Sir Bob Russell - Standards and Privileges Committee Contents


Appendix 1: Memorandum from the Parliamentary Commissioner for Standards


Complaint against Sir Bob Russell MP

Introduction

1. This memorandum reports on my inquiry into a complaint that Sir Bob Russell, the Member for Colchester, made claims against parliamentary allowances for the rental of his constituency office from 2002-03 to 2009-10 when that accommodation was owned by a company in which he and a family member held shares.

Background

2. On 6 November 2011 Mr Daniel Ellis wrote to complain about the ownership of the property in which Sir Bob Russell had his constituency offices.[21] Mr Ellis's complaint related to arrangements in place until June 2010 and he informed me that he had sent a version of his complaint to the Independent Parliamentary Standards Authority (IPSA), which had been responsible for the payment of Members' claims since May 2010. On 10 November, my office wrote to Mr Ellis to inform him that, once IPSA's process had been concluded, I would consider whether he had provided sufficient evidence to justify my initiating an inquiry.[22] I confirmed with the IPSA's Compliance Officer on 5 December that IPSA's consideration of the matter had been concluded.[23]

3. In his letter of 6 November, Mr Ellis had provided evidence of the ownership of the Magdalen Hall Company Limited, which he believed showed that Sir Bob Russell was the "largest shareholder" and that Sir Bob Russell's sister-in-law was amongst the other shareholders.[24] Sir Bob Russell's constituency office was located in a building owned by the Magdalen Hall Company Limited. Mr Ellis said it was his understanding that Sir Bob Russell had claimed "circa £780 per calendar month for renting his constituency office, Magdalen Hall." He said that the original lease indicated that the building had been sublet through Colchester Liberal Democrats but the more recent claims under the Incidental Expenses Provision indicated that the rent was paid directly to Magdalen Hall Company Limited, the company in which he believed Sir Bob Russell and his sister-in-law held shares.[25] Mr Ellis said: "It is my reading of the above that Mr Russell used public money to rent an office, directly or indirectly from a company that he, his sister in law, Lib Dem councillors and others own."[26]

4. Mr Ellis said that all versions of the Green Book were clear on the rules relating to constituency offices: they stated that a Member of Parliament must avoid any arrangement which may give rise to an accusation that they or someone close to them was obtaining an element of profit from public funds. He then quoted from the Green Book the rules which prohibited Members using their allowances to meet the costs of leasing accommodation from themselves or an organisation in which they or a partner or a family member had an interest. He enclosed extracts from the Green Book editions from June 2003 to July 2009.[27]

5. With his letter Mr Ellis enclosed a Companies House annual return for Magdalen Hall Company Limited, which he said showed that on 10 January 2010 Sir Bob Russell held 500 ordinary shares, and a person whom he identified as Sir Bob Russell's sister-in-law held 10 ordinary shares.[28] He enclosed a further Companies House annual return dated 10 January 2011 on which he noted that Sir Bob Russell had transferred his 500 shares on 5 June 2010.[29] Mr Ellis also enclosed a copy of the Articles of Association of the Magdalen Hall Company Limited.[30]

6. In addition, Mr Ellis enclosed documents which stated that between 2008 and 2010 Sir Bob Russell had claimed the cost of his office rent from parliamentary allowances and that the rent had been paid to the Magdalen Hall Company Limited.[31] He also enclosed a local news article from 29 June 2010 which said: "Colchester MP Bob Russell claims £780 expenses a month to rent an office from a company he has shares in".[32] The article alleged that Sir Bob Russell had claimed £780.42 a month for the rent of his constituency office and that: "The taxpayers' money goes to Magdalen Hall Company Limited, a company in which Mr Russell is the largest shareholder."

7. Mr Ellis wrote to my office again on 28 November.[33] He said that, although the evidence he had provided related to the period 2008-2011, he believed that the arrangement might have been in place for a longer period. He considered that it was possible that the arrangement dated back to 2002. He enclosed a copy of the lease of the building.[34]

Relevant Rules of the House

8. The Code of Conduct for Members of Parliament in place from May 2002 replicated a similar provision to the 1996 Code, and provided as follows:

    "No improper use shall be made of any payment or allowance made to Members for public purposes and the administrative rules which apply to such payments and allowances must be strictly observed."

9. The 2005 and 2009 editions of the Code of Conduct for Members of Parliament provided as follows:

    "14. Members shall at all times ensure that their use of expenses, allowances, facilities and services provided from the public purse is strictly in accordance with the rules laid down on these matters, and that they observe any limits placed by the House on the use of such expenses, allowances, facilities and services."

10. The Green Book published in April 2002 set out the rules then applying in relation to claims made under the Incidental Expenses Provision (IEP) to pay, among other things, for office and surgery accommodation. In his introduction to that edition of the Green Book Mr Speaker said: "Members are reminded that they are responsible for ensuring that the use of their allowances is above reproach."

11. Paragraph 4.3.1 described expenditure allowed under the IEP as follows:

    "The IEP may be used to meet the following expenses:

    ·  accommodation for office or surgery use or for occasional meetings;

    ·  equipment and supplies for the office or surgery

    ·  work commissioned and other services

    ·  certain travel and communications".

12. Under the heading 'Examples of expenditure allowable under incidental expenses provision' it stated:

    "Office and Surgery accommodation

    NB: By the end of March 2003 all arrangements for Members' offices will be required to conform with new guidance issued in January 2002, and available from the Fees Office. You are required to lodge copies of all leases with the Department of Finance and Administration and to keep them updated."

13. On 22 January 2002 the Head of the Fees Office had written to all Members to inform them of a change to the rules relating to constituency office accommodation.[35] That letter included a section headed "Restrictions on leasing", which read as follows:

    "You should avoid any leasing arrangement which may give rise to an accusation that you—or someone close to you—is obtaining an element of profit from public funds.

    The allowances should not be used to meet the costs of leasing accommodation from:

    ·  yourself. If, however, your office or surgery is in a building which you own or lease for other purposes, you may charge the additional costs to your allowances.

    ·  a close business associate, or any organisation in which you—or a partner or family member—have an interest.

    ·  a partner or family member (which includes relatives by blood and by marriage).

    If the accommodation is leased from a political party or a constituency association you should ask an independent valuer to assess the rent in order to ensure that it is being leased at no more than a market rate."

14. The Green Book for June 2003 reflected this guidance in new sections of this part of the Green Book dealing with principles and propriety. Paragraph 5.12.1 set out the principles as follows:

    "You are advised to ensure that arrangements for your office and surgery premises are above reproach and that there can be no grounds for a suggestion of misuse of public money.

    You must avoid any arrangement which may give rise to an accusation that you—or someone close to you—is obtaining an element of profit from public funds; or that public money is being diverted for the benefit of a political organisation."

15. Paragraph 5.12.2 on propriety included the following:

    "The allowances must not be used to meet the costs of leasing accommodation from:

    ·  Yourself (...)

    ·  A close business associate, or any organisation in which you—or a partner or family member—have an interest

    ·  A partner or family member (which includes relatives by blood and by marriage.)

    Exercise particular care if the accommodation is leased from a political party or a constituency association. You must ask an independent valuer to assess the property in order to ensure that it is being rented at no more than the market rate...."

16. Paragraph 5.12.6 noted the documents required as follows:

    "You must lodge a copy of the following with the Department of Finance and Administration

    ·  A copy of your lease

    ·  A copy of a recent independent valuation (required only if you lease from a political organisation or if you sublet part of the premises)

    ·  A copy of any agreement for cost sharing (required only if you share with another Member, with a Member of a devolved body or a MEP)

    ·  A copy of any agreement for services with your constituency association or other party political organisation.

    You must also inform the Department of any alterations to the terms of these."

17. In the April 2005 Green Book, and in the 2006 edition, the second principle against making a profit was moved to the section on propriety, so that the provision (paragraph 5.12.2) then read as follows:

"You must avoid any arrangement which may give rise to an accusation that you—or someone close to you—is obtaining an element of profit from public funds; or that public money is being diverted for the benefit of a political organisation. The allowances must not be used to meet the costs of leasing accommodation from:

    ·  Yourself (...)

    ·  A close business associate, or any organisation in which you—or a partner or family member—have an interest

    ·  A partner or family member (which includes relatives by blood and by marriage.)

    The requirements for the provision of documents remained unchanged, save that Members were also required to provide a copy of any sublease.

18. The Green Book published in March 2009 included the following among a list of fundamental principles: "claims should be above reproach"; "claims cannot relate to party political activity of any sort, nor must any claim provide a benefit to a party political organisation"; "Members must ensure that claims do not give rise to, or give the appearance of giving rise to, an improper personal financial benefit to themselves or anyone else."

19. The allowance for office expenses was provided under a new heading called 'Administrative and Office Expenditure'. Paragraph 2.2.4.1 dealt with arrangements for Member's constituency offices as follows:

    "If the accommodation is leased from a political party or a constituency association, you must ask an independent valuer to assess the property in order to ensure that it is being rented at no more than the market rate. See also the following heading on agreements for accommodation and services in combination. You must seek advice from the Registrar of Members' Financial Interests if the premises are provided rent free or at a rental below market rates."

20. There was a similar provision in the revised edition of July 2009. Neither edition contained the specific restrictions on leasing accommodation for constituency offices which had been contained in the Green Books of 2003, 2005 and 2006, as set out above.

My Inquiries

21. Having received confirmation from IPSA's Compliance Officer on 5 December that IPSA's consideration of the complaint submitted to them had been concluded,[36] I wrote to Sir Bob Russell on 7 December[37] and enclosed a copy of the complainant's letters of 6 and 28 November, with their enclosures.[38] I told him that the essence of the complaint was that he had made claims against parliamentary allowances for the rental of his constituency office from 2002-03 to 2009-10 when that accommodation was owned by a company in which he and a family member held shares. I told him that I had considered the complaint in relation to the arrangements for his claims against parliamentary expenses up to the end of 2009-2010 and that, with the Committee's agreement (which I had sought and obtained), I would include in my inquiry matters going back more than seven years.

22. Having summarised the rules, I asked Sir Bob Russell about the arrangement he had with his constituency party for the use of the property in Colchester and why it was decided that the property should be owned by Magdalen Hall Company Limited. I also asked him about the ownership arrangements for that company and for details of any shareholdings that he, or any member of his family, had held or continued to hold in it. I asked him whether he had transferred his shareholding on 5 June 2010—and, if he had, why he had done so. I asked him to provide details of the current ownership of the company and whether he still shared the property with his constituency party. I asked him to provide details of the kind of accommodation he had there during the period from 2002-03 to 2009-10, including how far that accommodation had been separate from the party's offices. I asked him about the claims he made against his parliamentary allowances during that period for the use of his constituency office, including how he had identified what costs fell to his constituency office as opposed to the party office. I asked him whether he had lodged with the Department of Finance and Administration the original copy of the lease and any independent rental valuation, as well as whether he had at any time had a discussion with the House authorities about his arrangements.

