Overdue Diligence

The sleepy little town of Dixon, Illinois, has a population of only 15,800. Prior to 2012, its only claim to fame was as the birthplace of movie actor and president, Ronald Reagan. Then its relative obscurity was dispelled as the case of Rita Crundwell exploded into the public consciousness with a crime that still beggars belief.

Rita was a hometown girl with no particular educational or professional qualifications to mark her out. She was a clerk with the local council – long-serving and willing to do all the running about which was required within the council. Everybody knew her, and everybody trusted her. What she did, however, was epic in scale. She embezzled the council to the tune of an amazing $53 million over a period of twenty years, a theft equal to $3000 for every man, woman, and child in that small community. She was eventually caught out, and was imprisoned for nineteen and a half years; but how did she get away with it for so long?  The questions were many, and the answers less than adequate. Rita had lived an openly grand lifestyle over that twenty years, buying, among other things, a whole string of top class horses; a huge state of the art stud yard property; and a $2,500,000 motor home – all on a clerk’s salary.

Two of the explanations given after her trial were significant. Firstly, she was able to navigate a complex set of financial arrangements which neither the mayor of Dixon nor his councillors understood. They just went along with whatever Rita told them. Secondly, the auditors failed to do the job expected of them. They argued that their job was simply to certify whether or not the council’s annual financial statement accurately reflected the council’s actual financial position, not to question whether or not there had been any financial malpractice. American courts found against them to the tune of $35 million in a civil case brought by Dixon council.

I thought about this when I read another pro-Joe article in the ‘Liverpool Echo’ in which the district auditor was quoted in support of the mayor over the stadium proposal. I was also mindful of some other relevant facts. For example, back in 1985, the then district auditor exercised his extensive powers to ban from office and surcharge, 49 Liverpool city councillors over a notional loss of to the city of £106,000. More recently, it has been a constant refrain of myself and others that there has been no due diligence worthy of the phrase when it came to many of the property deals struck by the city in the last few years.

The article in question includes the district auditor’s assertion the “the Council has a track record of delivering complex “invest to save” projects”; although they do not say whether these have been cost effective or not. Are we talking here about “investment” in EFC’s Finch Farm training facility; the loss-making (and Peel-owned) Liverpool Airport; and the failed cruise liner terminal in the Cunard Building? Frankly, I have little faith in the district auditor’s ability or willingness to objectively analyse anything which the city council does.

Incidentally, the district auditors – Grant Thornton – are one of the international “big five” bean counters, along with Deloitte, Pwc, Ernst Young and KPMG. Each of these also offer services as consultants – you know, the kind of people who borrow your watch to tell you the time, and then charge you for the privilege. These people have regularly been found to be remiss on a massive scale with major banks and corporations. Locally, of twelve local government bodies – that is, councils, police and residuary bodies – three use KPMG as their auditors, one uses Ernst Young, and eight use Grant Thornton. Easy money, it seems to me.

The recent appearance in the press of the district auditor related to the Liverpool mayor’s plan to borrow at least £280 million to the advantage of two private companies, EFC and Peel, each owned by a tax exile billionaire. Personally, I would rather trust the judgement of the council tax payers of Liverpool rather than Grant Thornton on the wisdom of this proposal. We have had more than enough of the interests of big business being put ahead of the ordinary people of the city.


What is in a Name?

You may think that I go on too much about developers. There are certainly more important issues, like homelessness, poverty, unemployment and crime. However, underpinning most challenges is the question of resources, especially in these times of forced austerity. The perception has taken hold that the key to alleviating those problems, lies in what today is generally described as “development” , raising extra resources. This illustrates perfectly how national government policy has shaped local thinking, whereby it is taken as read that “development”- and the developers who bring us this alleged panacea – is always a good thing.

Now, I would not for a moment suggest that economic development of the city-region is other than a good thing; what matters is its form and its beneficiaries. It must be carefully regulated, and actioned within a framework of local objectives for the benefit of local people. Too often, claimed development can act against the wider interests of communities, whilst garnering profits for developers who have no real interest in our area other than a monetary one.

