Virtual Lancaster

Report by Zoe Caldicott

Additional research by the virtual-lancaster team

Last updated to include comment from Council Leader Langhorn: 25 May 2010

How do private companies work behind the scenes to win council development contracts, even, perhaps, at the expense of local taxpayers’ interests? virtual-lancaster has uncovered negotiations on the fate of Lancaster Market, saved in March 2010 by a Full Lancaster City Council vote from closure, that cast a disturbing light on the proposed retail partner, ASCO and its methods of operation.

ASCO itself was wound up on 17th May, despite a last minute offer to creditors to accept reduced payments of debts in order to continue operation, reported in trade magazine Crains.

The information virtual-lancaster has uncovered does not in any way imply that Lancaster City Council failed to follow normal procedures in their negotiations. However, these procedures appear to give preferment to arrangements founded on conflicts of interest which could have cost local taxpayers dear, especially in the light of ASCO’s recent financial plight and wind up.

In the run up to the Council’s decision on the future of Lancaster Market, Lancaster City Council contracted the Manchester-based branch of an American consultancy firm, Cushman & Wakefield, to find a single retailer to take over the lease of the market building.

Cushman & Wakefield subsequently proposed ASCO stores, then owned by Ted Ward, to be that retailer – a company for whom they had already been cutting deals with to secure 30 new sites including the former Marks and Spencer Simply Food halls across the country.

Based on publicly-available figures published by the Council in the Cabinet agenda for 23 March 2010 we believe Cushman & Wakefield received about £30,000 for advising the Council and its officers to deal with ASCO – despite publicly available information as to founder director Ted Ward’s business history which has now led to him being banned from being a company director for 12 years. (We have asked the City Council for confirmation of this and have been told to expect a response in due course).

Had the deal gone ahead, Cushman & Wakefield would also have stood to benefit financially from any rebuilding of the Market.

It is believed the cost of reconstruction, converting the building for single retailer use, would cost at least £500,000, earning Cushman & Wakefield around £60,000 for design in the first two years alone. C&W therefore had the power to exercise substantial influence over which contractor was to perform the ‘gutting’ — deciding how the £500,000 of taxpayers money would be spent.

Whilst most taxpayers would expect any design, project management or rebuilding work of this nature to be put out to tender, virtual-lancaster has learned that Lancaster City Council decided to apply rules to avoid this.

It is the City Council Corporate Director’s decision to decide if competitive tenders need to be sought by following contract procedure rules. In this case, Lancaster City Council decided that Cushman & Wakefield were the only company who were able to provide this specialised service, and that no satisfactory alternative was available.

The Council have explained that because Cushman & Wakefield employ Gareth Colin Jones, a former member of staff from P&O Properties, part of Centreville, who originally commissioned the market, they have specialist knowledge of the building. According to Mr Jones, he is considered the ‘expert’ as he was in charge of the build and it was ‘only by chance’ that he was involved in this process.

However, there were many others involved in the build including Bovis Construction, the Building Design Partnership, and local firm Piningtons, so it is possible that there may be many other ‘experts’ who could have been satisfactory alternatives.

Contrary to claims circulating online, Cushman & Wakefield deny that they or any of their employees owned shares in ASCO.

“Cushman & Wakefield LLP has a duty of confidentiality to its clients and is not able to discuss its clients’ matters,” A J Bray, a partner in the company, told us. “Neither Cushman & Wakefield nor Matt Illingworth holds shares or have held shares in ASCO. Cushman & Wakefield operates a strict conflicts of interest policy as is required by RICS [Royal Institution of Chartered Surveyors]. There is no issue of a breach of our conflicts of interest policy.”

Cushman & Wakefield’s local agent, Matt Illingworth, has also categorically denied owning any ASCO shares, but stated that he was acting as a retained agent for Lancaster City Council and ASCO stores concurrently.

“I definitely made Lancaster City Council aware of this,” he told virtual-lancaster.

Illingworth previously worked for Donaldsons, who were commissioned to carry out an independent shopping survey for Lancaster City Council in 1998. Donaldsons then brokered the development agreement between Lancaster City Council and Centros Miller as preferred developer, again being, like Cushman & Wakefield, retained by both sides.

In addition to being retained as consultants to the Council in drawing up the Development Agreement their work for LCC also included providing the sole valuation for the council’s landholding; whilst Donaldson’s provided retail consultancy and letting agency services for Centros Miller on the Canal Corridor North site.

Asked about the relationship with Cushman & Wakefield, Cabinet member and Green Councillor Jon Barry, one of the few councillors to raise concerns about the proposed deal from the outset, says he was not aware that the consultancy firm was also working for ASCO Stores Ltd.

Will the proposed ASCO deal be investigated?

Despite considerable concern about the proposed deal, the Council’s auditors have rejected appeals for investigation, prompting concern that the role of the district auditor has been perverted by the introduction of private sector competition into local authority auditing services and the establishment of a client/contractor relationship.

Green councillor John Whitelegg told virtual-lancaster he asked the Audit Commission to investigate the recommendation made by officers in favour of the ASCO deal at Cabinet in February.

“It’s my view that it was poor judgment and irresponsible to recommend giving a huge sweetener to a near-bankrupt company with a credit rating of 3 out of 100,” he told us, before ASCO was wound up. (0 is bankruptcy).

This credit rating information was not made available to cabinet members in February.