23. Sir Bob Russell responded to my letter on 12 December.[39] In his letter Sir Bob Russell noted that the complaint related to payments by the Fees Office to Magdalen Hall Company Limited. He said that, according to the Party Treasurer of his constituency party, payments were paid directly to Colchester Liberal Democrats—irrespective of what the House published records may have said. He asked, therefore, that I contact the Fees Office to seek confirmation that that the payments were made to Colchester Liberal Democrats and not to Magdalen Hall Company Limited as claimed by the complainant. He noted that he had a sub-lease from Colchester Liberal Democrats, not from Magdalen Hall Company Limited. Sir Bob Russell concluded his letter: "The bottom line for me is: have I had a personal financial benefit from the arrangements? No."

24. On 8 January I received a substantive response from Sir Bob Russell to my letter of 7 December.[40] He noted in a preamble that he considered the complaint to be "vexatious, with the purpose of seeking to discredit me in the eyes of the electorate". In his letter, he stressed again that the arrangements at his constituency offices had "not resulted in any personal financial advantage" to him or anyone associated with him. He said that the reverse was the case: he had made "a considerable personal financial contribution" towards the operation of his constituency office which he said was to the "overall benefit" of both the public purse and his constituents.

25. Sir Bob Russell said that from 1997 to 2001 he had rented first floor offices in an office block in Colchester Town Centre; he moved from these offices shortly before the 2001 General Election. In the light of that experience, he decided that—if re-elected—he wanted to have more suitable office accommodation. He noted that the offices he had had previously had not been compliant with the Disability Discrimination Act. Having looked around, however, "it was a case of 'what we could afford was not suitable, what was suitable we could not afford.'" Sir Bob Russell told me that he had for the next year used a windowless former washing machine repair workshop and basement which "clearly could not be considered as a permanent base for the local MP". The former St Mary Magdalen Church Hall—later renamed Magdalen Hall—had then come on the market. Sir Bob Russell said that he had wanted accommodation that was fit for purpose—and cost-effective. He said: "The whole operation was to ensure penny for penny, pound for pound, that I maximised the allocation for constituency office purposes provided by Parliament." He believed that over the years he had achieved that. He told me that he had held more than 400 Advice Bureaux there, which he said was some 5,000 individual appointments. He estimated that, by holding Advice Bureaux in Magdalen Hall (rather than in Castle Methodist Church, as he had done for 18 months previously), he had saved "circa £18,500".

26. On the question of why it had been decided that the Magdalen Hall Company Limited should own the hall, Sir Bob Russell told me that he recalled that legal advice was that the property should be "acquired by a company—with named shareholders—rather than a constituency political party with a fluctuating membership." He explained that individuals, therefore, not necessarily members of the constituency party, purchased shares. He said: "I think we all considered this to be more of a "donation" than an "investment"!" He estimated that there were probably around 60 individuals and emphasised that there was "no suggestion of a dividend or making a profit." Sir Bob Russell said that he was "the largest single share-holder, with just under a third of those issued"[41] and told me that he had paid for these shares outright to enable the premises to be purchased in order to achieve his objective of a suitable constituency office. He said: "I have never made any return on those shares, nor did I ever expect or intend to" and noted that his share ownership had been published every year in the Register of Members' Financial Interests. Sir Bob Russell told me that his sister-in-law had two single shares valued at £250 each and that no other member of his family held shares.

27. Sir Bob Russell told me that well before the 2010 general election he had decided to transfer his shareholding to the constituency party as a donation. He said: "It was something which had always been in the back of my mind." He told me that he felt he owed a lot to his political party. He did not receive anything in return for the donation. He said that what had triggered his decision, rather than waiting for his eventual departure from the House of Commons (on defeat or retirement), was reading information from IPSA: this "made him think that perhaps this was as good a time as any other for me to donate them ahead of the change-over." He said that he considered that he had from 2002 to 2010 acted in accordance with the advice given by the former Fees Office and with the approval of the then Parliamentary Commissioner for Standards, along with separate legal advice given to his constituency party and himself.

28. Sir Bob Russell told me that the arrangements for sharing the building with his constituency party were the same in January 2012 as they had been since 2002, when the building was converted. He supplied a plan of the property showing the accommodation arrangements during the period from 2002-03 to 2009-10.[42] He explained that the portion of the building occupied by the constituency party was accessed by the side door, while the portion occupied by his constituency offices was accessed by the front door. He did not have keys to the side door, and no one in the constituency party had keys to the door to his constituency office. There was a connecting door (lockable from the side of Sir Bob Russell's constituency office) between the two halves of the building, because they shared toilet facilities and a kitchen. He added that he had himself "raised £4,500 through personal fund-raising to pay for the provision of toilet facilities for those with disabilities". He said that the layout of the building confirmed that there was an "approximately 50-50 split" between his constituency office and the party offices.

29. Sir Bob Russell told me that all his claims for the office costs relating to his constituency office were in the public domain. He considered that these confirmed that utility costs and business rates had been "shared 50-50 as required in the lease arrangements (agreed by the former House authorities)". He supplied a copy of the lease[43] and of an independent rental valuation carried out in 2010 by a firm of chartered surveyors, which he considered confirmed that the rent he was paying was in accordance with the market rent.[44] He told me that he had lodged the original copy of his lease and an independent rental valuation with the Department of Finance and Administration. He said that the rent was paid directly to the constituency party and that "not a single penny" had come to him.

30. Sir Bob Russell told me that he had discussed his arrangements with the House authorities. He would, he said, "never have ventured out on this arrangement ten years ago if there was any hint that what I was doing was improper". He said that neither he nor any of those who had given money to the project had made any financial gain out of the arrangement. He added: "What we have here is a group of people—good supporters of mine—who have assisted me in providing fit-for-purpose offices for myself and my staff, for the overall benefit to my constituents and maximising the value of the resources provided by the public purse for MPs to fund offices in their constituencies."

31. With his letter, Sir Bob Russell enclosed documentation which he said supported his "strong rebuttal that I have knowingly done anything which I should not have done." He also included a summary of this documentation.[45] He enclosed a copy of a letter of 21 May 2002 from a Fees Office official, which stated that she was "writing to confirm that the lease meets our approval".[46]

32. In addition, Sir Bob Russell enclosed a letter of 31 January 2002 from him to a senior official in the Fees Office.[47] That letter said that, following a meeting with that official and the then Head of the Fees Office and a subsequent telephone conversation between Sir Bob Russell and the official, he had decided to step down as a director of the company which owned the "headquarters building of my constituency party". He noted that the official had advised him that there was no requirement to do that, but that by doing so he would "remove the scope for criticism or complaint which someone might be minded to make". He said that he was "also grateful to [the official] and [the Head of the Fees Office] for confirming that the arrangements for my MP's constituency offices comply with what is set out in the letter from [the Head of the Fees Office] dated 22nd January". Sir Bob Russell also enclosed a letter of 13 May 2002 that he had sent to the same official in the Fees Office.[48] That letter informed the official that "I have at long last moved into my new constituency accommodation in Colchester" and that Sir Bob Russell and his staff had spent the weekend moving to Magdalen Hall. The letter continued: "We are now operating from our new base".

33. In response to my question about how he had identified the costs which fell to his constituency office as opposed to the party's office, Sir Bob Russell included a response of 3 October 2011 from the House authorities to a Freedom of Information request which stated that "no services other than rent have been provided".[49]

34. Sir Bob Russell enclosed an e-mail of 3 January 2012 from an official in the Department of Human Resources and Change in response to his request for information regarding his constituency office rent.[50] That e-mail stated that between July 2002 and March 2004, payments had been made to the Magdalen Hall Company Limited. Between April 2004 and August 2010 payments had been made to the Colchester Liberal Democrats Business Account. The e-mail confirmed that no payments were made directly to Sir Bob Russell. It also set out a summary of rent payments between May 2002 and 6 May 2010, which showed that from April 2002 the annual rent charged had been £8,235; the rent rose to £9,365 from April 2006. The official later amended this to May 2005.[51]

35. In addition, Sir Bob Russell enclosed a draft letter of 29 March 2004 from him to the Fees Office, asking the Fees Office to pay the rent to the constituency party and not to the Magdalen Hall Company Limited.[52] To that letter were added manuscript amendments which explained that the Magdalen Hall Company Limited owned the building which housed both Sir Bob Russell's constituency office and rooms used by Colchester Liberal Democrats. The amendments also explained that the Company leased the whole building to the constituency party, who in turn sub-let Sir Bob Russell's constituency office to him, and that the constituency party had requested that payment from the Fees Offices should go to them and not to the Magdalen Hall Company Limited. The notes also said that this had been described to Sir Bob Russell as "a tidying up operation".[53]

36. In response to my questions about his shareholding, Sir Bob Russell enclosed a letter of 21 December 2011 from the Company Secretary which confirmed that no dividends had been paid by the Magdalen Hall Company Limited on any of its shares since the company had been set up, and that no shareholder had obtained any financial benefit as a result of owning shares in the company.[54] A letter of 14 July 2010 from the hon. Treasurer of the Colchester Liberal Democrats to the Liberal Democrat Party headquarters stated that Sir Bob Russell had donated his shares to the constituency party.[55]

37. Sir Bob Russell also enclosed a letter of 23 April 2002 from the then Parliamentary Commissioner for Standards.[56] That letter said that the Commissioner had read the correspondence between Sir Bob Russell and the former Commissioner relating to the "sale and purchase of the former St Mary Magdalen Church Hall". The Commissioner had enclosed a register entry which recorded Sir Bob Russell's shareholding in the Magdalen Hall Company Limited. In his letter, Sir Bob Russell told me that he considered that this letter showed that he had "closely followed the advice given at the time and that approval was given for what took place".

38. I wrote back to Sir Bob Russell on 17 January.[57] I asked him to confirm or otherwise modify my understanding of his evidence, drawing on, in addition to his evidence, additional documentation from Companies House and the Land Registry.[58] The evidence from the Land Registry showed that on 30 April 2002 Magdalen Hall Company Limited purchased the property Magdalen Hall. The purchase price of the property was £100,000; the purchase was funded in part by a loan.

