Waste Management & Blue Bin Purchase Issue Referred To Police

BNP Group Leader and Chair of the Audit Committee Michael Coleman has today confirmed that he will refer the issues raised in the Internal Audit into waste management to the Police.

The Audit committee yesterday agreed to accpet the Internal Audit Report and to note the letter of support from the District Auditor for the Audit findings.

There will also be an action plans to oversee the implementation of the recommendations contained in the report.

”The matter has been fully investigated by the council’s internal audit team, and the district auditor has confirmed that he will not take further action. The recommendations in both audit reports have been endorsed by the council’s Audit Committee, which has also asked for an action plan to be prepared to ensure the recommendations are fully implemented. Any matters referred to the police will be matters for them.”

Cllr Coleman has commended the report and stated that in his opinion the purchase of the blue bins at £1.63million needed further investigation.

Listen to the Audio Interview with Cllr Coleman below.

Cllr Coleman’s decision to report the matter to the police has come as a suprise to members of the Audit Committee

Cllr Mick Salih [Community Voice] has said that Cllr Coleman’s actions are more to do with headline grabbing ahead of the local elections.

He has questioned whether it was appropiate for the Chair of the Audit Committee to refer the matter to the police when the committee accepted the findings of the Internal audit and the implementation of its recommendations.

Cllr Sailh said that he hoped that he would make the complaint to the Police as an individual as opposed to as chair of the Audit Committee as his views were not shared by the other members.

Waste Management ““ What Have Stoke-on-Trent City Council Got To Hide?

A while back, I wrote a very dismissive comment regarding waste management and recycling. It was along the lines of “Ëœme and my wife take recycling very seriously, but to be honest, I don’t care what the Council do with my rubbish once they have collected it’. I know now that I was very, very wrong to say this.

Over the past year or so, Pits n Pots have been urged to investigate Stoke-on-Trent City Council’s decision to move to the present method of Waste Management including Recycling.

We have stumbled along, asking here and there. We have read the Freedom of Information requests from Ian Norris and others and we could sense the frustration at the lack of information coming forward from the council.

Our interest was pricked further when a contributor wrote this comment article.

We thought that the claim in the article that the enhanced recycling scheme has incurred £3.49million of cost not budgeted for warranted further investigation so we requested an interview with head of Environmental Services Jane Forshaw which can be heard here.

Now if you listen to the audio clip at the bottom of this article you will clearly hear Jane Forshaw agree to answer any follow up questions that may arise out of her interview. “Just come back and talk to us” she said.

She also said that questions that are asked through Freedom of Information tend to be one dimensional and as a result receive one dimensional answers.

Pits n Pots as requested, submitted the following supplementary questions, expecting Jane Forshaw to keep to her word and offer detailed answers:

1 Why was a ‘collection only’ remit given to WRAP [their report dated 4/3/08 ref ROT019] and not ‘collection and disposal’

2] Is the remit given to WRAP the reason that, in Jane’s view, it was flawed?

3] The report gave various solutions, one of which was option j. This option recommended a solution based on collection and disposal close to the process adopted by NBC who are now achieving a recycling rate of 50% as opposed to our current rate of 40%. were all the options put forward to the EMB, the rest of the elected members, or appropriate overview and scrutiny committee, for consideration?

4] In the absence of any EMB/Councillor involvement, who took the decision to adopt the current enhanced system of recycling?

5] The composting was put out for tender twice, the first time the tender was pulled, why was this?

6] Can we have the exact date that the ‘blue’ bins were ordered?

7] Was this date before the EMB gave its approval for the scheme?

8] Did the NSRP commission an Independent report into suitable composting sites in the City of Stoke-on-Trent?

9] Was this report taken into consideration before placing
the contract with a company from outside of the area?

10] Our current system for collecting food waste means that only potentially only 50% is collected. [once fortnightly in brown bin] That 50% potential success rate will be further affect by the number of households that do not have the 3 bin system. Will this prevent the city achieving the government target of 45% for 2015 and the 50% target for 2020?

Imagine our surprise when we received the following email fro Stoke-on-Trent City Council’s Press & Communication Department in response to our request.

Tony,

On returning to this and given the extensive detail of
your questions I am inclined to recommend you forward it as an FOI.

It is beyond a standard media enquiry now and beyond our resources here to keep chasing it. Happy to forward this for you or if you want to take time and consider the parameters of your questions you may want to submit it direct to the Councils FOI team.

Sorry I can’t be more helpful but we do sometimes have to prioritise resources and make decisions on what the press team deal with and what departments deal with through FOI route.
Kind regards

So, what exactly have our City Council got to hide?

