Anatomy of a cover-up

Thankfully, Plaid Cymru are taking an interest in the Pembroke Dock grants business.
This is just as well because with a Labour government in Cardiff and the Conservatives in control in county hall, albeit sailing under the IPPG’s flag of convenience, nobody else has any interest in getting at the truth.
Plaid AM Simon Thomas has been asking questions and has received a letter from Welsh Government minister Lesley Griffiths AM explaining the current situation.
And, it seems, the problems with the grants scheme are now being dressed up as mere administrative failings.

In her letter the Minister claims:

“The Welsh European Funding Office (WEFO) investigation found the council’s procurement procedures were not followed and there was insufficient evidence to support the expenditure claimed. It will, therefore seek to recover a proportion of the grant paid to the council against this expenditure and will remove the properties in question from the EU scheme.

The investigation is now complete and WEFO is now satisfied the council has taken appropriate action to protect European Union (EU) funds in respect of current and future claims and has lifted its suppression of EU payments to Pembrokeshire County Council for the scheme”.

No mention anywhere of potential fraud – just someone failed to fill in the forms correctly.

I will consider these weasel words in more detail at the end of this piece, though I should explain the the “suppression of EU payments” refers to WEFO’s decision, now reversed, to halt further payments to PCC while the matter was investigated.

Two sample projects have been referred to the police: 10 Meyrick Street and 29 Dimond Street Pembroke Dock, and the minister says:

“Throughout the investigation WEFO worked closely with PCC and the police and going forward I understand the police and the council may continue to to work together on specific issues. However these do not form part of the Commercial Property Grants Scheme (CPGS), or any other EU funded scheme led by the council and so it would be inappropriate for the Welsh Government to comment further at this time.”

This claim, that the two schemes are not part of the CPGS, is hard to swallow given that I have a box full of documents which show that both 10 Meyrick Street and 29 Dimond Street received large dollops of EU money under the scheme.

However I think there is an explanation for this apparent disconnect between the facts and the Minister’s claim which I will provide at the end of this article.
In the meantime, let us take a look at the history of this long-running cover-up.

I first wrote about it on April 25 2013 when I produced a table which showed that five projects involving Mr Cathal McCosker (and companies which he controlled) his architect Kinver Kreations, and contractor G&G Builders Ltd had attracted grants that were, on average, three times greater than those awarded to 12 other developments.

Pembrokeshire’s Best magazine had earlier published an article about Mr McCosker’s publicly-funded stable of bedsits in Pembroke Dock in which the developer was labelled “The Baron of the bedsits”, but my concern was with the amount of grants received.

Cllr Michael Williams, Plaid’s leader on PCC, took up the cudgels and on 17 June 2013 he raised the matter at the audit committee of which he was then a member and it was agreed that a report would be brought before the next meeting.

When the committee next met on 23 September members were told that a report had been prepared by the council’s internal audit service which showed that my allegations about these grants were without foundation.

The minutes for the meeting record:

“Internal Audit has shared its findings with the Council’s Monitoring Officer who is satisfied that there is no evidence of maladministration or non-compliance with the governance arrangements relevant to the specific schemes or of any lack of competence in officers concerned with the administration of the schemes.”

In the meantime, in response to my Freedom of Information request, the council had provided me with copies of the Bills of Quantities (BoQs) for two of Mr McCosker’s projects (25 and 29 Dimond Street) and, though all the builder’s rates and totals had been redacted, armed with a scale rule I was able to compare the quantities in the BoQs with the plans on the council’s planning website.

It soon became clear to me that, whatever the Monitoring Officer and the internal audit service might say, there were some serious irregularities.

However, to be absolutely sure of my ground I needed to see the priced BoQs so I put down a Notice of Motion to the October meeting of full council calling for these unredacted documents to be made available to all elected members.

That NoM was remitted to cabinet which considered it at its meeting on December 2 when I came under attack from both the Leader and the responsible cabinet member Cllr David Pugh, who claimed that I didn’t understand how the grant system worked.

A report by the internal audit service informed members:

“By the time that these concerns were raised the CPGS, and the wider Pembroke and Pembroke Dock Regeneration Scheme, had already been through a number of in depth audits by four different auditors:

• Wales Audit Office (WAO)
• Welsh Government European Funds Audit Team (EFAT)
• The Directorate General for Regional and Urban Policy, European Commission.

None of these found any shortcomings.

The concerns expressed have been taken seriously leading to a review of the operation of the CPGS by the Council’s Internal Audit Service. This review, which was reported to the meeting of the Council’s Audit Committee on 23 September 2013 found no cause for concern.