39. According to Companies House records, I noted that in December 2002 Sir Bob Russell had owned 100 of the total 244 shares in Magdalen Hall Company: he was the largest single shareholder. There were 41 other shareholdings, none of which had exceeded more than 10 shares, and the price paid for the shares was £50 each. I said that I assumed, therefore, that in 2002 Sir Bob Russell had paid £5,000 for his shares. I said that, according to the Companies House records over the course of the years, further shares had been issued and the number of shares held by Sir Bob Russell had increased.[59] When Sir Bob Russell donated his shareholding to the Colchester Liberal Democrats in 2010, the value of these then 500 shares was £25,000 and the party had registered this donation with the Electoral Commission. Sir Bob Russell's sister-in-law's shareholding was two at 16 December 2002 and ten by 10 January 2011. I said that, on the basis of the valuation of Sir Bob Russell's shareholding, I assumed that the current market value of these was £500.

40. I understood that, according to the property valuers, in March 2010 Sir Bob Russell was not being charged more than the market rate and that the valuers had made various visits to the property from time to time, the latest of which had been in September 2009. I said I assumed that no earlier valuations were lodged with the House authorities.

41. In addition to asking him to confirm or otherwise modify my understanding of his evidence, I asked Sir Bob Russell for further details of his shareholding in Magdalen Hall Company Limited and to confirm specifically what he had told the House authorities, in 2002 or at any other time, about his arrangements. In particular, I asked whether, in addition to discussing his directorship, he had informed the Department that he was the largest single shareholder in the company which owned the property and that his office was to be rented from his constituency party who in turn would lease the property from that company.

42. With my letter I provided copies from my office's registration files of relevant earlier correspondence between Sir Bob Russell and the then Parliamentary Commissioners for Standards, together with a former Commissioner's note of a telephone conversation of 27 November 2001.[60] A letter of 23 November 2001 from the Commissioner advised Sir Bob Russell to register his shareholding "if the share allocation is already agreed and imminent".[61] Her record of their telephone conversation noted that Sir Bob Russell had told her that he would wait to register his shareholding until it was "agreed and signed" and that "as soon as it was agreed he would make an entry".[62] A letter from Sir Bob Russell of 30 November 2001 said that he would "write further in respect of my Party's pending purchase of the former St Mary Magdalen Church Hall, Colchester, once the precise details of [his] involvement [were] confirmed".[63] In my letter, I noted that these exchanges were about the registration of Sir Bob Russell's shareholding and that there had been no reference to his intended use of part of the property for his constituency office.

43. Sir Bob Russell responded to my letter on 22 January.[64] He confirmed that my understanding of his evidence was correct save for one "serious misunderstanding of the facts", although he said he could understand how it had arisen. This related to his shareholding. He said that while it was true that in 2002 he had purchased 100 shares in Magdalen Hall Company Limited, these had then been valued at £250 each, thus had cost £25,000 in total. He said it had not been correct, therefore, to assume that he had paid £5,000. Sir Bob Russell explained that in 2009 the Company had decided to sub-divide each £250 share into five shares of £50 and in his case, therefore, while the number of shares increased from 100 to 500, the total value remained at £25,000. He noted that the same explanation applied to the increase of two to ten shares in the name of his sister-in-law. He confirmed that he had not acquired further shares either by purchasing them or by the Company assigning them without cost to him. Sir Bob Russell said this was further evidence that he had made no personal financial gain from the arrangements for his constituency office.

44. In addition, Sir Bob Russell said that he had no recollection as to why, initially, the rent was paid to Magdalen Hall Company Limited rather than to the constituency party. He noted that a new treasurer had "pointed this out and arrangements were made to rectify the situation." He said that at all times the rent was not paid via him but directly by the Fees Office. He noted that he had, in fact, never become a Director of Magdalen Hall Company Limited. He said that this had been a proposal, both reflecting his "position as the largest shareholder", and so that his "half of the building would have a voice". In view of the advice of the then Fees Office Sir Bob Russell had decided not to become a Director. He said this was further evidence of his openness at all times with the House authorities and that my observation that he had consulted with, and followed the advice of, the Fees Office about his arrangements was correct. He also confirmed that he had no knowledge of any other rental valuations.

45. In relation to what he had told the House authorities in 2002, Sir Bob Russell said that, looking back to conversations which occurred 10 years ago, he did not have written evidence that he had told them that he would be the largest single shareholder, and that his constituency office would be rented from his constituency party on a sub-tenancy to their tenancy with Magdalen Hall Company Limited—but, he said, "they most certainly knew that the latter was the case." He highlighted that the letter of 21 May 2002 from the House authorities to him stated that the lease which he had provided to them for his office space had met their approval.[65]

46. Sir Bob Russell said that, as the whole purpose of the exercise was to secure a suitable constituency office, he could state "with absolute confidence that the House authorities were fully aware" of what he had been seeking to achieve. He said: "It is simply inconceivable that this was not so." He told me that: "This would have been mentioned whenever conversations took place—specifically when the advice was given that it would be better that I did not become a Director of the company."

47. Sir Bob Russell told me that the House authorities had been of "considerable assistance in ensuring that matters progressed" and that they were "definitely aware that my constituency office was to be located at Magdalen Hall." In his view the payment by them of the rent when he moved into his office in May 2002 again provided "clear evidence that they knew this was the case." Sir Bob Russell considered that the fact that the House authorities also had the layout plan of his constituency office was further evidence that the House authorities were "fully in the picture as to the reason for the acquisition of the former St Mary Magdalen Church Hall—to be my constituency office."

48. In respect of the 2001 and 2002 correspondence between him and the then Commissioners,[66] Sir Bob Russell acknowledged that, ten years later, a fresh set of eyes could reach a conclusion different from that which he said had been "the clear understanding of all parties involved at that time". He considered that that would, however, be a wrong conclusion. In the context of the involvement of two former Parliamentary Commissioners for Standards and individuals working in the Fees Office, Sir Bob Russell invited me to accept that the purpose of the exercise— namely the acquisition of a building for his constituency office—had been "common knowledge by all involved".

49. He said: "While I cannot prove that I verbally told the House authorities that I would be the largest shareholder in the then proposed company, they were certainly aware that I was a "large" shareholder because my discussions with them reference whether I should or should not be a Director." Sir Bob Russell said that the fact that he had told the then Parliamentary Commissioner for Standards in November 2001 that he intended to purchase shares valued at £25,000 clearly showed him being a "large" shareholder. Sir Bob Russell noted that, following advice from the then Commissioner, he had in due course registered his shareholding in the Register of Members' Financial Interests. While he said that he did not have "a total memory recall" of his conversation with the then Commissioner in November 2001, Sir Bob Russell said that he was "absolutely certain" that he would also have mentioned the purpose of the exercise—namely to provide a constituency office. He said: "It is inconceivable that I did not."

50. Sir Bob Russell said that it was in this context, therefore, that he invited me to accept "at least on the balance of probability if nothing else" that the then Commissioner "was fully in the picture as to what was proposed"—and also to accept that when her successor wrote to him in April 2002 he had "no reason to believe that this was anything other than an endorsement of what I had previously notified to" the previous Commissioner and discussed with her.[67] Sir Bob Russell considered that this was "a green light to what had been discussed intensely over several months with the House authorities to allow me to have my constituency office at Magdalen Hall."

51. Sir Bob Russell again strongly rebutted that he had knowingly done anything which he should not have done. He considered that at all times he had "closely followed the advice given" and that "approval was given for what took place." He said that the arrangements had not resulted in misuse of public funds and there had been "no personal financial gain to me."

52. I wrote to the Director-General for Human Resources and Change on 25 January for his advice on this complaint.[68] I asked for: a breakdown of Sir Bob Russell's claims from parliamentary allowances from 2002-03 to 2010-11; confirmation that the Department did not hold, and had not held, an independent valuation of the market rent for Sir Bob Russell's share of the Colchester premises from any time from April 2002 to March 2010; any relevant documentation; and an explanation of why the House made rental payments to Magdalen Hall Company Limited between July 2002 and March 2004 when Sir Bob's lease had been with his constituency party.

53. Having summarised the relevant questions to be resolved, I asked whether the Director-General had any information to confirm that in 2002 the Department had been aware that the property housing Sir Bob Russell's constituency office was owned by a company in which the Member had a substantial shareholding (and in which his sister-in-law had two shares) and of the circumstances in which the company was created. I asked, if the authorities had been aware of the full circumstances, in 2002 or subsequently, how this approach had at the time been considered to be consistent with the relevant Green Book rules, and whether that remained the Department's view. I asked whether he thought the House authorities should have asked Sir Bob Russell for an independent rental valuation in 2002 and again in 2004.

54. The Director-General for Human Resources and Change responded to me on 21 February.[69] He said that the arrangements which were under scrutiny had begun in 2001-02, when Sir Bob Russell entered into arrangements with others for the purpose of acquiring a church hall to serve both as a constituency office for himself and as offices for the local Liberal Democrat party. The Director-General noted that at about the same time, the then Head of the Fees Office had issued new guidance which "affected" the arrangements that were being set up. He told me that the transactional records and most of the correspondence relating to the period between 2002 and 2004 had "properly been destroyed under the House's Authorised Records Disposal Practice", and in his view the few records that remained in this instance might support more than one explanation. The Director-General said: "I must therefore express extreme caution about drawing inferences from this period."

55. The Director-General told me that on 22 January 2002, the Head of the Fees Office had written to all Members setting out restrictions on leasing office accommodation where the costs were being met by the Fees Office: with effect from April 2003 Members were not allowed to rent from themselves or close associates or family; the lease had to be lodged with the Fees Office; and if leasing from a political party or constituency association, there must have been an independent rent valuation. He enclosed a copy of that letter.[70] He said that Sir Bob Russell had met a manager in the Fees Office in late January 2002 and followed this up with a letter on 31 January, confirming that a copy of his lease would be supplied and that he would provide an independent valuation.[71] The Department had on file a further letter from Sir Bob Russell of 13 May 2002 (enclosing the lease), and a reply from the Fees Office to the effect that the lease was acceptable.[72] He said that the Department also had records of the payments made, and to whom they were made. The Director-General noted that the answers he was providing to my questions were subject to the caveat that "from this limited information base we cannot answer a number of your questions with any certainty".