“The Commission passed my complaint onto the commercial company KPMG who are the Council’s auditors and after several weeks KPMG has rejected my complaint saying it does not fall within their remit.

“I am disappointed.”

At the meeting of full Council on 31st March it was even clearer that ASCO represented an unacceptably high risk to the taxpayer, John says, and yet the leader of the Council, Stuart Langhorn, repeated the original officer recommendation of 16th February.

(UPDATE 25/5/10: Councillor Langhorn, disputes this interpretation of the meeting, telling virtual-lancaster it is incorrect and that “no recommendation was made by me and the report contained no recommendations.”)

“I do not understand why council officers could even contemplate making this recommendation when the available evidence was so heavily stacked against ASCO and when we are dealing with large amounts of taxpayers’ money,” Coun Whitelegg says. “No well-directed private business would have given this idea any house room at all.

“I find this deeply worrying, especially after ASCO closed down its only store in Warrington less than two weeks after the full council decision, leaving staff and suppliers unpaid.”

virtual-lancaster has asked the City Council the following questions in the light of our research. We have been told to expect a reply in due course but decided that further delay in the publication of this story was not in the public interest.

1) When did Lancaster City Council contract with Cushman & Wakefield to find a trader to occupy the market hall?

2) What were the broad terms of the contract?

3) Can you confirm that Cushman & Wakefield was paid at least £30,000 for its services, as suggested by the publicly available documents presented to City Cabinet on 23rd March 2010?

4) Can you confirm that the contract now been terminated/completed and state what Cushman & Wakefield has been paid in total for its services under this contract?

5) How was the cost to the taxpayer of the ‘white box’ refit to be capped at £500,000?

Responding to our story, Council leader Stuart Langhorn again comments on the financial implications of retaining the market building.

“The context of my view is important – and that is the significant risk to the council tax payer of the district with the market as it is and continues to be. Indeed the position I took was to mitigate the risk – which was acknowledged to be great.

“The fact is that I was the one who moved the establishment of the task group to look at the market situation,” he continues. “So, in terms, of placing checks and balances I did more than any other Cabinet member to get the issue discussed in a sensible manner.

“The original decision was made, and the decision to appoint Cushman and Wakefield, before I was Leader and no one on Cabinet suggested that there was an issue with them.”

The Final Fate of ASCO?

If the murky world of now-wound-up ASCO and its business dealing were not already unclear enough, further information regarding ASCO’s chief shareholder and former Managing Director Ted Ward has also come to light since the City Council rejected the proposal to close the Market and offer the building to a single retailer – revealed as ASCO in the Morecambe Visitor on 2nd March, but named by council staff in meetings with Market traders some two weeks earlier.

Companies House research reveals that Mr Ward has been banned in March for 12 years from being a company director on the grounds that he is unfit to undertake this role. This punishment was the result of his Blackhurst and Ward venture which ended in January 2010 in compulsory liquidation, the company owing just over £626,000.

If Ward was found to be controlling any of his other companies from behind the scenes, he runs the risk of being prosecuted and liable for all company debts under section 15 of the Company Director Disqualification Act 1986.

At least three companies supported Evolve’s successful winding up petition against the company: Hammonds of Kuntsford, a wine supplier owed £19,400, a cleaning company owed £4,000 and a refrigeration company owed £4,000.

Cushman & Wakefield’s Matt Illingworth requested that Evolve kept the petition of out the London Gazette just before Lancaster Council’s final decision. In doing so, this would have minimized any negative publicity for ASCO.

“Home Solicitors [who represent Cushman & Wakefield/ASCO] contacted our solicitors and said that they would give us a post dated cheque if we did not advertise in the London Gazette,” Paul Davidson from Evolve told us. “Obviously, we refused and told them the money along with interest would have to be paid in full.”

“Matt Illingworth phoned me and wanted us to pull back,” he added. “He said he would keep me updated on developments and would phone on a daily basis. That was the last I heard from him until I telephoned him. He was very cool with me on the phone and his response was that he hadn’t been in touch because I had gone ahead with advertising the petition in the Gazette, which I replied to him that was always the case and the only I would pull back is if we got paid in full.

“I found him to be very coy and defensive towards ASCO and the management – so much so, I commented to my Finance Director that I thought he was on the payroll of ASCO.”

Before its difficulties, ASCO had lined up several store openings in Formby (at the beginning of May), Newcastle Under Lyne, Huntingdon, Leeds and, in July, Doncaster.

Information received by virtual-lancaster indicates that Cushman & Wakefield believed they had agreed terms on Lancaster Market hall by the end of March, before the Full Council meeting rejected the plan – but they did not expect ASCO to take over the Market until June 2011.

In other news, Crain’s Manchester (subscriber access required) recently reported that Gavin Wall, who is Ted Ward’s and ASCO’s legal representative, the Chief Executive Officer of Home Solicitors, was had been shot in the leg at his home address by two masked men only a month after opening his firm.

Wall is an ex-Wolstenholmes employee, a leading law company which, according to The Times, regulators closed down. Five solicitors were suspended after allegations of dishonesty and breaches of accounting rules involving hundreds of thousands of pounds of clients’ money.

Home Solicitors began working for ASCO on their first day of operation.

• Council Rules: http://committeeadmin.lancaster.gov.uk/Published/StdDataDocs/1/3/3/0/SD00000331/NPart5FinancialRegulationsSection2ContractsMarch2010.pdf (PDF)