Before that meeting, Councillor Stoddart circulated a letter to Audit Committee Members setting out his concerns. It would seem that the concerns expressed have arisen in large part due to misunderstandings about the operation of the CPGS. There is every reason, based on the assurance provided by the aforementioned external auditing bodies, to consider that the procedures and operation of the grant scheme are both sound and effective.”

This is just what the cabinet members wanted to hear and they unanimously agreed to recommend to full council that my NoM be rejected.

Labour Leader Cllr Paul Miller was also taking an interest in the subject and he put down a NoM calling for the establishment of a panel of members to take an in-depth look at the way these grants had been administered.

Predictably, Cabinet were at one in recommending that this, too, should be thrown out.

When the Cabinet’s recommendation came before full council on December 12 the report on Cllr Miller’s motion stated:

“• The procedures used to administer the CPGS had been approved by WEFO before the scheme had been allowed to operate. The various allegations had not damaged the Council’s standing with the relevant grant funding bodies, as alleged in the supporting statement, because audit evidence did not support them.”

“• In addition to the external audits, an Internal Audit review had been conducted in response to concerns raised by some Members. The Internal Audit review had concluded that those concerns were not substantiated. Immediately before the meeting of the Audit Committee [on September 23] to consider the Internal Audit report, Councillor R M Stoddart had circulated a letter making further allegations. A report in response to that letter, and to other anonymous allegations, was due to be considered by the Audit Committee at its next scheduled meeting in February. The report would demonstrate that the allegations were without substance.”

After repeating what was said in respect of Cllr Miller’s proposal, the report to the December 12 full council meeting where members were recommended by officers to refuse my motion records that, when the matter came up for discussion ten days earlier at cabinet:

“The Leader expressed his disappointment that Councillor Stoddart considered there was any impropriety with the administration of the scheme and with the investment made in Pembroke Dock given that the local Community was desperate for such levels of investment to rejuvenate Pembroke Dock.

Cabinet Members were also concerned by the comments made given the substantial amount of audit work undertaken at every stage of the process and the fact that no shortcomings had been identified.”

Part of Cllr David Pugh’s contribution to the December 12 full council is recorded in the minutes as:

“He also advised Council that, in considering the matter, Cabinet had received a rebuttal of the allegations made by Councillor Stoddart in his submission and all the concerns raised had been addressed and refuted. He reminded Council that both the THI and CPGS had been the subject of numerous audits where no wrongdoing or fraud had been found.”

Though, as we all know, from the webcast of the meeting he said a good deal more than that, including the accusation that I was someone who “didn’t have truth on his agenda”.

As it turned out, almost everything Pugh said during his ten-minute tirade turned out to be untrue, and that part concerning his visit to the attic at Coronation School, outright lies.

However, the IPPG had a problem because if they refused my request to see the documents it might look like they had something to hide.

So they hit upon what they thought was clever ruse: they argued that, as the matter was already under consideration by the audit committee, there was no need for my proposal. And, of course, as the audit committee, of which I was not a member, would deal with this matter in closed session, the information would be safe from my prying eyes.

The audit committee next met on January 2014 when it was addressed by the Director of Development Dr Stephen Jones.

The minutes record:

“The Director of Development addressed the meeting and he advised that he was the Lead Director with overall responsibility for the Regeneration function of the Authority. He advised that he did not have operational management responsibility for the programmes in question and, on that basis, it was difficult for him to give any personal guarantee that every penny had been accounted for. However, he believed that the evidence to be provided in due course would demonstrate that processes were in place to ensure that the funding had been managed in accordance with the relevant grant conditions.

The Director of Development stated that both the Welsh European Funding Office (WEFO) and the Heritage Lottery Fund (HLF), as providers of the grant funding, were satisfied with the management of both programmes. It was noted that WEFO and HLF were responsible for hundreds of £millions of grant funding; that they both used a risk based audit approach and that they had indicated their satisfaction with the audit of approach used in Pembrokeshire.

The Director advised that Pembrokeshire was considered one of the best performers in Wales having won a recent HLF award for the THI Programme in Haverfordwest, which reflected the quality of provision of the scheme. Similarly, WEFO was satisfied that the CPGS was being delivered in accordance with the grant offer and the project had recently been awarded, in principle, further funding for the two towns.”

At the suggestion of the then chairman of the audit committee Mr John Evans it was agreed that all the files on these grant projects would be assembled in a data room where committee members could inspect them and make notes at their leisure.

And that was when the clever ruse at full council turned out be not so clever after all because my knowledge of Section 100 of the Local Government Act – that’s the one which gives members of the public the right to attend meetings, inspect documents etc – acquired during my time as a journalist, led me to believe that all elected members had a right to inspect these documents, not just those who sat on the committee.

So it was, after a protracted exchange of emails, that the Monitoring Officer eventually had to concede that my interpretation of the law was correct and I was allowed access to the data room.