56. The Director-General enclosed with his letter the relevant documentation held on file. This included the following:

a)  a letter from Sir Bob Russell to the Fees Office of 4 July 2002 asking them to make the payment of the rent for his constituency office to Magdalen Hall Company Limited;[73]

b)  letters from the House authorities to all Members of 17 January 2003 and 20 March 2003 reminding them that the new restrictions on leasing office accommodation were coming into force at the end of March and asking Members to provide any relevant documentation;[74]

c)  a letter from Sir Bob Russell to the Fees Office of 29 March 2004 asking them to make payments in future to his constituency party.[75] This letter appeared to be the final version of the draft with manuscript notes provided by Sir Bob Russell with his letter of 8 January 2012.[76] This final version included the following description of Magdalen Hall Company Limited: "shares are held by members and supporters of Colchester Liberal Democrats";[77]

d)  a letter from Sir Bob Russell to the Fees Office of 23 March 2007 informing them of an increase in the rent costs for his constituency office;[78]

e)  a letter from Sir Bob Russell to the Director-General of 30 March 2010[79] responding to a letter from him of 17 March 2010[80] providing a copy of the original lease for his constituency office[81] and the independent valuation of March 2010;[82] and

f)  a letter from an official in the Department of Resources to Sir Bob Russell of 11 May 2010 seeking supporting evidence from his landlord for the increase in rent which he had claimed during 2009-10.[83]

57. The Director-General also enclosed a summary of the payments made in respect of the use of the constituency office as far as these were available.[84] From April 2002 to April 2010, taking account of subsequent information about the backdating of the rent to May 2005, these claims amounted to £97,162.34, of which £70,847.83 was for rent.[85] The Director-General confirmed that the Department did not hold an independent valuation from 2002 but could not at this distance say "for certain" whether or not such a valuation had been supplied. He noted that the Department did hold the valuation of March 2010.

58. The Director-General told me that the immediate reason for paying Magdalen Hall Company Limited direct between July 2002 and March 2004 appeared to have been the written instruction dated 4 July 2002 from Sir Bob Russell.[86] He noted that, given the lapse of time since then, it was not possible to say whether there had been other contact with Sir Bob Russell about this, or whether consideration had been given to the appropriateness of the arrangement. The Director-General noted that the sublease gave no indication as to whom the rent should be paid, and said it was not unusual for rent to be paid to a third party such as a management company. He told me that Sir Bob Russell had written again on 29 March 2004 requesting that payments be made direct to the constituency party.[87]

59. In respect of what knowledge the House authorities had about Sir Bob Russell's, and his sister-in-law's, shareholdings, the Director-General confirmed that there were no additional letters on file which related "directly to the issue of the ownership of Magdalen Hall." He noted that while Sir Bob Russell referred to standing aside from a directorship in January 2002,[88] he could see nothing that in itself suggested that Sir Bob Russell held shares (or at least shares with other than a nominal value). The Director-General said that it was "entirely possible" that the substantial personal shareholding was disclosed at the meeting in January 2002, but that in his view it was difficult to see how Sir Bob Russell could then have been led to understand that the arrangements for his constituency offices complied with what was set out in the letter from the Head of the Fees Office dated 22 January 2002.[89] The Director-General suggested that one possible explanation was that the arrangements complied as of that date, but would cease to comply when the full force of the arrangements took effect in April 2003. He thought it was very unlikely that the shareholding of Sir Bob Russell's sister-in-law would have been discussed. He noted that there was no reference to her involvement in the company in any of the correspondence held by the Department.[90]

60. The Director-General said that had the Department been conscious of the ownership of Magdalen Hall Company Limited in June 2003 (when the Green Book rules were updated with the restrictions on leasing office accommodation), he believed that they would have ruled that the arrangement did not comply with the Green Book, and would have approached Sir Bob Russell accordingly. The Director-General said: "This was an issue which was active at the time: in addition to the 2003 Green Book, two circulars were issued to all Members (on 17 January 2003 and 20 March 2003) reminding them of the tighter rules."[91]

61. The Director-General noted that the Department had asked for an independent rental valuation in 2002, and Sir Bob Russell had undertaken to supply one. He said it was possible that Sir Bob Russell did so, but if that was the case, the Department had no record of it, having disposed of most of their records from that period. He told me that it would of course have been wise to have sought a valuation in 2004 or 2005 if one had not been supplied in 2002, but he could not now determine whether that was the case.

62. Finally, the Director-General noted that the 50/50 apportionment of costs relating to the premises seemed reasonable on the basis of the information available and that regardless of whether or not a valuation had been provided at an earlier stage, the 2010 valuation confirmed that the rent was at that time at or below the market rate.[92] He said: "In the light of that, the rent paid on the office over the years strikes me as reasonable."

63. I wrote to the Director-General on 22 February 2012 to ask him to help me in identifying the relevant evidence to show that in 2002 the Department had asked Sir Bob Russell to provide an independent rental valuation, as he had told me in his letter of 21 February.[93] He replied on 27 February 2012.[94] He noted that the Department's letter of 22 January 2002 had set out the new arrangements for constituency offices, which included the requirement for an independent valuation if the accommodation was leased from a political party or constituency association.[95] This had been followed by a meeting between Sir Bob Russell and senior officials in the Fees Office and a subsequent telephone conversation between Sir Bob Russell and a senior manager. Sir Bob Russell had then written on 31 January 2002 that his office space would be "assessed by an independent valuer".[96] The Director-General told me that he inferred from this that "the Department had asked him to carry out an independent valuation."

64. Having considered carefully all the evidence I had received, I noted that a key question was whether Sir Bob Russell had referred to his shareholding in his meeting and other discussions with senior Fees Office officials in 2002. The members of staff involved had since retired but, given the central significance of this issue, I decided it was necessary to write to the then Head of the Fees Office to see if he could help me with his recollection of these events. I did so on 22 February.[97] In particular I asked him to confirm that he did indeed agree that Sir Bob Russell's arrangements for his constituency offices complied with the Department's letter of 22 January 2002[98] introducing the prohibition on Members using allowances to meet the costs of renting constituency offices from themselves or from any organisation in which they, or a partner or family member, had an interest. If such agreement had been given I asked for the reasoning and whether the former Head of the Fees Office recalled that in coming to his decision he had been aware of the ownership arrangements of Magdalen Hall, namely Sir Bob Russell's substantial shareholding and the much lesser shareholding of his sister-in-law. Finally, I asked whether he had any recollection of the Department receiving an independent valuation of the market rent of the property.

65. Unfortunately the former Head of the Fees Office was out of the country and uncontactable for some weeks. While I was concerned about the resulting delay, I decided—and so informed Sir Bob Russell[99]— that in fairness I needed to have his evidence to see how far he could confirm Sir Bob Russell's recollection. The former Head of the Fees Office responded to my letter on 3 April.[100] He said, that if indeed he had been consulted (he considered Sir Bob Russell's letter of 31 January 2002[101] to be unclear on that point) he had no recollection of it. He told me that he was "certain" that if the "full extent of the Member's involvement with the Magdalen Hall Company Ltd".—i.e. that Sir Bob Russell "continued to be a majority owner even though he was standing down as a director and that his sister in law also had a small shareholding"—had been fully disclosed at the time to him or to the other official in the Fees Office it would not have been seen as complying with the new rules which were to come into force at the end of March 2003.[102]

66. In respect of the letter of 21 May 2002 from a Fees Office official, which confirmed "that the lease meets our approval",[103] the former Head of the Fees Office said that he could not recall "either approving or confirming the lease" but told me that "it could not have been granted in full knowledge of all the circumstances of the Member's involvement with Magdalen Hall Company." [104] He told me that he had "no recollection" of the Department receiving an independent valuation of the market rent for Sir Bob Russell's constituency office.

67. I wrote to Sir Bob Russell on 16 April asking for his comments on the advice from the House authorities and the evidence from the former Head of the Fees Office.[105] In particular I asked whether, in the light of this evidence, he accepted that his arrangements were in fact a breach of the rules of the House which came into force at the end of March 2003. I asked Sir Bob Russell whether, taking account of the responses from officials, he believed that he had provided the Department with the details of his and his sister-in-law's share ownership. I also asked him for any reasons why he thought the Department had come to a different view then about his arrangements that it and the former Head of the Fees Office did now, having seen all the evidence available. I asked him whether, in light of the evidence, he accepted that he had not in fact provided the requested rental valuation in 2002, or at any time before 2010, as required under the rules. I asked Sir Bob Russell why additional information about the share ownership arrangements was added to the final version of his letter of 29 March 2004 which was sent to the House authorities and why that letter did not mention his own shareholding or that of his sister-in-law.[106]

68. Sir Bob Russell responded to me on 18 April.[107] He told me that he was satisfied that he had at all times proceeded with advice given to him by the House authorities and the then Commissioners and that he was satisfied that he had "complied with both the letter and the spirit of the advice so given". He enclosed a further copy of the letter of 13 May 2002 that he had sent to an official in the Fees Office.[108] Sir Bob considered that this letter clearly confirmed "what I have indicated was the subject of numerous conversations—namely that the whole point of acquiring Magdalen Hall was as a constituency office". He considered that this was also made clear in the letter of 21 May 2002 from the Fees Office, which thanked Sir Bob for providing his lease and confirmed "that the lease meets our approval".[109] He also enclosed a copy of the letter of 12 November 2001 from him to the then Parliamentary Commissioner for Standards.[110] He noted that this letter set out his intended stake in the company. He acknowledged that the letter did not say that he hoped to move his constituency office into the building in question, but he considered that he could "state with absolute confidence this would have been made clear" in "subsequent conversations (telephone and personally)."

69. I wrote to Sir Bob Russell on 26 April 2012.[111] I told him that in view of what he had said in his letter of 18 April about his contacts with officials in the Fees Office and the former Parliamentary Commissioner for Standards, I had decided that I should take evidence from the former senior official in the Fees Office to whom he wrote and from the former Commissioner.

70. On the same date I wrote to this former senior official in the Fees Office and to the former Commissioner asking them to give evidence.[112] I asked the former official in the Fees Office whether she had any recollection of the correspondence or of any meetings or telephone conversations she had had with Sir Bob Russell about this matter. In particular I asked whether she could recall him telling her about the ownership arrangements of the company which was to buy Magdalen Hall—namely his and his sister-in-law's shareholding—and if she recalled why she had recommended to him that he should not be a director of the company.

71. I asked the former Commissioner whether she recalled the correspondence and her note of a telephone discussion with Sir Bob Russell and whether she had any recollection of any action she had taken following these; in particular, I asked whether she had passed on orally or otherwise to her successor or to the Fees Office any information about this matter. I also asked whether she recalled if Sir Bob Russell had told her in conversation at any time that the property was to be used both by his constituency party and by himself as a constituency office.

72. I received a response from the former Commissioner on 4 May.[113] She said that she did not recall the detail of conversations with Sir Bob Russell in 2001 but that, as her note of that telephone conversation demonstrated, she had made notes of all her telephone conversations with Members. The former Commissioner said that, had Sir Bob Russell mentioned anything material, other than the shareholding, it was likely that she would have recorded it.

73. The former member of staff in the Fees Office responded to me on 8 May.[114] She noted that these events had taken place a very long time ago and told me that she did not recall in detail her dealings with Sir Bob Russell at that time. She said that, as far as she could recall, she met Sir Bob Russell once and spoke to him on the telephone "on at least one occasion". She said: "We discussed his intention to move his constituency office and I can confirm that I was aware that the new location would be Magdalen Hall." She told me that she was "not sure" that Sir Bob Russell had "made clear the exact nature of the ownership of the property". She said that she was inclined to think that he had not, as the "standard advice that we were giving at that time was that whilst renting from companies in which they had a major stake was not explicitly against the rules as they stood in January 2002 it would be when the new rules came into force." The former member of staff said that she was sure that they never discussed the shareholding of his sister-in-law. In respect of my question about her advice to Sir Bob Russell that he should not be a director of the company, she told me that it was "standard advice" that Members should not hold an executive position in companies "with which they conducted parliamentary business".