That is why it is incumbent on local authorities to use all of the powers available to them to ensure that self-styled “developers” cannot abuse the interests and good name of our communities with obviously scam projects. Thus, it is laudable that Wirral politicians are taking an active (if belated) interest in the transparent failure of the Peel group to deliver on its development promises in relation to the Wirral Waters site, as council officers blindly propose decimating the borough’s green belt.

More mysterious, incidentally, is the neglect of due diligence procedures by some councils, in their gaderene rush to take on any and every proposal put to them. This is a recurring phenomenon in Liverpool. That council insists – despite all of the evidence to the contrary – that it exercised due diligence in its dealings with companies which have been shown as fronts for con artists. Well, I would definitely contest the council’s view on its professional competence when it comes to due diligence.

Driving into the city centre from any direction, one is soon close to one of the failed big money projects, along with block after block of student flats (one looks in vain for the social housing desperately needed by local families). The latest one is the so-called Fabric District between London Road and Islington. The named developer is the Yeung Property Group, the brainchild of Sze Ming Yeung. The mayor sings the praises of this organization in the fawning Echo, but on what basis, one can only wonder. Mr Yeung has thirteen companies to his name, mostly registered at a dockside address, and most of which have him listed as the sole director. The first of these was listed with Companies House just two years ago; nearly all of the rest were created within the last year.

I am not suggesting anything improper about Mr Yeung and his companies – how could I, when there is no information of any significance about them in the public domain? To my knowledge, there is no business record of any note about them, so why on earth should the mayor endorse them so effusively? What is the basis for this?

Of course, there are plenty of other self-described developers around, many of them keen to widely publicise their claimed success. Mr Elliot Lawless has become a millionaire at the tender age of 31 years of age whilst Mr Lawrence Kenwright has rocketed from bankruptcy to the role of local Donald Trump within half a dozen years or so. The question must be asked: how are these and others, together with their financial arrangements, assessed by LCC before the council engages in business with them?

Most local people welcome investment in their local area. However, they see investment as a means to an end, not an end in itself. That is, they look for the positive impact which that investment can, and should, have on their lives. Generally, that might mean jobs, housing or simply a better environment. Too often, citizens despair at failed and abandoned projects, concreted green space, and undeveloped land banks, providing big profits for a few, with little or no return for the many.

Land Banks

If you were a visitor from any other country, it would soon be evident that local government and other public agencies hereabouts are at crisis point. Whether one looks to the increasingly desperate complaints about policing (or lack of it !), and the response that poor policing is down to cuts; or one looks at the monumental disgrace of the unfinished Royal Hospital with the collapse of Carillion, the ultimate culprit is central government and its deadly commitment to austerity.

In local government, this crisis is most evident in the car boot sale of council assets, primarily land. For example, a Freedom of Information request to Halton Council has shown the widespread sale of council-owned land, some of it at giveaway prices. Little wonder, then, that there is resistance to the suggestion that Halton Council should repay penalised motorists caught in the penalty trap that is the Mersey Gateway bridge.

All across the city-region, the same tensions are surfacing, causing political controversy in each borough. We have witnessed Knowsley’s u-turn over flogging off its parks. St Helens felt the shock of an independent’s electoral success in Rainhill, marked by a  council dispute with local residents concerning greenfield site development. Right now, Formby fumes over new housing plans before Sefton Council, whilst there is ongoing anger over the route for the relief of congestion due to docks-bound traffic.

This last issue is especially noteworthy as once again, it seems that the demands of docks owners Peel outweigh those of residents. This is not lost on those who see how Peel are also a major beneficiary of the planned football stadium at Bramley Moore. Indeed, across in the Wirral, as the council flag up scores of potential building sites, to the consternation of many residents, Peel again rears its ugly head. Its failure to match up its ten-year old bluster, promising development and meaningful investment, has now led Wirral South MP Alison McGovern, to belatedly call Peel to account. Put up or move on from its massive, if unproductive, land bank, she demands.

