Levels, run by the group’s owner, Preston Benson, is in administration.
All of that means that Simpson already has a very full in-tray at Sutton Council, without having to face renewed questions about his role in the Brick by Brick scandals and the Fairfield Halls fiasco. Time will tell whether CIPFA come calling – it could take months, if not years – or whether Sutton Council’s chief executive, Helen Bailey, retains confidence in one of her most senior officers.
But following the Kroll Report, it seems very likely that Richard Simpson will be under greater scrutiny than at any point in his career so far.
Read more: £30m Fairfield Halls project never went to competitive tender
Read more: Simpson and the Sutton similarities over £100m property loan
Read more: #PennReport: Cover-ups and denial over Brick by Brick failure
Read more: After four-year delay, council to submit complaint reports
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This is a perfect illustration of why the local government gravy train needs to be stopped, to prevent people from ruining one local authority and then going unpunished as they move on to ruin another one.
From this information it appears Simpson has been a stranger to good governance and transparent financial practice and further from the increase in risk faced by Sutton Council’s property development, someone who had not learnt from experience.
The speculative use of hundreds of millions of valuable public resources while statutory duties are starved shows the abject state that Local Government has descended into after the administration of the Austerity Regime with it’s Localism Agenda. It created a blank cheque for Councils to gamble with property while forcing them simletaneously to cut back on the provision of public services. Surely this state of affairs cannot be allowed to continue and some sanity about good professional practice and the proper use of pubic money reappears in politics. This point looks like it hasn’t been reached yet while individuals do not face the consequences of their actions
Sutton councillors should think very carefully about whether they can have any trust and confidence in Simpson to continue to handle taxpayers’ money. If they ignore the evidence, don’t take action and let Dickie continue to make a mess of things, they will be complicit in what follows, morally if not legally and politically
Franz Kafka would of had a field day writing about the absurdity of these creatures landing cushy jobs after financially ruining Croydon, instead of ending up in prison. The authorities don’t seem to care, most of the media barely seems to care, only Inside Croydon and its readers seem to care about the absolute insanity. I need to touch grass and watch the “I’m mad as hell” monologue from Network or something!
I think Sutton should sack the whole of their HR department, as they are clearly not checking CVs, references or gossip as HR departments have done since their titles were invented. To take on a financial manager without checking whether his previous employers were still solvent was sheer, blind, folly. I fear incompetence is the major feature of Council Departments generally. When I worked at Croydon Council offices many years ago, no common sense was required, we just had to do as Councillors told us, usually to keep happy loyal party members who had big houses around the edge of the borough. Mary Walker ruled the roost then, and everyone did what she said regardless of research, policy, funding or benefit to Council Tax payers. I wouldn’t say that politics ruled, but unelected party members did, so much string pulling tying the staff in knots. If Officers and Councillors cannot be held to account for disastrous decisions, just floating off from one borough Council to another unimpeded, this will never end.
Maybe the references given were ‘economical with the truth’. It wouldn’t be the first time that senior staff have left behind the mess they created here and waltzed off to another top job somewhere else. If so, Sutton could always sue Croydon for palming them off with damaged goods
Investigations without an outcome Act or prevent is a miss justice.
It says to future employees there is no accountability on fraudulent acts of
Miss use , negligence on reporting of taxpayers money.
That no matter what the higher you go you can get away with anything!
The police themselves drop investigations also – something fishy there
God help us, if we have no safeguards to ensure good financial governance in public office where are we heading? A free for all with public money? This will obviously will attract unscrupulous types who enjoy power and money, who don’t give a damn about anyone else. Authoritarianism here we come!