74. I wrote to Sir Bob Russell on 14 May,[115] enclosing copies of my letters of 26 April to the former Commissioner and to the former member of staff in the Fees Office and their replies of 4 May and 8 May respectively.[116] I invited him to comment in response to the evidence in those letters and asked him again to respond to the questions which I had put to him in my letter of 16 April.[117]

75. Sir Bob Russell sent me a substantive response on 8 June.[118] In his letter, Sir Bob Russell told me again that he had had no personal financial benefit from the arrangements in the establishment of the company which owned the premises where he leased space for his constituency office and that he had not used public funds for purposes other than that for which they were intended. He considered that the documentation surviving from the period (notably from his own records) clearly showed that he had sought advice at every stage, from the autumn of 2001 to the spring of 2002. He told me that he had sought advice, been given advice and had followed that advice. "Had I been given different advice," he said, "I would have followed that different advice!"

76. Turning to his discussions with the Fees Office in 2002, he said that it was "impossible" that he had not mentioned in the course of those discussions that Magdalen Hall would be his constituency office. He considered that the evidence from the Director-General that it was "entirely possible" that he had made known to them his personal shareholding in Magdalen Hall provided further contemporary evidence that he was "at all times open and frank with the proposals relating to my new constituency office". He told me that "the Department was fully conscious of the ownership of Magdalen Hall Company Limited" and that he was "saddened" that "the Department is seeking to distance itself from the advice it gave me at the time". He suggested that "what you have gathered from people's memories of a decade ago is much less reliable, frankly, than my memory and that of my Office Manager". He said that he concurred with the recollection of the Fees Office official, except that he was "confident that I would have certainly explained the status of Magdalen Hall Company Limited; namely in effect a not-for-profit mutual company to which I would have no financial benefit".

77. He noted that his ownership of shares had been declared annually in the Register of Members' Financial Interests and that he had been "open and transparent at all times". On his sister-in-law's shareholding, he told me that it was "perhaps unlikely" that he would have mentioned it and told me that he was not sure that he knew at the time that she had shares in the Magdalen Hall Company Limited. He said that he did not know the names of everyone who had put money into the project and that others were responsible for "that side of things". He considered that "in any event, this is de minimis" because his sister-in-law's shares represented less than half of one per cent of the share value. He stressed that he had not been a "majority owner" of shares in the company, as the former Head of the Fees Office had described him in his letter of 3 April[119]—his stake "represented less than 25 per cent of the shares".[120]

78. On the question of whether he had submitted an independent rental valuation for the property at the time, he told me that his Office Manager's opinion was that it was "highly unlikely" that he had not done as requested. He noted that the former Head of the Fees Office had observed that he had no recollection of the Department having received such a valuation. Sir Bob Russell asked why, if he had not submitted the required valuation, he had not been sent a reminder; why the Department had paid the rent for his constituency office without an independent rental valuation, and why the absence of an independent rental valuation had not been noticed by the Department's internal or external auditors.

79. On his dealings with the then Parliamentary Commissioner for Standards, he said that he was "not surprised" that she did not recall the detail of conversations with him. He said that he was "bound to observe" that the fact that her "relatively brief" note of their conversation did not mention the purpose of his shareholding in the Magdalen Hall Company Limited—"namely as my new constituency offices"—did not mean that he had failed to mention that. He said that it was "inconceivable that, noting all my conversations with others, I did not mention this to [the Commissioner] as well". He concluded: "The balance of probability is that I did; I would have had no reason not to".

80. In the same letter, Sir Bob Russell told me that his secretary from that time, now re-designated as his Office Manager, vividly recalled "how particular I was in seeking advice from the House authorities and only proceeding on that advice". He added that she was "prepared to testify to that effect". Given that I had taken evidence from witnesses who could not confirm Sir Bob Russell's recollection of his conversations, I considered it was fair and necessary to accept Sir Bob Russell's invitation to seek evidence from his Office Manager. I accordingly wrote to her on 12 June.[121]

81. Sir Bob Russell's Office Manager wrote to me on 17 June to inform me that she would be unable to respond to my request for evidence until her return from a two-week break.[122] I was concerned about the inevitable delay and on 20 June wrote to Sir Bob Russell to ask whether he wished to await her evidence or forgo her evidence and move directly to the interview that would conclude my inquiry.[123] Sir Bob Russell wrote to me on 28 June and said that his Office Manager could not "bring any new material evidence" to that which I already had.[124] I accordingly withdrew my request.

82. Having considered all of the evidence I had received, I considered that it would be helpful to meet Sir Bob Russell for an interview and did so on the date he requested— 5 July.[125] Having confirmed the facts of the arrangements for the purchase of Magdalen Hall and his claims for renting his constituency office, I asked him about his interpretation of the rules promulgated by the Fees Office in their letter of 22 January 2002, which had said that Members must not lease accommodation from an organisation in which they had an interest.[126] He said that he had "had the meeting to interpret the rule". His interpretation of the term "interest" was that "you plan to sell the shares, to try to make a profit". I asked him whether he considered therefore that a shareholding was not an interest. He said that he had had a meeting to discuss that question.

83. Sir Bob Russell said that it was necessary to read the rules "with the interpretation of what Parliament intended: that no Member should gain from the public purse". When I asked whether he was arguing that Parliament intended to allow a Member to lease from an organisation in which he or she had an interest, provided that no profit was made, he replied "Yes, absolutely". He said that he had had "no benefit whatsoever" from being a shareholder. He acknowledged that "there was a potential" benefit but said that "that was never the intention. The intention was to provide me with the best possible constituency offices".

84. Sir Bob Russell had told me in a letter of 8 January that he had decided to divest himself of his shares by donating them to the party because of information from the "fledgling IPSA".[127] I asked him whether I was right to conclude that, under the new IPSA rules, he would have had to divest himself of them anyway. He replied: "You've made the case for me". I noted that the rule in question had come into effect in May 2010 and that his shares had been transferred in June. He explained that he had made the decision before the election, but that "by the time all the paperwork was done, it was June". When asked what he would say to the suggestion that he had transferred his shares when he did because he knew that it was contrary to the IPSA rules which had been promulgated in March 2010, he said that "the arrival of a new charging system was a good opportunity to do what could have been done at any time up to then. It was just a trigger."

85. I asked Sir Bob Russell if he had considered whether the fact that he did not lease the property directly from the company in which he had an interest meant that the restrictions on leasing did not apply, since the rule did not mention sub-leasing. Sir Bob Russell responded that he had not made a profit from his arrangements and that his argument was that, since he had not made a profit, the rule on leasing did not apply.

86. I asked Sir Bob Russell whether he accepted that the company had an interest in having him as a sub-tenant. He said: "I was quite flattered, actually—they took out "key employee" insurance to cover me. Without me, they would have been left without a tenant. There was no guarantee that the party would hold the seat, or that my successor would want to keep the lease." He told me that the constituency party had not had offices before moving to Magdalen Hall; he had no idea whether the constituency party paid rent to the Magdalen Hall Company Limited for their share of the property. He said that he had "no reason to doubt" that the constituency party paid over his rent in full to the company.

87. I noted that the new Green Book which came into force in March 2009 made no specific reference to the leasing restrictions. I asked whether Sir Bob considered that the restrictions on leasing did not apply between March 2009 and May 2010. He told me: "It was seamless. It made no difference to me."

88. Sir Bob Russell had described the company as a "not-for-profit mutual" in his letter of 8 June.[128] I asked him whether it was not in fact a private company limited by shares, as set out in the articles of association.[129] He acknowledged that that description was "factual" but said: "You've got to deal with the reality here, not what might have happened". He also acknowledged that such companies had legal obligations, namely "the annual return to Companies House". I noted that, if he had wanted to ensure that there was no return on the investment, it would have been possible to have set up a company limited by guarantee. Sir Bob Russell accepted this, but said that "the reality is that it was a not-for-profit mutual."

89. I asked Sir Bob Russell why, given the importance of these matters to his plans for his constituency office, he had not set out the arrangements in writing. He commented: "We're talking about this with the benefit of ten years' hindsight. I was calling people, having meetings, writing letters." He added: "This letter of 31 January does what you've said. It does."[130] I noted that the letter did not mention his shareholding in the company. He replied: "That's why the Fees Office official told me to step down [as a Director]".

90. The Speaker's introduction to the Green Book in 2003—and subsequently—stated that Members themselves were responsible for ensuring that their use of allowances was above reproach. Sir Bob Russell had told me in his letter of 8 June that he had sought advice, been given advice and followed that advice.[131] I asked him whether his argument was that, as long as a Member followed advice, that Member could not be in breach of the rules. He said: "I would say that if the Fees Office give you advice and you follow it, that's one thing. If they give you advice and you don't follow it, that's another thing." He did not think that a Member who followed wrong advice could be in breach of the rules. He noted that we were "talking about the top man here"—that is, the then Head of the Fees Office. I asked what would happen if the Head of the Fees Office gave wrong advice. Sir Bob replied: "If advice is wrong, then it's wrong. But how could a Member tell the Head of the Fees Office that he was wrong? If he had told me it would be a breach of the rules, I wouldn't have done it." I asked Sir Bob if his argument was that the Fees Office had at the time given him the right advice, but that officials were now going back on their advice. He said "Yes, and I am saddened that they are doing so."

91. I told Sir Bob Russell that the Director-General had told me in his letter of 21 February that had the Department been aware of the ownership of Magdalen Hall Company Limited in June 2003, he believed that they would have ruled that the arrangements did not comply with the Green Book rules.[132] I asked him why he thought the Director-General was wrong. He replied: "I know he is wrong. My memory of something I was so close to at the time is superior to his." I asked whether he had pressed officials at the time on their advice; he said he had not. I asked whether the advice had surprised him. He told me that his letter of 31 January 2002 had confirmed it.[133]

92. I asked Sir Bob whether he had told the Fees Office that he was a major shareholder in the company. He said he was "certain that they knew", and referred to his letter of 31 January 2002, which said "as a result of your advice I have decided to step down as a director".[134] He accepted that being a shareholder was not the same as being a director, but said that "in the context of the discussions we were having, it [his shareholding] would have been known". He said he would describe the likelihood that the Fees Office were not aware of his shareholding as "zero". When I asked whether he had a clear recollection of having told the Fees Office of his shareholding, he said that he "would have said it to numerous people" and that he had had "numerous meetings and phone calls, including with the Fees Office". I asked whether he had told the Fees Office before January 2002; he said "yes, it was part of the process". He drew my attention to his entry in the Register of Members' Financial Interests and said "I couldn't have been more transparent—it's all on the record."