In Liverpool, I am told that the council – or rather the mayor – is looking again at off-loading the magnificent Croxteth Hall. There are also well-founded fears of fresh incursions across the city into its parks portfolio. One can only wonder where this enthusiasm for asset-stripping might end. The public alarm over this sale of the family silver is real and politically dangerous, although the role of government in pressurising councils is national and there for all to see. It is recognised as a product of the Tory obsession with smaller government; but is it, many ask, the role of local councils to fall in line so meekly with this right-wing ideology?

There is certainly huge frustration within local Labour parties; and Labour currently controls all councils within the Liverpool city-region. So, Momentum gets oxygen from what it sees as the complicity of the local Labour establishment in pursuing national government’s agenda. That being the case, it bodes ill for many Labour councillors looking for reselection as Labour candidates early next year.

It also sets a marker for Labour MPs who show scant awareness of the depth of anger felt within constituencies at what many members deem to be ineffective representation in parliament. The parliamentary predicament of the present administration is far worse than that faced by the doomed Major government. However, Theresa May et al remain convinced that the fear of Labour’s current leadership will keep the Tory party together, and leave Labour in the wilderness. Yet many local Labour Party members look on in bewilderment as they perceive their elected representatives to be sitting on the fence in Trappist silence, divorced from both local sentiment and local priorities.

As politicians of all persuasions prepare for their summer break, they may wish to reflect on their original decision to stand for public office. Reticence on the issues important to their electorates – whether on local or national matters – simply leaves a huge opening for others to fill. Whether such political opportunists are from the hard left or the hard right, they will not be slow to fill the burgeoning political vacuum.

Days of Reckoning

Whatever happens within the city of Liverpool reverberates across the whole city-region. This is undeniable. As the city of Manchester is the driver within its own city-region, so is Liverpool within ours. Therefore, it follows that events within Liverpool’s controlling Labour group have consequences for us all. It has not always been this way – that is, a dominant and numerically overwhelming Labour council – nor will it remain so. Anyone who has spent any time in politics knows that the political tide does inevitably turn – sometimes in a small way, sometimes in a spectacular fashion.

Thus, recent developments within Liverpool’s Labour group, and within the city-wide Labour Party, are of significance to us all. At first glance, it may be considered as solid a political edifice as one of the Three Graces; but appearances, as always, can be deceptive. The mayor, for example, has become increasingly as isolated as he has become regularly agitated. The recent loss of three leading members of his cabinet has left him with three formidable potential political enemies on the council’s back benches. It appears that he now recognises just how unpopular he is with both Labour Party members and the general public. Perhaps that is why he avoids both of these sets of the disenchanted whenever he can. Never the most industrious of politicians – he would be pushed to put in a two and a half day week – he has no political nous and no political strategy.

Changes in Liverpool’s constituency Labour parties are already preparing the ground for his demise. A recent notable sign of this has been the city-wide demand that he face a meeting of Labour Party members to explain his madcap scheme to borrow hundreds of millions of pounds to then lend to Everton Football Club. Next year, nominations will be called for the mayoral candidacy. That already seems to be a weighted contest against Mayor Anderson’s re- selection. Constituencies, branches, and affiliated organisations are lining up to see him off. I believe that there will be a parallel move to rid the city of the discredited post of elected city mayor. The old leader and council model of governance is viewed as far preferable to an all-powerful and unaccountable mayor.

Yet it is not just Mayor Anderson who faces political oblivion. My understanding is that rank-and-file Labour Party members, led by Momentum devotees, are seeking to cull during the re-selection process, those councillors whom they view as political deadwood. It remains to be seen how extensive this purge will be, and, more, importantly, whether or not it will help to effect change in the council’s prevailing but ailing culture.

Of course, before then, we can anticipate major court cases involving leading council personalities, both officers and elected politicians. Who knows where they will ultimately lead the city and the city-region. There is so much to spill out into the public domain, including the financial arrangements at the top of the ill-fated Liverpool Direct Limited. There is also the disgraceful – and continuing – scandal of the failed and fraudulent building projects, wherein both investors and contractors were ripped off, and council fees left uncollected. We may even see how much the council has spent on legal fees on behalf of departed chief executive Ged Fitzgerald, and the lawyers’ largesse disbursed on behalf of Mayor Anderson.