I have spoken to numerous verifiable sources over recent days, elected members, former elected members, the great and the good and a picture is starting to form.

I suspect that the smoke screen that now clouds this whole issue is all a cover up.

My sources lead me to believe that there was absolutely NO elected member involvement in the decision to move to the current enhanced recycling method.

One source tells of an EMB meeting where the then interim Council Manager demanded that members of the EMB nod this policy through.

The EMB refused due to the lack of substance to the report. There was absolutely no detail or information put before members so that they could make an informed decision on this matter. There was quite a heated row over the issue.

The Interim Council Manager stormed out of the meeting threatening to “Ëœcall the government for intervention’ allegedly.

To my knowledge this was never put before that particular EMB again.

There was a WRAP Report commissioned by the Council [WRAP ref ROT019 dated 04/03/08]. It was never produced to an EMB, elected councillors, the relevant Overview & Scrutiny Committee. Indeed I suspect that the Portfolio Holder at the time did not know about the WRAP report.

The remit of the WRAP report was Collection Cost only, in other words the “Ëœcheap as chips’ option.

Now, I have seen this report and it gives various options and states that on a cost only basis the method that we eventually opted for.

One of the other options [J in the WRAP report] This option recommended a solution close to the process adopted by NBC who are now achieving a recycling rate of 50% as opposed to our current rate of 40%.

My sources tell me that the WRAP report was withheld from all Elected Members therefore non of the options were put forward to the EMB, the rest of the elected members, or appropriate overview and scrutiny committee, for consideration.

I have also been told by a number of sources that the blue bins were purchased before the results of the trials were known.

Our Councillors are often attacked for their actions and performance and are often described as being poor quality.

On this issue however, no one can or should accuse our councillors of not scrutinising and considering all options to find the appropriate system of dealing with our cities waste recyclables. A system that will not just achieve the current government target of 40%, but a system that will ensure that we hit the future targets of 45% [2015] and 50% [2020].

Had our councillors had the WRAP report issued to them they may well have chosen Option J which may have helped our council achieve their 2020 target now, just like Newcastle Borough.

This whole issue needs further investigation and the Council have to start giving out some conclusive answers to some very pertinent questions.

I strongly suspect that an officer or executive of the council took decision and made sure that there was no elected member involvement.

If future government targets are not achieved, I wonder who will get all the criticism. My Guess? Our councillors.

I urge all elected members to back the calls for the District Auditor to look into this issue in its entirety. Wrap report, tenders, blue bins, the whole sorry affair.

Britannia Stadium Investigation Cost £27000

It has just been revealed that the District Auditor’s investigation into the Britannia Stadium Shares sale has cost the City Council £27,000.

The Leader of the Council, Mohamed Pervez, is rumoured to have quoted that councillors should have been happy with the internal investigation. Did he read it? He didn’t even go to the meeting, perhaps because it was in the day time.

Typical, flippant comment from a politician who doesn’t know or bother to even find out the facts, and, quite frankly, has a significant responsibility for this outrageous cost.
If we go back to the beginning, I went through the proper channels to get the answers I, and many other people were interested in.

Two simple questions:

  • Who signed off the deal for the sale of the shares in the Britannia Stadium?
  • Why weren’t councillors told at the full council held to discuss the matter, that payment was in instalments?

Six months later ““neither the Council Manager, Mr Steve Robinson nor the Elected Mayor, Mark Meredith had responded. Nobody can say I didn’t give them ample opportunity to answer, so I formally wrote to the DA for help in the matter.

He decided that an internal audit, agreed by the council, would be the best way to deal with the matter. I disagreed ““ but that was the course of action taken.

At the same time one Mohamed Pervez, Deputy Elected Mayor, now the Council Leader, took over the formal responsibilities of the council, because of Mark Meredith’s arrest. It was at this time that Mr Pervez, in his new powerful role could have released the information at no cost to the council.

We waited a month, then another and another. 12 months later the internal audit report came out ““ with still no answers to the questions. It wasn’t worth the paper it was written on and I even ripped it up at a full council meeting. Some of the key people involved had apparently refused to co-operate.

It was at this time that the District Auditor, recorded at the Audit Committee to discuss the issue, expressed his disappointment at the report as it had failed to deliver key information. The DA then decided that, in hindsight, that he should have realised that the council’s internal audit would be inadequate.

He, the DA, then instigated his own investigation, which is strongly rumoured to have been hampered by non-cooperation and legal challenges and threats.