93. I said that when Sir Bob Russell wrote to the Fees Office in 2004 he had added to the letter information about the ownership of the company but made no mention of his own shareholding.[135] I asked Sir Bob Russell whether it was possible that his discussion in 2002 with the Fees Office could have been held without mentioning his personal shareholding. He told me that there had been a series of conversations, and said "You can't take one letter, one meeting, in isolation." I noted that it would have been possible for him to have written his letter of 31 January 2002 even if he had overlooked to mention his shareholding.[136] He said that it was "inconceivable" that he wouldn't have mentioned it and told me: "I am absolutely convinced that I mentioned it. It was such an important part of my life: I would not have fouled it up. I went to extreme lengths to take advice. I can't explain why their memories differ from mine. I had a meeting."

94. The Director-General had accepted that it was entirely possible that if Sir Bob's shareholding had been raised the advice would have been that his arrangements were within the rules then, but not after April 2003.[137] I asked Sir Bob Russell why he thought that it was not conceivable that he had been given that advice. He said, "because it would have been a pointless exercise to do it for about 9 months. If they'd said that, either the project wouldn't have gone ahead or we would have found another way to do it." He thought that it was not possible that he had been given the advice but forgotten it.

95. I asked whether Sir Bob Russell believed he had not been aware of his sister-in-law's shareholding at the time. He told me that he could not remember and that he may or may not have known of it. He told me that he was not aware of the full list of shareholders, but had perhaps been sent fortnightly updates. In commenting on the interview note, Sir Bob Russell said that those updates had been of "donations. Not names".

96. I asked Sir Bob Russell why he thought that he must have provided an independent rental valuation. He said he believed he had "because the Fees Office would have asked for evidence. The Hall might not have existed". He added: "There must have been a valuation for them to have paid the rent. If not, why wasn't I chased for one? The internal audit would have picked it up. There had to have been one: it's as simple as that." He told me that an independent rental valuation had been made by a reputable local firm of surveyors;[138] he thought that there may have been such a valuation before 2010.

97. I asked Sir Bob Russell whether, overall, he thought he should accept any responsibility for the way in which his arrangements had been made. He told me that his "responsibility was to ensure that what I was doing was correct. I was satisfied that it was correct then, and I'm satisfied now." He reiterated that he had had no financial gain from the arrangements, had taken advice from the Fees Office and had conveyed what he was doing to the Commissioner. He said that he could not find fault with what he had done and that his conscience was "totally clear". He did not think that the complaint was justified, because he had not gained financially and he had not misused public funds. He told me that what records he had confirmed "beyond reasonable doubt that I sought advice, took advice, and followed advice."

98. Finally, I summarised the specific allegations against Sir Bob Russell and invited any further comments he wished to make. In respect of the allegation that he had been in breach of the rules restricting leasing from a company in which the Member had an interest, he said "I do refute that. It would be different if I still had the shares, but this complaint came 18 months later. My interpretation of "interest" is something which brings me financial gain." On the allegation that he had not given the Fees Office information about his shareholding before they agreed that his arrangements complied with the new rules, he said "I totally refute that. My letter on 31 January 2002 confirms the opposite. It says "thank you for confirming that my arrangements comply with the rules.""[139] In respect of the allegation that it was more likely than not that Sir Bob Russell had not lodged with the Fees Office an independent rental valuation for his constituency office in 2002, he said that he could not prove that he had done so, but that he knew he must have done because he was claiming rent. He added: "The only other possible conclusion is that the Fees Office paid rent without the documentation, and the internal audit and the external audit didn't spot it." He said that it followed from this that he had sent the valuation to the Fees Office.

99. In conclusion, Sir Bob Russell referred to the views of his then secretary, now his office manager. He said: "All she could have told you was that I went to great lengths to ensure that I complied with the rules. She can vouch for that."

100. Following our interview, Sir Bob Russell wrote to me on 11 July.[140] He said that the facts of the inquiry were quite simple: first, that the House of Commons had stated that no Member should gain financially from the receipt of public money provided to assist him or her with constituency office costs, and that that was the "clear intention" of the Parliamentary rules; second, that all the evidence showed that he had not gained "a single penny" from the arrangements for his constituency office; and third, that all the evidence showed that every penny he had received from the Fees Office had been used for the purpose for which it had been provided. He concluded: "I therefore trust that this malicious complaint can now be disposed of with the contempt it deserves".

101. Finally, in preparing the evidence for this memorandum, my office noticed an apparent discrepancy in the start date for the rental increase from £8,235 a year to £9,365 a year. My office raised this with the House authorities, and they confirmed on 18 July 2012 that the start date for the rental increase was in fact May 2005, and not April 2006 as suggested in the Director-General's letter. They also provided revised figures for Sir Bob Russell's claims to take account of this.[141]

102. Sir Bob Russell made some additional points summarising his evidence when he responded on 1 August[142] to the draft of the factual sections of this memorandum, which I had sent him on 19 July.[143] He told me that he felt that, in the interests of natural justice, it should be noted that officials were recalling from memory what may or may not have happened when he sought their advice in the period from late 2001 to May 2002. He said that he, as the person most directly involved, had "a much firmer grip on what occurred, backed up by contemporary correspondence" which supported his recollection. He felt that "the jogging of people's memories" was not fair on him. He questioned whether those who had been asked about their dealings with him would be able to have "memory recall" of their dealings with other Members. He noted that the Director-General had stated in his letter of 21 February 2012 that "from this limited information base we cannot answer a number of [the Commissioner's] questions with any certainty".[144] He suggested that the accuracy of some recollections was perhaps put further in doubt by the late evidence of 18 July 2012 from the House authorities that they were wrong with their original evidence about the backdating of the rental increase.[145]

103. In setting out his own conclusions, Sir Bob Russell said that the House of Commons had ruled that no MP should make a personal financial gain from the receipt of public funds. He said that he had not done so. He said that every penny had been used for the purposes for which it was intended—namely, the running costs for his constituency office. He had contributed £25,000 of his own money so that he could have a "fit-for-purpose constituency office", which was of benefit to his constituents and better value for the public purse than renting a commercial office. He emphasised that he had sought advice, been given advice and had followed that advice.

104. Sir Bob Russell noted that the House authorities had destroyed most of the records from the period in question. He said that the contemporary documentation that did survive, which he said had mainly been provided by him, confirmed that he had sought advice. He considered that it was "contrary to natural justice" for people ten years on to seek to distance themselves from "what was the case at that time" when they accepted they could not be entirely accurate with their recollections. He concluded that, to the best of his knowledge and belief, he had complied with "both the spirit and the letter of the rules and regulations."

Findings of fact

105. In 2001, Sir Bob Russell was looking for suitable accommodation for his constituency office. Magdalen Hall, then called St Mary Magdalen Church Hall, was for sale. Members of Colchester Liberal Democrats and others formed the Magdalen Hall Company Limited and that company bought Magdalen Hall on 30 April 2002. Sir Bob Russell owned 100 of the total 244 shares in Magdalen Hall Company Limited; the value of his shares was £25,000 and he was the largest single shareholder. The next largest group of shareholders owned ten shares each. Sir Bob Russell's sister-in-law owned two shares at a cost of £500.

106. Magdalen Hall Company Limited leased the whole building to the Colchester Liberal Democrats, who in turn sub-let half of the building to Sir Bob Russell for his constituency office. Sir Bob Russell's constituency office has been based at Magdalen Hall ever since. Between 2002-03 and 2009-10 Sir Bob Russell made claims from his parliamentary expenses for the costs of renting this accommodation. The annual rent was £8,235 from April 2002 and rose to £9,365 from May 2005. Over the total period these claims amounted to £97,162.34, of which £70, 847.83 was for rent. The House authorities made these rental payments, at Sir Bob Russell's request, to Magdalen Hall Company Limited between July 2002 and March 2004, and thereafter (on Sir Bob Russell's instruction) to the constituency party. In June 2010 Sir Bob Russell divested himself of his shareholding by donating it to his constituency party.

107. On 22 January 2002, the Head of the Fees Office wrote to all Members setting out new restrictions on leasing office accommodation where the costs were being met from parliamentary funds.[146] With effect from April 2003, Members would not be allowed to claim the cost of leasing accommodation for their constituency offices from themselves, from close associates or from or any organisation in which they—or a partner or family member—had an interest. They were required to lodge the lease with the Fees Office and, if leasing from a political party or constituency association, to provide an independent rental valuation. The letter also told Members that they would be required to avoid any leasing arrangement which could give rise to an accusation that they, or someone close to them, was obtaining an element of profit from public funds or that public funds were being diverted for the benefit of a political organisation.

108. In November 2001, Sir Bob Russell wrote to the then Parliamentary Commissioner for Standards about his proposed shareholding, which he said was to enable the purchase of the church hall by the Colchester Liberal Democrats.[147] The then Commissioner advised him to register his shareholding.[148] Following a telephone conversation with the then Commissioner, Sir Bob Russell wrote to her to explain that his shareholding was provisional and to say that he would register it once the details were confirmed.[149] Neither that letter nor the Commissioner's note of the telephone conversation refers to the additional use of the property as constituency offices. On 23 April 2002 Sir Bob Russell wrote to her successor to register his shareholding, in an entry which listed as a registrable shareholding "Magdalen Hall Company Limited; company formed to facilitate the purchase of the former St. Mary Magdalen Church Hall, Colchester, by Colchester Liberal Democrats".[150] That entry remained in the register from 2002 to 2010.

109. In late January 2002, Sir Bob Russell attended a meeting with the then Head of the Fees Office and another senior Fees Office official to discuss the arrangements he was making for his constituency office. After that meeting, Sir Bob Russell wrote to the Fees Office on 31 January 2002 to note that he would follow their advice not to become a Director of the company which was to own Magdalen Hall (although this was not contrary to the rules) and to thank them for confirming that his arrangements complied with the new rules.[151]

110. The Director-General's evidence is that, had the Department been conscious of the ownership of Magdalen Hall Company Limited in June 2003 (when the Green Book rules were updated with the restrictions on leasing office accommodation), he believed that they would have ruled that the arrangement did not comply with the Green Book rules, and would have approached Sir Bob Russell accordingly. The Director-General's evidence is that he could see nothing in the available documentation that in itself suggested that Sir Bob Russell held shares (or at least shares with other than a nominal value). His evidence is that it was "entirely possible" that the substantial personal shareholding was disclosed at the meeting between Sir Bob Russell and the Fees Office in January 2002. But in his view it was difficult to see how Sir Bob Russell could then have been led to understand that his arrangements complied with the new restrictions on leasing office accommodation sent to all Members on 22 January 2002.[152] He thought it very unlikely that the shareholding of Sir Bob Russell's sister-in-law would have been discussed and there was no reference to her involvement in any available correspondence. The Director-General's evidence is that the only independent valuation held by the Department was the March 2010 valuation,[153] but it was possible that one had been supplied in 2002. The Director-General expressed "extreme caution" about drawing inferences from the period in question, since the transactional records and most of the correspondence relating to the period between 2002 and 2004 had been destroyed. He considered that the few records that remained might support more than one explanation.