I know that this is not the most positive picture to paint of the city. A bright summer to date has lightened the gloom somewhat, as changes to the city’s skyline give an impression of progress. However, that is not the take of many on the current state of play. For example, how does one explain a recent gem whereby the council, in borrowing £200 million to repair potholes, incurs an extra £10 million of cuts (that is, additional to cuts already ordained) whilst that loan still has to be repaid with interest ? Is it any wonder that there is a popular perception that the current city council is a hotbed of ineptitude and corruption, unable or unwilling to provide the services which are its core business? Many may feel that that is an unfair characterisation, but, as my old mother used to say, the truth often hurts.

A Perfect Storm

Last week’s Panorama programme referencing Liverpool, set in train some of the notable events of recent days. Predictably, the BBC flagship was inhibited in its content by the threat of litigation if it said too much. In addition, many people are afraid, for whatever reason, to go on the record about the tragedy into which Liverpool is fast degenerating. I am told, for example, that fears for their jobs restrains many within the council from speaking out. However, enough was said on the programme, and sufficient connections made, for viewers to draw their own conclusions concerning the messy mix of the council, developers, and the local media. Hopefully, it might be the trigger for remedial action.

By action, I do not mean the absurd proposal of Mayor Anderson to seek “voluntary” declarations by developers of their good faith. The council is already duty bound to conduct due diligence on its deals with external partners. The whole point of due diligence – one of the areas in which the council is failing spectacularly – is to establish that individuals and their companies are reliable and trustworthy partners. Dishonest people lie as a standard business practice, or put up “clean” people as their proxies. When he first came to power, I pointed out directly to the mayor that he was dealing with dodgy people who were making claims about his probity. He did not like my advice, choosing instead to regard me (and others like me) as his sworn enemy.

His refusal – or inability – to recognize the scale of the corruption in the city, and his resultant failure to do anything about it, is matched only by the ”Echo’s” myopia with regard to local civic reality. This one time seeker of truth hit a new low last week, brazenly claiming for itself the credit for raising awareness of the scandal of the many failed development projects and the scams associated with them. Nothing could be further from the truth. In fact, it has consistently praised these same con artists and their fraudulent activities despite the pleas made to the paper by concerned citizens and investors. Private individuals have dug out the truth about these so-called “developers”, NOT the Echo.

In fact, what we have in Liverpool is a perfect storm for corruption. This has three major elements: an inept administration; a dysfunctional council machine; and a woefully inadequate local media. This does not mean that there are not many individuals who are committed councillors, able and willing public servants, or honest journalists. On the contrary; but they are overwhelmed by a culture which either ignores or fails to appreciate the abnormality of the city’s governance.

For many years, I have noted and commented upon Liverpool City Council’s institutional incapability of administering major projects. Unlike comparable cities like Manchester, Leeds and Sheffield, LCC has repeatedly failed to get to grips with the larger development needs of the city. A major part of this is down to a civic culture which is focused on the needs of the council as an organization, and its personnel, rather than on the needs of the population it is supposed to serve.

Nor is this just a recent phenomenon. This introspective culture has been around for over 150 years. It is for historians to explain this Liverpool “exceptionalism”; but in today’s world, it is a major drawback. I do not expect Mayor Anderson to understand the importance of this. Even if he was intellectually capable of doing so, his ego would not tolerate it. His wholly misplaced self-belief has, however, exacerbated that pre-existing problem. Having concentrated so much power in the administration in his own hands, he is simply unable to use them in a coherent and constructive way for the benefit of the city as a whole. Crooked developers see that. They and their allies within council structures take full advantage of this fundamental weakness at the heart of the city.

Thus, changing the people at the top – like the mayor, for example – whilst it would be welcome, would not of itself resolve the issue. Nor would a change in the structure – like abolishing the mayoralty, and reverting to a council leader and committee model of governance – be a panacea, although this would also be welcomed by many. Yet without a change in the civic culture – a much more difficult objective – I fear we will continue to have cycles of corrupted local government in the city.