If officers and councillors had done their jobs right and been honest in the first place, it would not have cost one penny ““ not one.

Only at the last full council did one of my questions contain misinformation ““ Cllr Follows, on the matter of the Geese Cull wrote that the City Council has a “robust wildlife management plan” ““ but then had to admit that it does not exist!

Honesty, openness and transparency cost nothing ““ secrecy and lies cost us dear, as we have learned time and time again in Stoke-on-Trent.

So if you want to know why two simple questions cost us £27,000 Cllr Pervez, take a good long look in the mirror.

I wish that the government would consider making it a criminal offence for senior officers in local government to mislead or lie to elected representatives and the public. All too often those that were at fault have gone on to greener pastures by the time their damaging actions have come to light.

Democracy Contempt In stoke-on-Trent

The District Auditor’s Report on the sale of the Britannia Stadium reveals, under independent scrutiny, why Elected Mayor’s are an attack on openess, transparency and our hard fought British democracy.

Even more shocking is the contempt with which officers, paid to serve in the public interest by the public purse, show to elected members and the public.

Make no mistake in thinking that this is a one off report. Secrecy, deceit and hidden agendas are par for the course in Stoke-on-Trent City Council.

The new CEO has an enormous task in an organisation in which top heavy management is rotten to its absolute core, and colludes with equally rotten senior politicians, to cover their own arses, and pick up their salaries in shame. Many of them not even prepared to commit more tyhan a part time role but still picking up £20000-30000.

The governance commission tried to lay the chaos at the door of politics and the councillors. Yet the real source of the problems lie at a more fundamental level.

A culture driven by mistrust and now a cabinet determined to squash any debate or scrutiny, aided by an officer core scrambling to save its own skin.

Fortunately they will fail as a growing team presses them at every opportunity – the likes of PitsnPots, D4S and dedicated councillors. I urge anyone and everyone to use FOI and questions to the council meetings and help to free and restore democracy, scrutiny and honesty.

DA’s Report into the Britannia Stadium Sale Descends into Farce!

The Audit Committee for Wednesday 19 May, already delayed from Monday 17 May, has now been cancelled because the report from the District Auditor on the Sale of Stoke-on-Trent’s City Council’s shares in the Britannia Stadium to Stoke City Football Club, still could not be made ready in time.

The report has now been put back to the 20 June 2010. Sorry to be suspicious or cynical but by the 20 June ““ Mick Salih, myself and PKB could have been removed from the Audit Committee by the new “coalition”.

It was October 2008 ““ yes 2008! ““ when I first submitted my complaints to the District Auditor.

This raises the question of the effectiveness and competence of the DA’s office in Stoke-on-Trent, and I know a number of us are considering an official complaint.

Little did I know then, that such simple questions as “who decided on instalments” and “why weren’t the councillors told of the instalments plan” would take so long to answer that we have had 2 new chief executives in the intervening period.

Farce almost seems like an inadequate description: little wonder that many councillors or the public have no faith in the accuracy of information from the council, or the ability of our democratic system to hold decision makers to account.

Once again we have little more to do that speculate over the latest foot dragging.

I rather suspect that some mentioned in the DA’s report are very unhappy with its conclusions and are frantically pressurising him to alter its wording.

One silver lining that has come out of this cloud of a delay, is the return to high office of those that were at the helm and the centre of this scandal when all this occurred.

A primary element of Democracy’s survival is trust.

In particular, trust in those appointed to manage and facilitate its fair and proper function. Trust that information is accurate. Trust nothing is hidden away to deceive those elected by the public. Trust that accountability is held at its heart.

At the moment this is absent from the corridors and senior offices of Stoke-on-Trent City Council.

Britannia Stadium Scandal Continues

Yesterday councillors meeting as the Audit Committee on Stoke-on-Trent City Council were once again angry and disappointed as the District Auditor failed to present his report first requested, unbelievably in October 2008, on the sale of the shares in the Britannia Stadium by the City Council.

The internal audit report left large gaps in the matter ““ some key individuals appear not to have been interviewed for example”“ and it played down the fundamental question of why the issue of instalments was keep secret.

If there was nothing wrong with instalments why not be upfront about it?

We all hope that the DA’s report will be as thorough as we would expect, and we can draw a line under it and move on.

Rumours, however, have been rife within the corridors of power that one the the main reasons that it has all taken so long is that at least one of the key figures, one glaringly obvious figure not mentioned in the internal audit report, and no long with the council, has refused to cooperate or even be interviewed by the DA.