111. The evidence of the former Parliamentary Commissioner for Standards is that she does not recall the detail of her conversations with Sir Bob Russell in 2001. She believes, however, that had Sir Bob Russell mentioned anything material, other than his shareholding, it is likely that she would have recorded it.

112. The evidence from the former senior official in the Fees Office is that she does not recall in detail her dealings with Sir Bob Russell at the time. She is not sure that Sir Bob Russell made clear the exact nature of the company; she is inclined to think that he did not. She is sure that the shareholding of Sir Bob Russell's sister-in-law was never discussed.

113. The evidence of the former Head of the Fees Office is that, while he had no recollection of being consulted on this matter, he was certain that if the full extent of the Member's involvement with the Magdalen Hall Company Limited had been fully disclosed at the time to him or to the former senior official in the Fees Office it would not have been seen as complying with the new rules which were to come into force at the end of March 2003. He could not recall either approving or confirming Sir Bob Russell's arrangements, but said that the approval could not have been granted in full knowledge of all the circumstances of the Member's involvement with the Magdalen Hall Company Limited. He had "no recollection" of the Department receiving an independent valuation of the market rent for Sir Bob Russell's constituency office.

114. Sir Bob Russell's evidence is that he is certain that he would have told the Parliamentary Commissioner that the building the Magdalen Hall Company Limited intended to acquire was to be used as his constituency office. As evidence of his openness he notes that his shareholding was registered in the published Register of Members' Financial Interests from 2002 to 2010. Sir Bob Russell is equally certain he told the Fees Office in January 2002 of his shareholding in the Magdalen Hall Company Limited as well as the use of the building as his constituency office. He is clear that, after he had provided this information, he was advised by senior officials—including the then Head of the Fees Office—that his arrangements would comply with the rules restricting the leasing of constituency offices which would come into effect in April 2003. He accepts that there is no written evidence that he told the Fees Office about his shareholding, but he is sure that he did so. He notes that his letter to the Fees Office of 31 January 2002 confirms that he sought advice. In respect of his sister-in-law's shareholding in the company, Sir Bob Russell's evidence is that he cannot remember whether he was aware of it at the time. He thinks it is "perhaps unlikely" that he would have mentioned it in his discussions with the Fees Office. He notes that her shareholding represented less than half a percent of the total value of the shares. His evidence is that he accepted the advice he was given by the officials involved because he believed that his shareholding did not constitute an "interest" under the rules, since he did not expect or intend to profit from it. He is "saddened" that the Department is now seeking to distance itself from the advice it gave him at the time, particularly as the relevant officials accept that they either cannot now recollect being consulted or cannot recall the detail of their dealings with the Member.

115. On the question of whether Sir Bob Russell provided an independent rental valuation for his constituency office, as required by the rules, his evidence is that he must have done so, on the basis that the Fees Office would not have paid the rent for his office if he had not done so. He notes that Fees Office records from that time have been destroyed.

116. Sir Bob Russell considers that the complaint against him is malicious and made by a political opponent to discredit him in the eyes of the electorate. His evidence is that he sought advice, received advice and acted on that advice at all times and, in doing so, ensured that his arrangements for his constituency office were fully within both the spirit and the letter of the rules. His evidence is that he did not gain financially from the receipt of public funds—rather, he used his own money to help provide a constituency office.

Standard of Proof

117. When considering allegations against Members, the Commissioner and the Committee normally require allegations to be proved on the balance of probabilities, namely, that they are more likely than not to be true. Where the Commissioner and the Committee deem the allegations to be sufficiently serious, a higher standard of proof will be applied, namely, that the allegations are significantly more likely than not to be true. In this case, there are judgments to be made about what Sir Bob Russell told the Fees Office officials in 2002 about his shareholding and that of his sister-in-law, and about whether he provided the required independent rental valuation in 2002 or subsequently. In all the circumstances, I consider that I can apply the normal standard of proof to these judgments, although I have been ready to consider applying the higher standard if the particular circumstances justify it.

Conclusions

118. The question I have to resolve is whether Sir Bob Russell was in breach of the rules of the House from 2002 to 2010 by having a substantial shareholding—and his sister-in-law a much smaller shareholding— in a company which owned the property which he sub-let for his constituency office and whose rent he claimed from parliamentary allowances.

119. Sir Bob Russell decided on the arrangements for his constituency office as long ago as 2002. It was bound to be difficult to find reliable evidence about the genesis of those arrangements after such a passage of time. But I considered it necessary to investigate this complaint for two reasons. First, because of the length of time over which the conduct complained of had continued, ending only in the first month of the current Parliament. And secondly, the amount of money involved—a little over £70,000 in rental payments. I therefore sought and received the Committee's agreement to going back more than 7 years.

120. But it is understandable and inevitable that records from and memories of 2002 are much less certain than they are likely to be of more recent events. Partly because of that, Sir Bob Russell has by his own account spent much time in preparing his responses to my inquiries. I am grateful to him for that—as I am to others who gave evidence. As a result, the inquiry has spanned the year. The time taken to resolve inquiries depends generally on the complexity of the allegations, the speed and fullness with which Members and any witnesses are able to respond and the nature of these responses. In this case, a combination of these factors has meant that this inquiry has taken much longer than I would have liked.

121. In considering whether or not Sir Bob Russell was in breach of the rules of the House, I have considered the following questions:

1.  Were Sir Bob Russell's claims for his constituency office from 2002 to 2010 within the rules of the House at the time?

2.  Were the Fees Office in receipt of all the relevant facts before approving the arrangement?

3.  Did Sir Bob Russell provide the Fees Office with an independent rental valuation for the property before 2010?

Were Sir Bob Russell's claims for his constituency office from 2002 to 2010 within the rules of the House at the time?

122. Before April 2003 the rules were silent on whether a Member could lease accommodation from an organisation in which he or she—or a partner or family member—had an interest. But in June 2003 the Green Book included in the section for meeting Members' claims for office and surgery accommodation new paragraphs headed "Principles" and "Propriety". They had come into effect that April. The "Principles" paragraph required Members to ensure that their office arrangements were above reproach and that there could be no grounds for a suggestion of misuse of public money. And they required that there should be no profit to the Member or benefit to a political organisation.

123. Under a separate paragraph on "Propriety", the rules said that "the allowances must not be used to meet the costs of leasing accommodation from ... any organisation in which you—or a partner or family member—have an interest." It is this rule against which Sir Bob Russell's arrangements need to be judged. That rule had taken effect in April 2003 and remained in place until the Green Book was substantially revised in March 2009, when the reference was dropped. The Independent Parliamentary Standards Authority subsequently restored this rule with different wording in its first expenses rule book which came into operation on 7 May 2010.

124. In my judgement it was open to Sir Bob Russell to claim the rent for sub-leasing his constituency accommodation from an organisation in which he had a major shareholding from May 2002, when his arrangement started, until the end of March 2003. Any claims he made over this period were not in breach of the rules of the House.

125. Equally, given that the Green Book of March 2009 was silent on this type of arrangement, I consider that Sir Bob Russell's arrangements could not be held to be in breach of the rules after that date. That Green Book referred to the principles that claims should be above reproach and that they must not provide a benefit to a party political organisation or give rise to an improper personal financial benefit. I have no evidence—and do not believe—that Sir Bob Russell breached any of these principles.

126. I consider, however, that the claims Sir Bob Russell made from April 2003 until March 2009 were clearly in breach of the then rules of the House. This was because the rules prevented Members leasing accommodation from any organisation in which they had an interest. In my view, Sir Bob Russell undoubtedly had an interest in the company which owned the property. He was by far its largest shareholder. In my judgement the rule clearly and specifically prohibits such an arrangement. Equally, the smaller shareholding of Sir Bob Russell's sister-in-law was a breach of the rules. The rules included no threshold below which any interest did not apply and the sum invested—£500—was not negligible.

127. Sir Bob Russell has sought to argue that the rules requiring Members not to make a profit from their claims apply to and qualify the leasing restriction. He has argued that since neither he nor his sister-in-law made a profit—or intended to make a profit—the leasing arrangement was permitted under the rules.

128. I accept that Sir Bob Russell believes strongly that the only criterion is whether or not he—or his political party—made a profit from the arrangement and, since he argues no such profits were made, the leasing restriction did not apply to him. This is in my view a genuine misunderstanding and misreading of the rule, but a misunderstanding and misreading nonetheless. In the June 2003 Green Book the rule against making a profit from public funds is in a separate paragraph from that imposing the leasing restriction. They are in my view separate rules. I accept that in the April 2005 and June 2006 Green Books these two provisions were included in the same paragraph. But there is no evidence that the intention was to qualify the absolute effect of the leasing restriction and the revised positioning of the two provisions makes no attempt to do so. Indeed, were the rule intended to be simply that Members must not make a profit from their arrangements, there would have been no need to include the leasing restriction in the 2005 and 2006 Green Books (as it is not included in the 2009 Green Book).

129. In my view the intention of the leasing restriction was to prevent Members appearing to benefit—financially or otherwise—an organisation in which they had an interest. That is an absolute restriction, additional to and separate from the requirement to avoid making a profit from public funds. By sub-leasing his constituency office from an organisation in which he had an interest, Sir Bob Russell broke that rule. While the rule does not require a benefit to be established, I consider that there would have been some benefit to the company in having Sir Bob Russell in its property: he was an assured payer, and completely compatible with the head leaseholder, the Colchester Liberal Democrats.

130. Sir Bob Russell has also sought to argue that he did not in fact have an interest in the company because his shares never made him any money. For this purpose he seeks to define an interest as that which releases a profit. I do not accept this argument. I have no doubt that a shareholding in a company gives the shareholder an interest for the purpose of the interpretation of this rule. Any shareholder—even in companies not paying dividends—has an interest in the company in which he or she holds shares. Sir Bob Russell recognised he had a significant financial interest through his shareholding when he registered it in the Register of Members' Financial Interests. By the same token he should have recognised that his significant shareholding constituted an interest for the purpose of the Green Book's leasing restriction.

