APPENDIX 8
Supplementary memorandum submitted by
the Parliamentary Commissioner for Standards
Complaint against Mr Peter Mandelson
FURTHER
INFORMATION CONCERNING
MR MANDELSON'S
MORTGAGE
FROM
BRITANNIA BUILDING
SOCIETY
1. Since my report to you of 11 May 1999
some matters of information have been provided or clarified. A
note on the sequence of events, which takes account of that additional
information, is attached.
THE
LOAN FROM
MR GEOFFREY
ROBINSON
2. Mr Robinson provided two loans to Mr
Mandelson: one of approximately £23,000 (EF telephone
conversation with Herbert Smith, 19 May 1999) on 2 October
1996 to cover the 5% deposit and approximately £350,000 (the
rest of the £373,000) on 22 October 1996.
MR
MANDELSON'S
EXPECTED GIFT
FROM HIS
MOTHER
3. At the meeting of the Committee on 18
May 1999 Mr Mandelson said that he discussed house purchase with
his mother around Easter 1996 (Minutes of Evidence, 18 May
1999, Q3). On 23 May 1996, Mr Robinson offered him help with
house purchase should he need it. Mr Mandelson and Mr Robinson
house-hunted together, visiting 3 or 4 properties over the summer
(Q28).
4. Mr Mandelson told the Committee that
at no time during the period from Easter to 30 August 1996 did
he inform his mother of the kind of sums which would be required
to finance any property purchase nor of the price of houses he
viewed (Q1). Prior to signing the mortgage application
form he had not informed his mother of the amount (£373,000)
he expected to need from her to finance the purchase of the Northumberland
Place house in addition to a mortgage.
(Chairman) "When did
your mother know about the sort of money that was required?
(Mr Mandelson) When I told her.
(Chairman) When was that?
(Mr Mandelson) I suppose I went into
the detail of it in September. It was after I had completed the
application form." (Q9-10)
(Mr Williams) "Did you not, therefore,
alert her before going ahead to what you now discover to be the
scale of buying a property in an area that was too dear for you?
(Mr Mandelson) No, I did not." (Q159)
5. Mr Mandelson also said he did not discuss
his need for a loan with Mr Robinson until around 27 September
(Q20). Mr Robinson signed the cheque for the deposit on
2 October 1996 and exchange of contracts took place on 3 October
1996.
6. Mr Mandelson told Herbert Smith that
he only borrowed money from Mr Robinson on a temporary basis when,
immediately prior to exchange, his mother had started to waver
on providing the purchase monies. Mr Mandelson believed this to
be only temporary and concluded that his mother would put up the
£373,000 at completion. He told Herbert Smith that had he
not reached this conclusion he would not have exchanged contracts.
Mr Mandelson told the Committee that he does not recall telling
Herbert Smith that he would not have exchanged contracts.
INFORMATION
FROM MESSRS
HERBERT SMITH
7. "2. Payment of the Deposit
Our investigation has revealed that the Rt Hon
Geoffrey Robinson MP was involved in the purchase of Northumberland
earlier than the Society had first thought. After questioning
Stephen Wegg-Prosser at interview as to the source of the deposit
monies, we were informed by him in a subsequent telephone call
that his son, Benjamin Wegg-Prosser recalled collecting a cheque
for the deposit monies from Mr Robinson and delivering this to
WPF. Whilst WPF's Monies Received Form records the money having
been received from Mr Mandelson, Stephen Wegg-Prosser maintained
at inteview, and at all times since, that he could not recollect
personally ever seeing the cheque, and that he was not aware of
Mr Robinson's involvement in the transaction until the 14th-15th
October 1996.
Mr Mandelson confirmed that Mr Robinson had provided
the deposit monies in order to allow him to keep the vendor's
strict timetable for completion by exchanging contracts on 3rd
October 1996. Originally Mr Mandelson's mother was to put up the
deposit as well as the balance of completion monies. However,
Mr Mandelson explained that he had only borrowed this money on
a temporary basis from Mr Robinson when, immediately prior to
exchange, his mother had started to waver on providing the purchase
monies. Despite his mother's change of mind, Mr Mandelson believed
this to be only temporary and concluded that at completion she
would put up the necessary monies. Had he not reached this conclusion,
we are instructed that he would not have exchanged contracts."
(Extract from Herbert Smith inquiry report 22
March 1999.)
8. (Mr Mandelson) "I
do not actually recall saying to Herbert Smith, or making such
a categorical statement that if she had not helped me financially
I would not have gone through with the sale." (Q13)
and later
(Mr Williams) "Yes, but what they
say is that 'Despite his mother's change of mind, Mr Mandelson
believed this to be only temporary and concluded that at completion
she would put up the necessary monies." (Q190)
.............................