There is a name with this rumour, but it is much more fun to leave it for you to speculate ““ and the DA would not confirm or deny the question when asked ““his only comment was that he was “unaware” of the rumours.

Now it looks like this is not going to be sorted until after the elections ““ what a shame the people of Stoke can’t go to the polls with a clearer view of what actually went on before they vote.

Typical.

Britannia Report ““ Audit Report

Here is the full text of the Audit Report into the sale of the Britannia Stadium shares by Stoke-on-Trent City Council. Analysis next.

Covering Letter:

Dear Councillor,

Please find attached the Council’s Internal Audit report into the decision to sell the Council’s shares in the Britannia Stadium.

This report will be followed by a report by the Council’s District Auditor (DA).

The DA’s report will be finalised when he has concluded discussions with named individuals in the report. The Council understands, at this time, that this will not be a Public Interest report.

The Council understands that the DA has concluded that:

“¢ the Internal Audit report has been carried out thoroughly and to the appropriate professional standards
“¢ it is an accurate representation of the facts, based on the information available
“¢ there is no evidence of any financial wrong-doing
“¢ there is no evidence to suggest that the council did not receive reasonable value for its shareholding.

The DA has, however, concluded that there were issues with the Council’s prevailing governance arrangements and processes, and these will be made clear when the DA’s report is issued.

Both the Council’s Internal Audit report and the DA’s report are due to be discussed by the Council’s Audit Committee at its meeting on 8 February 2010 but I am of the view that all members should have an opportunity to review the Council’s Internal Audit report prior to that
meeting.
Yours sincerely,

Paul Simpson
Director of Central Services and 5151 Officer

Report:

Internal Audit Report January 2010

Sale of City Council Shares in Stoke-on-Trent Community Stadium Development Company

1. Introduction

1.1 Following a request from the former Interim Chief Executive, Internal Audit has looked into the above matter and I am now able to provide the following information.

1.2 The information is based upon examination of documents provided and conversations with existing City Council officers who played a significant role in the process. Discussions have also been held with officers who were actively involved in the process but who are no longer employed by the authority (Steve Robinson, former Council Manager/Chief Executive, Julie Gill, former Director of Central Services and Kelvin Turner, former Head of Finance).

1.3 Discussions have been held with Michael Tappin, former Councillor, and at the time, Leader of the Labour Group and portfolio holder for Resources; and Councillor Roger Ibbs, at the
time Leader of the Conservative and Independent Alliance Group. Clarification has also been sought from the Audit Commission.

2. Work Undertaken

2.1 Initially a copy of the report to Council (14 June 2007) setting out the proposal to sell the shares was obtained together with the supporting minutes.

2.2 To obtain further details, discussions have taken place with Gerry Clarke (Principal Solicitor) and Robert Thorley (Assistant Head of Finance – Corporate Accounting), officers who were involved in the process of drafting the report. They were able to provide a number of documents that provided essential information. Auditors have also met with Kelvin Turner, former Head of Finance and section 151 Officer (April – October 2007) and a meeting with Steve Robinson and Julie Gill, was held in December 2009.

2.3 Part of the payment received for the sale of the shares was by way of a dividend. In order to investigate the legality of this process, advice was sought from Chris Parry, Legal Services (Senior Solicitor).

2.4 In order to consider the decision making process, the Schemes of Delegation for 2006 and 2007 have also been examined.

3. Background

3.1 In 1996 the Council invested £3.14m in Stoke-on-Trent Community Development Stadium Company (SDC), for which it received 1,440,000 shares in the Company. Since that time there have been several attempts by the owners of Stoke City Football Club to purchase the City Council’s shareholding.

3.2 On 16 May 2007 an offer of £4.5m in stage payments, plus £500,000 in kind benefits for the sale of the city council’s shares in SDC, was discussed by representatives of Stoke City FC and the Council Manager/Chief Executive.

3.3 On 14 June 2007, the City Council resolved to sell its shareholding in Stoke-on-Trent Community Stadium Development Company Ltd to Stoke City FC Ltd for £4,500,000 plus £500,000 in the form of agreed ‘in kind’ community benefits.

3.4 On 21 December 2007, the share sale was completed and a dividend payment (£480,000) and the first instalment (£1,520,000) were received by the City Council. A further instalment of £1,250,000 was received in December 2008, and the final payment, again of £1.250,000, was received on 21 December 2009.