But that was not the end of the matter because all I was allowed to do was inspect the documents and make notes.

However, after another exchange of emails with the Monitoring Officer, culminating in a robust exchange of views in his office during which I threatened, if necessary, to go to the High Court to enforce my rights under S100 it was eventually agreed that I could take photocopies of any documents I wished.

To say the data room was a goldmine of information would be an understatement.

The only problem is that members have the information on a confidential basis, so I am not able to reveal everything I know, though nobody should be in any doubt that, if I come to the conclusion that a cover-up is being engineered (and I’m nearly there), I will put everything I know in the public domain and, if that should lead to a brush with the Ombudsman and the standards committee, I will head straight to the High Court armed with the public interest defence.

However, as I understand the law, the confidentiality requirements only apply to commercially sensitive information, so there are things I can say without, hopefully, getting into trouble.

For this grant scheme fraud to work, the developer needs a compliant architect and builder.

One difficulty with a competitive tendering process in place, is to ensure that the “right” builder wins the contract. There are several possible ways to achieve this.

One is to include operations in the BoQs that are never intended to be carried out which the builder “in the know” can price at loss-making rates to gain an advantage over the others, who, naturally, proceed on the basis that all works contained within the BoQ will be required.

Another is to over-specify e.g purpose-made hardwood windows when the intention – known only to the favoured builder – is to use standard softwood which come in at about a quarter of the price.

And simplest of all, as the tendering process is totally under the control of the developer’s architect, open all the other tenders and then give your man the nod as to the price he has to beat.

In the case of No 10 Meyrick Street, the chosen method was to provide the preferred builder with a different BoQ than the rest.

So while the other 15 tenderers were pricing for 490 sq metres of hack off and re-render, the version submitted by G&G Builders called for only 156 sq m.

This gave G&G a roughly £10,000 head start – a not inconsiderable advantage in a contract worth approximately £100,000.

It was the discovery of this ruse during a visit to the data room by the author of that other website and myself that finally persuaded the council to take my allegations seriously, though you have to wonder why the army of auditors who had given the projects a clean bill of health (see above) hadn’t spotted this themselves.

Jacob and I took this evidence to the Director of Finance and soon after the police were alerted.

The council then collected a dossier of evidence – much of which was provided by me – and on 8 April 2014 this was sent to Dyfed-Powys police.

This included a spreadsheet that I had worked up which showed that, in the case of 29 Dimond Street (Paul Sartori charity shop) there had been payments of grants in excess of £40,000 for work that was either ineligible for grant aid, or, in some cases, simply not done at all.

Examples can be seen at Shop fit-up and The roof, the whole roof, and nothing but the roof.

On June 9 this year I had a meeting with three officers from WEFO during which I explained at some length how these irregularities came about, including a detailed examination of those at 29 Dimond Street (see links above) and 10 Meyrick Street.

These are the two properties referred to in the Minister’s letter about which she says:

“However these do not form part of the Commercial Property Grants Scheme (CPGS), or any other EU funded scheme led by the council and so it would be inappropriate for the Welsh Government to comment further at this time.”

So, if these two projects do not form part of the CPGS scheme, why did three officers from WEFO travel all the way from Cardiff to Liddeston and spend two hours discussing them with Old Grumpy?

During that meeting I was told that McCosker had offered to pay back an unspecified amount of overclaimed grant money and that WEFO would be recovering this from PCC.

According to a recent article in the Pembrokeshire Herald, this comes to £144,000 for the two projects discussed above, but it is not known how much is involved in the other three McCosker projects.

My understanding is that Mr McCosker offered to repay the money after the council asked him to provide bank statements as proof of payments he is supposed to have paid to G&G Builders.

You might wonder why he might prefer this course to the cheaper option of providing the bank statements.

One possibility is that the payments were never made – at least not the full amount on which the grant was based – and he has concluded that £144,000 is a small price to pay to avoid appearing in court on a fraud charge.

As I promised at the beginning, I will now explain the thinking behind the Minister’s remarkable claim that 29 Dimond Street and 10 Meyrick Street “do not form part of the Commercial Property Grants Scheme.”

The explanation for that is to be found in another part of her letter when she says:

“It [WEFO] will, therefore seek to recover a proportion of the grant paid to the council against this expenditure and will remove the properties in question from the EU scheme.”

So, having recovered the grant money, WEFO will expunge these projects from the records and pretend they were never in the scheme in the first place.
And, if the schemes were never in the scheme, WEFO’s auditors can’t be blamed for failing to notice the various scams that I have identified.
Very neat!

It is difficult to decide whether this parallels Stalin’s practice of airbrushing victims of his purges from official photographs, or Winston Smith in Orwell’s 1984 beavering away rewriting history at the Ministry of Truth.