Examination of Witnesses (Questions 140-155)
DEPARTMENT OF
ENTERPRISE, TRADE
AND INVESTMENT
AND INVEST
NORTHERN IRELAND
13 FEBRUARY 2006
Q140 Jon Trickett: Then the company
went bust.
Mr Harding: To my knowledge it
is as you describe.
Jon Trickett: Apart from the fact that
this is an absolutely extraordinary set of innocent relationships,
if innocent is the right adjective to use, has any thought been
given to the quality of Mrs Townsley's advice about the nature
of this company at the time at which a further £25,000 was
handed over to them? The loan was made in February 2003 and the
company went bust in September of the same year with total losses
to the public sector of £100,000. Has somebody gone back
and looked at whether this advice was sound advice at the time
or whether there is a case for civil action against the Townsleys,
MTF or any other adviser related to the Townsleys? Has that been
explored? There is a phrase in here about, "the board were
made aware that there was a risky sector", but the company
went bust a few months after this £25,000 fast track loan
had been recommended by Mrs Townsley herself. Her and her husband
had intimate knowledge about the company, they were shareholders,
they had a business relationship in the past, and they were trading
through a subsidiary with Arcom. Has any thought been given to
the fact that this may well have been negligent advice?
Chairman: I am sorry, you cannot just
shrug again, you are here to answer questions.
Q141 Jon Trickett: We have been given
advice that they have lost £100,000, made a £25,000
fast track loan, paid all this money for blinking shares, Mr T
is well engaged in this company, very deep into it, and Mrs T's
two separate companies are trading with Arcom from time to time
and she is advising them on the £25,000. Do you not feel
extremely unsettled and should we not be looking at every word,
jot and tittle that she has advised the board on and the public
sector about this further £25,000?
Mr Morrison: Can I say, Mr Trickett,
any company that needs a fast track loan needs it because it is
in difficult financial circumstances. Clearly the way things panned
out it was a bad decision. It is always very easy after the fact
to say that. I would say that the set of circumstances that you
describe I find disturbing.
Jon Trickett: I am sure the Committee
will think the word "disturbing" is an English understatement
really.
Q142 Chairman: Mr Quinn, you are
new to all of this. It must have been a shock to you to come to
this new Department with this Report from the Comptroller and
Auditor General appearing on your desk. Would it be an overstatement
to say that some of the controls that your predecessors were exercising
were more akin to those pertaining in a Banana Republic than in
a department of state in the United Kingdom?
Mr Quinn: The Report is rightly
critical but it is also precisely critical. It is very specific
about what was done wrong and what was not done right. I prefer
to take a rather more analytical approach to it because the issues
are serious and they deserve serious consideration.
Q143 Chairman: How are you going
to restore confidence in your Department now you have taken over?
I presume that you are here to do that, what are you going to
do?
Mr Quinn: I would make two broad
points. One, I think the Department made the first step in restoring
confidence when it recognised in December 2002 that its oversight
of its NDPBs had not been up to scratch. I think that was a first
important step. Two, if you read paragraph 17 and the very long
list of steps the Department has taken since then, which we continue
to take, that is essentially the agenda that we have for
restoring confidence in the Department's oversight of its NDPBs.
I am in no doubt that my colleagues in the Department and in the
NDPBs are now fully aware of the standards of public administration,
governance and financial control that I would expect.
Q144 Mr Williams: The Sharman Committee,
which was set up to look at accountability of all public functions,
recommended that all government companies should in future be
audited in the UK by the National Audit Office. The same applied,
Mr Dowdall, to yourself. Have you now got full auditing rights
to all the companies or are there any that are still outside your
reach?
Mr Dowdall: The key thing in relation
to this case is that I have full auditing rights in relation to
INI, the successor body to LEDU, which is a full NDPB. I would
now have the right to audit any government company set up as a
company limited by guarantee. Even the Sharman Rules would not
have given me the right to audit EBT. I think the changes introduced
at the time of Sharman would have given me unequivocal access
rights so that if there was any hint that anything was wrong I
would not have had to negotiate my way in, I could now go in and
investigate them.
Q145 Mr Williams: This Committee
wants to be reassured that you now have all the access you require
that is permissible under the Sharman recommendations.
Mr Dowdall: Yes, I have.
Q146 Mr Williams: There is nothing
left outside now, because if it is we would like to focus on it
obviously in view of this situation and make recommendations.
Mr Dowdall: I know the work that
you have done to ensure that the National Audit Office has these
full rights in GB. That has been implemented in parallel in Northern
Ireland and there is just one more step to go in both GB and Northern
Ireland, as you know, in terms of auditing companies, which is
in hand at the moment.
Q147 Mr Bacon: Mr Quinn, the total
funding to EBT was in the region of £4.35 million, is that
correct?
Mr Quinn: That is correct.
Q148 Mr Bacon: How much of that went
to the accountancy practice controlled by Mrs Townsley?
Mr Quinn: I think the figure is
£1.4 million.
Q149 Mr Bacon: £1.4 million
out of the £4.35 million.
Mr Quinn: Yes.
Q150 Mr Bacon: In other words, around
a quarter of the total monies that were made available for this
small business regeneration went directly to this accountancy
practice. Is that correct?
Mr Quinn: Yes.
Q151 Mr Bacon: It says that you are
hoping to get back some monies through the liquidator. What is
your best estimate of what you will recover?
Mr Quinn: I think we are hoping
to recover about £1.9 million. I look to my right. The difference
between what we put in and the likely recoverables is in the region
of about £2.4 million
Q152 Mr Bacon: Are you hoping to
recover any monies from Mrs Townsley or Mr Townsley?
Mr Quinn: I do not think there
is action in train along those lines.
Q153 Mr Bacon: Do you anticipate
that there will be?
Mr Quinn: I will turn to Invest
because they are dealing with the liquidator.
Mr Morrison: I think it is for
the liquidator to decide whether any Reporting action is necessary
in relation to the directors of EBT. We are not intending to take
any action.
Q154 Mr Bacon: Could you repeat everything
loudly, please, because I cannot hear what you are saying.
Mr Morrison: Sure. It is up to
the liquidator to decide whether it needs to Report any potential
action in relation to the directors of EBT. That is its duty.
For our part, we are not expecting to take action at this stage.
Q155 Chairman: I think that concludes
our hearing. It seems to me that this is one of the worst cases
of conflict of interest and impropriety this Committee has seen
in a long time. It is deeply worrying to us that this went on
for many years under the noses of supposedly close oversight by
your officials. You allowed LEDU to operate outside the Code of
Public Conduct which every accounting officer is charged with
upholding. You can expect our Report to indict your Department
for serious dereliction of its responsibilities. I assume you
have been sent to clean up this mess so we will judge you on the
quality of your response. Do you wish to say anything further?
Mr Quinn: No, thank you.
Chairman: Thank you. That concludes our
hearing.
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