4. Executive Summary

4.1 Previous owners of Stoke City Football Club made a number of offers to purchase the City Council’s shareholding in the Stadium Development Company. Several offers were received and rejected by the council until in May 2007 an offer in the sum of £4.5m plus £500,000 community benefits was made by representatives of Stoke City F.C. (8.1)

4.2 The council originally invested £3.14m and subsequently received £4.5m, which included £480,000 by way of a dividend payment, in addition to in kind community benefits. In cash terms the council received an additional £1.36m over and above its original investment. The funding of the new stadium through SDC also facilitated the regeneration of what was previously derelict land. There is no evidence to suggest that the council did not receive value for money in the sale of its shareholding in the company (9.2)

4.3 Under the council’s prevailing governance arrangements, at the time the deal was agreed, the Council Manager/Chief Executive’s post was one half of the Executive that could have taken the decision. The constitution gave the Council Manager/Chief Executive the authority to negotiate and conclude the transaction without any reference to full Council, nonetheless he took the decision to report the sale of the shares in SDC to full Council in order to gain support for the proposed sale. (8.5)

4.4 On 16 May 2007, it was established that the council would accept instalment payments for the sale of its shareholding in SDC. Many further discussions took place regarding the details of the instalments. The issue of instalment payments was not included in the (14 June) report to Council, as the details had not been finalised and the report was to concentrate on principles rather than details. Whilst the sale agreement was being compiled, evidence suggests that the payment terms were amended such that the initial payment on completion reduced from £3.14m to £2m. (8.1) (10.2)

4.5 In light of the information available prior to the Council meeting of 14 June, details could have been included stating that discussions were ongoing. Had the report included that payment was to be made by instalments (excluding interest), this additional information may have prompted further debate at Council and could have affected the final resolution. Kelvin Turner has explained that the details were not included because they hadn’t been finalised. The report was one of principle, not detail, and set out a summary proposal at that stage. His intention had always been that the details (especially the details relating to the £500,000 in kind benefits), were to be reported back to the Executive and Members’ Board. (8.4), (10.1)

4.6 From evidence available, and discussions with members and officers present during 2007, it appears that the two senior members involved in the authorisation to endorse the share transfer, were not aware of instalments/stage payments until the day of the completion meeting (21 December 2007).

5. Other Matters of Note

5.1 The report (14 June 2007) agreed to the sale of the City Council’s shareholding (“subject to the necessary contractual detail”). Whilst it did not delegate authority to Directors to “further
negotiate” the terms of the sale with the Football Club, it was the view of senior officers that such authority was implied within the Scheme of Delegation.

5.2 The Elected Mayor gave assurances to Council (14 June 2007) that some detail would be reported back for future executive decisions. From records provided, there is no evidence that such reports have been taken back.

5.3 The amount of the initial payment and subsequent instalments varied on a number of occasions between May and December 2007.

5.4 Under the prevailing constitution in light of the decision regarding the original proposal, it would seem to have been good practice, although not necessary, to report back to full Council regarding the outcome of the subsequent negotiations and the detail of the final payment terms.

5.5 The declaration of the dividend raises the issue of whether the authority was entitled to it by rights of being a shareholder, rather than it being used as part payment of the £4.5m. The matter has been referred to Legal Services for an independent view. .Based on the information that was provided, the conclusion of the Senior Solicitor was that ‘I cannot say that the dividend was unlawful’.

5.6 Calculations of the interest forgone over the period of the instalment payments, amount to approximately £180,000. It was the view of the then Director of Central Services that the decision to accept the final terms of the sale, fell within the (Chief Officer) Scheme of Delegation. (10.4), (10.8)

5.7 Neither of the Schemes of Delegation (2006 and 2007) prevailing throughout the share sale process state explicitly the £value levels which apply to chief officer decisions. However officers have explained that, as with several other delegations, such authority is implied.

5.8 Whilst various calculations have been carried out to estimate the likely value of the Council’s original investment had interest been applied, no reference to the rate of return used is reported in either the Council report or the minutes.

5.9 The Council Manager/Chief Executive recalls taking advice from Legal Services in order to clarify whether the sale could be finalised without the need to return to Council. (10.10)

5.10 In May 2007, in addition to Stoke on Trent City Council’s unique constitution, the formation of the Elected Mayor’s new coalition and Executive and Members’ Board introduced new roles for senior members. The Executive and Members’ Board assigned portfolio roles to nine elected members, two of whom were the then Councillors Tappin and Ibbs. Councillor Ibbs was already a director on Stoke on Trent Community Stadium Development Company and in
August 2007 Councillor Tappin was nominated to join SDC as a director. At that time Councillor Tappin also sat on the Board of Stoke on Trent Regeneration Ltd. In addition both members also held the office of group leader for their respective political groups.