(Mr Mandelson) "Which page?
[of the Herbert Smith inquiry report]
(Mr Williams) It is sheet three, the
second paragraph. It is the second half of that paragraph that
is the relevant bit.
(Mr Mandelson) No, what they are saying
there is that before exchanging contracts I believed my mother
would finance it and she wobbled but I was convinced I could persuade
her back into her original position and if I had thought that
I was unable to persuade her I would not have proceeded with the
exchange of contracts.
(Mr Williams) That is what they are
saying, yes.
(Mr Mandelson) I do not think that
is true." (Q192-4)
9. The Committee was unclear about who had
instructed Herbert Smith in the last sentence quoted in paragraph
7 above. I asked Mr Duncan Wiggetts, who undertook the inquiry
on behalf of Herbert Smith (EF telephone conversation 19 May
1999) to clarify what had been said and by whom. He said "Mr
Mandelson told us that had he not reached this conclusion he would
not have exchanged contracts."
10. "3. Mother's Gift
Mr Mandelson has told us that he believed that
between exchange and completion his mother would become reconciled
to the proposal that she should advance the balance of purchase
monies and that she would ultimately put up the necessary monies,
thus allowing Mr Mandelson to repay the deposit to Mr Robinson.
However, Mr Mandelson became worried when he visited her, after
exchange, at the distress his request was causing and, only at
that stage, we were told, did he raise with Mr Robinson the possibility
of Mr Robinson lending the monies required for completion and
doing so on a long-term basis."
(Extract from Herbert Smith inquiry report 22
March 1999.)
11. (Mr Bottomley) "Was it
likely that your mother could have produced over £300,000
in cash without selling her home?
(Mr Mandelson) Certainly, yes." (Q86)
12. "4. Sale of Mr Mandelson's
flat at Wilmington Square
Both Mr Mandelson and Stephen Wegg-Prosser confirmed
that no contracts were sent out for Wilmington until after the
purchase of Northumberland (as no firm offers were received during
the early period) and that it was clear from as early as mid to
late September that there would be no simultaneous sale and purchase."
(Extract from Herbert Smith inquiry report 22
March 1999.)
13. (Chairman) "Did you
originally tell the Britannia that you intended to complete on
the sale of your London flat at the same time as you completed
on the purchase of your house in Northumberland Place?
(Mr Mandelson) Yes. My firm intention
was to have a contemporaneous sale of my flat in Wilmington Square
in Clerkenwell, discharge my mortgage in Hutton Avenue, Hartlepool
and the purchase of Northumberland Place." (Q33)
14. "5. Mr Mandelson's position
There is no doubt that Mr Mandelson failed to
ensure that all material information was disclosed in the mortgage
application form when he signed it and submitted it to the Society.
It is also clear that Mr Mandelson failed to inform the Society
of material changes to the nature of the transaction: in particular,
the loan from Mr Robinson (first, the deposit and, then, the balance)
and the delay in the sale of Wilmington."
(Extract from Herbert Smith inquiry report 22
March 1999.)
15. On the basis of this information my report
to you of 11 May 1999 was not complete. Mr Mandelson failed to
inform the building society of three material facts rather than
two:
(i) he did not inform the building society of
his outstanding loan on his Hartlepool house when he filled in
his mortgage application form on 30 August 1996;
(ii) he did not inform the building society of
his loan from Mr Robinson for the deposit of approximately £23,000
on 2 October 1996, nor the terms of the loan drawn up by his solicitor
on 14/15 October 1996, nor of the loan of £350,000 for the
balance of the purchase price which Mr Robinson provided on 22
October 1996;
(iii) he did not inform the building society
when it became clear in mid to late September that the sale of
his Clerkenwell flat (Wilmington Square) would not be simultaneous
with the purchase of Northumberland Place.
MY
CONCLUSION
16. My conclusion that Mr Mandelson breached
the Code of Conduct for Members arises from my finding that he
failed, after the 30th August 1996 and before accepting the Britannia's
loan at completion on 23 October 1996, to inform the Britannia
Building Society of the material facts set out above. This conclusion
is based on established facts.
17. I have not found it necessary to decide whether
Mr Mandelson's mother had offered to provide him with the loan
of £373,000 towards this purchase at the time he signed his
mortgage application form and made his statement to Britannia
Building Society about how he was funding the balance of the purchase
price.
| 20 May 1999 | Elizabeth
Filkin |
| 