5.11 Both Councillor Ibbs and Michael Tappin hold the view that there was never a conflict of interests in their roles as elected members of Stoke on Trent City Council, directors on the Stadium Development Company, and Stoke on Trent Regeneration Ltd. They saw their role as custodians of the city council’s interests and whilst they held several roles, their primary role was always to ensure that the city council’s interests were foremost in all decisions.

6. Original Investment

6.1 A report to the Policy Committee in September 1996 provided information to Members regarding the development of a new Community Stadium at Trentham Lakes. It explained that under Section 33 Local Government and Housing act 1989, the Council would be investing in the newly formed Stadium Development Company.

6.2 The Council subsequently invested £3.14m, in return for which it received 1,440,000 shares in Stoke-on-Trent Community Development Stadium Company.

7. Initial Requests to sell

7.1 During 2003 and 2004 there were ongoing discussions between Stoke City FC and the City Council before, under a new chairman, a revised offer of £3.14m plus ‘in-kind’ benefits of £500,000 was made by the Club in December 2006. In response (March 2007), having had
several discussions with various members, the Council Manager/Chief Executive set out that the offer was not acceptable and stated that “we therefore decline the offer made”.

7.2 Following the rejection of the above offer, the Council Manager/Chief Executive was asked to look into the matter to secure a better deal. No reports regarding the various offers to sell
the shares were taken to Council.

8. Agreement to Sell

8.1 From the documents examined, it has been established that an offer was made by the club on the 16th May 2007 for £3.795m plus ‘enhancement’. Later that day, Steve Robinson met with Peter Coates and Tony Scholes and suggested their offer should be in the region of £5m, including £0.5m ‘in kind’ benefits as a concession to the club. In the negotiations it is understood that the purchase was also offered as staged payments (instalments) as it was a significant divergence from the original offer. The deal, i.e. £4.5m, staged payments and £0.5m ‘in kind’, was agreed in principle (by Peter Coates and Tony Scholes) subject to:-
a) The deal being done quickly
b) The Council using its good offices to encourage Stoke Regeneration Ltd to sell its holding on similar good terms

8.2 Following the May meeting, Steve Robinson recalls that he briefed Councillors Ibbs and Tappin on the emerging details of the improved offers. His recollection is that he mentioned that payment by instalments was something that the Club were keen on, and that it would be worked out as part of the details of the work as it was completed.

8.3 An e-mail sent from Robert Thorley to Gerry Clarke on the 23 May 2007 confirms that the sale of the shares had been agreed in principle by the Council Manager/Chief Executive and that payment was to be made in instalments.

8.4 Following the agreement set out in Robert Thorley’s email, he drafted a joint report (of the Chief Executive and Head of Finance, as section 151 Officer) to Council. This was subject to approval by Kelvin Turner (see 10.1). Records show that details were originally included stating that payment for the shares was to be made in instalments. As there was no final decision on instalments at the time of writing the report, they were not included. Kelvin Turner’s intention was that once the details had been finalised, they would be reported back to the Executive and Members’ Board, especially as the £500,000 in kind detail was the major issue which members had focused upon at the 14 June meeting.

8.5 Under Stoke on Trent City Council’s unique constitutional arrangements, the decision making authority within the council rested with the Executive (Council Manager/Chief Executive and Elected Mayor), with all other Councillors performing effectively a scrutiny role on items such as this. Whilst the decision (to agree to the sale of the shares as proposed by the Club) could have been made by the Executive; Steve Robinson felt it was good practice to take the report to full Council. Additionally he felt that it was important that the new administration (specifically the new Executive and Members’ Board approach), gained a good start and that there was not a strong opposition to the proposed sale. The
report sought to obtain political buy in as opposed to being a necessity. The Council Manager/Chief Executive viewed the report as agreeing the overall price, not the structure of the deal; the key factor being the value being achieved as this had been a key reason for the failures to sell the shares before this date. Following the (14 June) meeting, negotiations continued, although the Council Manager/Chief Executive’s personal involvement reduced.

8.6 The minutes of the Council meeting (14 June 2007) record that the Elected Mayor explained that the City Council was being asked to agree the fundamental deal and he gave assurances that the detail would be worked up and some of it would come back for future
Executive decisions. From the minutes, it is not clear what detail the Elected Mayor was referring to when stating that some of it would be reported back.

8.7 Both Steve Robinson and Kelvin Turner recollect that leading members were briefed throughout the process and it is Steve Robinson’s view that he did mention to them that payment by instalments was something the Club were keen on. Kelvin Turner was present on a number of occasions when Councillors Ibbs and Tappin were briefed on developments.

8.8 The view of Michael Tappin and Councillor Ibbs is that they were unaware that the agreement to sell included staged payments; they only became aware of these details after having agreed to the transfer of the shares on 21 December 2007.

9. Value for Money

9.1 The report of 14 June recognises the difficulty in placing an accurate and objective value on the Company’s worth. But having considered several factors, it sets out the view that the Chief Executive and Section 151 Officer “consider (the offer) to be a good one that is commensurate with their worth.

9.2 From discussion with Kelvin Turner, he felt that the price had represented a good deal. His recollection was that had the Authority invested the original amount of £3.14m, it would have had a value of approximately £5m. There is evidence to support this in the form of an e-mail response provided by the Treasury Accountant in January 2007. In addition there is a document (undated) which highlights potential returns on the original investment of £3.14m
since 1996 using various methods of calculation. This indicates figures of between £5.15m and £5.77m.

9.3 Evidence suggests that external valuations of the stadium confirmed the council’s holding to be worth approximately £5m. As a shareholder the council would have been liable for 36% of the costs of repairs and refurbishment to the stadium, which by this time was 10 years old.

9.4 When asked about Member involvement throughout the above discussions, Kelvin Turner recalled that the Chief Executive had briefed Members about the offer; he was specific in recalling that the Elected Mayor, and Councillors Ibbs and Tappin were briefed by the Chief Executive prior to the final offer being made.

10. Instalments and Dividend Payment

10.1 The report presented to Council on the 14 June 2007 did not include any information relating to the proposal to accept payment by instalments. From discussion with Kelvin Turner, he explained that the details were removed because they hadn’t been finalised. The report was an “in principle” report; no final decision on instalments had been made at that time, therefore the report set out a summary proposal. ‘

10.2 During the period following approval (14 June 2007) to completion (21 December 2007) the instalment terms changed on at least 2 occasions. Initially (23/5/07) a completion payment
of £3.14m was proposed with 2 annual instalments of £680,000. This subsequently became £2.5m with instalments of £1 m, before finally becoming £2m with instalments of £1.25m.

There is an e-mail from Kelvin Turner to Gerry Clarke (27 September 2007) that requests amendment of the payment terms “following further discussions with Tony Scholes”. No evidence to support the basis for this reduction was available during the audit.

10.3 Examination of officer meeting notes (meeting held between City Council, Stoke City Football Club and St Modwen) undated: but estimated to have been made during June 2007, intimate that the Club, having agreed to a purchase price of £4.5m, were unlikely to increase their offer to accommodate interest charges;

” no circumstances in which the price to be paid for the shares will be increased in the future ”

10.4 In order to verify the amount of interest forgone, an exercise was carried out in February 2009, based on advice provided by the authority’s financial advisers (Sector Treasury Services). The outcome of the exercise reported that the effect of accepting payment by instalments estimated the potential interest foregone at £180,000. The interest forgone would have been lower, had the original proposal of a higher completion payment remained.

10.5 As early as July 2007, officers were aware that the club were offering a dividend as part of the deal. The club -proposed that £480,000 of the £4.5m be paid by declaring a dividend from the Development Company. As a shareholder in the company the City Council was entitled to receive dividend payments however there is a clause in the original agreement which prevents the declaration of any dividends whilst there is a loan outstanding.

10.6 The latest set of accounts (year ending 31/03/06) show that the value of loans outstanding was £740,000. It has been assumed that this is the loan which affects the clause relating to non-payment of dividend; however this has not been confirmed. Prior to December 2007, no dividends had been paid since the formation of the company.

10.7 Authorisation to receive part-payment by dividend was given by Kelvin Turner to Gerry Clarke on 25 September 2007. An e-mail from Kelvin Turner on 27 September sets out the arrangements which ultimately became the basis of the Share Sale Agreement. This
resulted from discussions Kelvin held with Tony Scholes. His intention was to take the detail to the Executive and Members’ Board for agreement.

10.8 Following the departure of Kelvin Turner in October 2007, the remainder of the sale process was overseen by Julie Gill. She has explained that she had considered the decision to accept the instalment payment based on the following criteria:

“¢ Calculations using an average interest rate of 5.25%, had demonstrated that
the amount of interest forgone was less than £200,000
“¢ This amount was therefore within the chief officer delegation range for
decisions
“¢ The substance of the deal remained the same’

10.9 An e-mail from Gerry Clarke to Julie Gill dated 23 October 2007 highlights that the provisions of the agreement ‘do not accord with what was agreed at full Council’.

10.10 A further mail also issued by Gerry Clarke to Julie Gill dated 7 November 2007, states that

‘last time we spoke you were going to speak to Steve to see if we needed to go back to full council to approve the changes to the deal reported to full council’. Having raised this with Steve Robinson and taking advice from Legal Services, it was confirmed that the sale could be finalised within the constitutional governance “,

without a return to council. Steve has explained that having briefed the relevant Members [who, were attending SDC Board meetings] about the issues of detail at the May meeting, there was no need for the report to go back to Council. He viewed the practice of taking the (June 2007) report to Council and subsequently finalising details with key members as recognised and established practice.

The report had been written to ensure that Councillors had full knowledge of the proposals, in particular the valuation and the price achieved, finalising the details within the constitution. The decision to stick to the original approach having taken the report to full Council was not in any way taken to avoid reporting further details, but simply to progress the transaction quickly and with the many other pressing issues that were going on at the time to ensure
that the Council’s recovery could be achieved as quickly as possible. Steve Robinson’s recollection is that at no time, either before or after the completion of the sale, did members raise concerns [with him] or request that the matter be referred back to Council. He felt that the roles of (former) Councillor Tappin and Councillor Ibbs as members of EMB and directors of the Stadium Development Company demonstrated their authorisation of the sale.

10.11 It is not clear which officer from within Legal Services provided the advice referred to above (10.10) to either Julie Gill or Steve Robinson.

10.12 An e-mail from Robert Thorley to Julie Gill confirms that he expects the Stadium Company’s accounts for the year ended November 2007 to show that the loan amount outstanding stands at £3/4m. This is acknowledged by Julie Gill in her response to Gerry Clarke to confirm the reason for no dividend having been paid prior to November 2007.

10.13 An extract from the minutes of SDC board meeting on 21 December (11 :OOam), at which Councillors Tappin and Ibbs were present, records that a dividend of £1,333,333 was declared and paid to the shareholders in the amounts of

“¢ Stoke on Trent City Council (36%) £480,000
“¢ Stoke on Trent Regeneration (15%) £200,000
“¢ Stoke City Football Club (49%) £180,000 (leaving £473,333 to pay)

Following the declaration of the dividend, a second and separate meeting (11: 15am) of the Board was held to deal with the completion requirements pursuant to the sale and purchase agreement. The meeting resolved to approve and register the transfer of the shares produced to the meeting. Having agreed to the sale of its shares in the SDC, the city council ceased to have an entitlement to representation on the Board and therefore Councillors Ibbs and Tappin resigned their directorships of the Stadium Development Company. It was resolved to accept the resignation letters with effect from the close of the meeting. Prior to the resolution of the Board to endorse the sale of the shares, it is understood that the Club’s legal representative went through the Agreement. However, it is Councillor Ibbs and (former)
Councillor Tappin’s view that the issue regarding staged payments was not discussed until after the deal had been concluded.

Furthermore, it is Councillor Ibbs and (former) Councillor
Tappins view that had they known about staged payments, they would have raised objections to the transfer at this time, the transaction could have been suspended, pending further discussions.

10.14 On the 21 December 2007, Share Sale Agreements (the City Council’s document having been signed by the Head of Legal Services/Monitoring Officer on behalf of the City Council for £4.02m; this being the £4.5m, net of the dividend payment of £480,000), were exchanged. The initial payment for the shares was received by the council on 20 December 2007 (£1,520,000). The dividend payment was received on 21 December 2007 (£480,000).
The first instalment of £1.25m was received on 21 December 2008; the second and final instalment of £1.25m was received on 21 December 2009.

10.15 It is believed that following the completion meeting, both Councillors Ibbs and Tappin returned to the Civic Centre to discuss the detail of the sale with council managers. At this time the Council Manager/Chief Executive was on annual leave and it is understood that discussions were held with the then Interim Assistant Chief Executive, Chris Harman.

10.16 Following the SDC Board meetings on 21 December, it is understood that although discussions took place between Councillors Ibbs and Tappin and senior council officers regarding the terms of the Agreement, no formal objection was raised. Based on the documents examined and discussions held, there appears to be no further evidence that any other reports were put to Council on the final payment terms agreed with Stoke City Football Club.

10.17 The Agreement to sell the council’s shares in SDC was signed on behalf of the Council by the Head of Legal Services/Monitoring Officer. Whilst he wasn’t present at the meeting on 21 December, he had signed the share sale agreement prior to the meeting.