131. I have considered also whether the fact that Sir Bob Russell was sub-leasing the accommodation meant that the prohibition on leasing accommodation from an organisation in which the Member had an interest did not apply. He was not leasing it directly from that organisation. But that could not have been the intention of the rule since it would then have been very easily circumvented. To make such a narrow interpretation—which in fairness Sir Bob Russell has not sought to make—would undermine the effectiveness of the provision which, as the heading makes clear, was intended to ensure propriety in the arrangements Members made for leasing accommodation.

132. It follows that I do not consider it material in meeting this rule that Sir Bob Russell had a sub-lease from his constituency party rather than a head lease from the company, or that up to 2004 his rental claims were paid by the House authorities direct to the company and then from that date were paid to the constituency party. There would appear to have been no practical effect in the change in the payment arrangements. I accept Sir Bob Russell's evidence that after 2004 the rent for his constituency office would have been paid over to Magdalen Hall Company Limited—the property company in which he had the largest shareholding.

133. In my view, Sir Bob Russell was mistaken when he appeared to suggest twice at interview that his situation would have been different had he not divested himself of his shares in June 2010. That may affect the public perception of his arrangements, but it does not affect the application of the rules at the time. What matters is whether the ownership by Sir Bob Russell—and his sister-in-law—of shares in the company which sub-leased to him his constituency offices on which he claimed Parliamentary expenses complied with the Green Book rules as they were from April 2003 to March 2009. I have concluded that they did not.

Were the Fees Office in receipt of all the relevant facts before approving the arrangement?

134. Sir Bob Russell says that in discussions he had with two senior members of the Fees Office in January 2002—and in previous discussions with the Fees Office—he certainly would have mentioned that he was a shareholder in the company buying the property in which he planned to establish his constituency office. His evidence is that the Fees Office approved his arrangement in full knowledge of that fact.

135. The House authorities—namely the Director-General whom I consulted and the two retired officials involved at the time—consider it difficult to believe that the two officials could have given their approval if they had been told of Sir Bob Russell's shareholding. The Director-General speculates that they might have approved the arrangement up until March 2003, but advised Sir Bob Russell to change it after then. But there is no evidence that they did so.

136. There is no record of the conversations, and, understandably, neither Sir Bob Russell nor the officials involved have a firm recollection of what was said. Sir Bob Russell's case is that it is "inconceivable" that he did not tell them. I agree that it is inconceivable that he did not tell the Fees Office that he wanted to use part of the property for his constituency offices. It seems likely that he told them his party was establishing a company to make the purchase. I accept he told them he was to be a Director of the company. None of that is at issue. The question is whether Sir Bob Russell also told them of his personal shareholding in that company.

137. I need to consider, therefore, whether on the balance of probabilities it is more likely to be true than not to be true that Sir Bob Russell did not provide information about his personal shareholding to the Fees Office in 2002.

138. Sir Bob Russell has suggested that the conclusive evidence was his letter to the Fees Office of 31 January 2002 where he recorded the outcome of his discussions with officials. He states in that letter that officials, including the Head of the Fees Office, had confirmed that the arrangements for his constituency office complied with the new rules set out in the letter from the Head of the Fees Office of a few days before. I accept that Sir Bob Russell's letter represents strong evidence that the Fees Office agreed to his arrangements. But it does not necessarily follow from the text of that letter that Sir Bob Russell referred specifically to his personal shareholding. Sir Bob Russell is adamant—and has been from the beginning of this inquiry—that he did tell the officials of this fact. The two officials fairly tell me that they cannot remember the details of the conversation, but that, had they known, they would not have advised that it was within the rules.

139. In consulting the witnesses, I showed them all the relevant evidence I had received in the course of my inquiry. This was in accordance with my normal practice, since I consider it fair that, in a process that is intended to be inquisitorial and not adversarial, witnesses—including Members—are aware of what is being said about them before being invited to respond, particularly when their involvement could reflect on their personal reputation and professional competence. I regret the way that Sir Bob Russell has sought to criticise both the current and retired officials of the House for the evidence they have given. I consider that they have been open and honest about their interpretation of the available documentation and about how much—and how little—they can remember, ten years on. I do not accept Sir Bob Russell's suggestion that officials have changed their interpretation of the rule as it was at the time. I am satisfied that the officials have given their evidence in the utmost good faith—as has Sir Bob Russell himself.

140. I found it difficult in advance of his oral evidence to secure Sir Bob Russell's specific evidence on whether he informed officials of his shareholding, as opposed to discussing with them his intention to use part of Magdalen Hall as his constituency office. Had he failed to tell officials of his shareholding (or that of his sister-in-law), it would have been quite possible for them to have agreed the arrangements as set out in his confirmatory letter of 31 January 2002. And—were it not for the shareholdings—that agreement would have been fully consistent with the forthcoming change in the rules. There is no reason to suggest that the Parliamentary Commissioner's office had a responsibility to check Sir Bob Russell's arrangements against the Green Book—or that House officials had a responsibility to check the Member's Register entry. The Commissioner's office had all the information it needed to advise on registration matters. The question is whether the Fees Office officials had all the information they needed to advise accurately on expenses matters.

141. Sir Bob Russell's description of his shareholding in his evidence to me as akin to a donation (which for 8 years it was not) and of the company as a mutual (which it never was) must raise some doubts about how clearly and accurately he would have explained the ownership arrangements to officials in 2002. While these are, in my view, reasonable doubts, what I have to decide is whether there is sufficient evidence to enable these doubts to be substantiated on a balance of probabilities.

142. Having weighed carefully all the evidence and in particular the statements from Sir Bob Russell and the two retired officials, I do not believe, on the balance of probabilities, that the evidence that Sir Bob Russell did not tell the Fees Office of his personal shareholding is sufficiently strong to permit me to conclude that he was wrong in his recollection. But neither is the evidence sufficiently strong to say that the House officials did know and made what I consider to be an obvious and fundamental error in their advice. Given the seniority and the experience of the officials concerned—and the immediacy of the new rules—that would certainly be surprising.

143. In reaching my conclusion, therefore, I make no criticism and cast no aspersions on the standing or reputation of those officials. The question I have had to resolve is whether the evidence is sufficient to say—ten years on—that Sir Bob Russell's strongly asserted recollection is wrong. I cannot and do not do so. I conclude, therefore, on the balance of probabilities, that Sir Bob Russell did tell Fees Office officials of his personal shareholding as well as the other details of the arrangements for establishing what was to be his constituency office, as indeed he had previously told the then Parliamentary Commissioner for Standards before making his registration. I accept too that the fact that he made this registration of his shareholdings meant that he was open about this aspect of his arrangements—they were on the public record from 2002 to 2010. In respect of the shares of Sir Bob Russell's sister-in-law, I consider that the evidence, not least from Sir Bob Russell himself, suggests that it is more likely than not that he did not refer to this shareholding in his contacts with officials in 2002.

144. I do not accept the argument that if a Fees Office official, however senior, advises a Member about the interpretation of the rules—even if he or she is in full possession of all the relevant facts—the Member themselves cannot be held to have breached those rules. The long established principle is that Members themselves accept personal responsibility for keeping the rules. That responsibility cannot be delegated or transferred to a House official. It is however very strong mitigation that a Member has consulted the appropriate House officials and taken and acted on their advice if, in the event, they are subsequently found to have breached the rules of the House. In my judgement, and recognising and giving full and fair weight to the uncertainties of conversations held over 10 years ago, Sir Bob Russell is entitled to that mitigation.

Did Sir Bob Russell provide an independent rental valuation for the property before 2010?

145. The Green Book rules required Sir Bob Russell to provide in 2003 an independent rental valuation on the part of the property which he was to lease from his constituency offices. This is because the offices were to be sub-let from his constituency party. The provision was to ensure the Member paid a fair and not inflated market rate. There is no documentary evidence that Sir Bob Russell submitted such a valuation to the Fees Office. Sir Bob Russell's evidence is that he had no recollection of sending it to the office, but he must have done so since the Fees Office paid his claims without demur and the auditors never questioned them.

146. There is no evidence that Sir Bob Russell paid an inflated rent for his constituency offices.The subsequent independent valuation made in 2010 provides no grounds for suggesting this. But there is no assurance that the rent was established after making an independent valuation in 2002 or when in 2006 a rise was backdated to 2005. And, if any such valuations were made, there is no assurance that they were sent to the Fees Office. But equally, there is no evidence to the contrary. Without such evidence I do not consider it fair to conclude on the balance of probabilities that Sir Bob Russell failed to forward the independent valuation to the Fees Office as required under the rules. I do not, therefore, find that he was in breach of the rules in this respect.

Overall Conclusions

147. My finding, therefore, is that from April 2003 to March 2009 Sir Bob Russell was in breach of the rules of the House in sub-leasing offices in a property which was wholly owned by a company in which he and his sister-in-law had an interest through their shareholdings. His rental claims for that property, therefore, were not in accordance with section 5.12.2 of the 2003 Green Book rules—and its subsequent editions before March 2009.

148. I conclude that the evidence is not sufficient on the balance of probabilities for me to conclude that Sir Bob Russell omitted to tell Fees Office staff in 2002 of his substantial shareholding in this company before they approved his arrangements, although it is more likely than not that he did not refer to his sister-in-law's shareholding.

149. Had the evidence been sufficient to conclude that Sir Bob Russell had failed to give information about his shareholding to Fees Office officials before they approved his arrangements under the new rules, I would have regarded this as a serious breach. But the seriousness is strongly mitigated by that finding. It is also fair to point out that Sir Bob Russell received no personal financial benefit from the arrangement at any time. And the evidence suggests that the rent charged by his constituency party for Sir Bob Russell's offices was a fair market rent. So the party received no undue financial benefit. All these factors seem to me substantially to mitigate the seriousness of Sir Bob Russell's breach.

150. On the balance of probabilities, I accept that Sir Bob Russell lodged a market rental valuation with the Fees Office, as requested by them and as required by the rules, in 2003. He was not, therefore, in breach of the rules for not having done so.

151. This inquiry may serve as a reminder of how important it is for Members to give as full and clear an account as they can of the details of their arrangements when—commendably—they seek advice from the authorities. And to make sure they identify the reasons for the advice they are being given. As Sir Bob Russell very fairly told me, had he realised in 2002 the problem that his arrangements would cause 10 years later, he could have found a different way of supporting the project to which he attached such importance. And, as this report suggests, I believe that that would have been the better course.

8 August 2012  John Lyon CB


21   WE 1 Back

22   Not included in the written evidence Back

23   Not included in the written evidence Back

24   WE 2 Back

25   WE 5. The rent was in fact paid directly to the Magdalen Hall Company Limited until March 2004, and thereafter to the Colchester Liberal Democrats (see WE 22). Back

26   Sir Bob Russell received a knighthood in the New Year Honours List 2012. Back

27   Not included in the written evidence Back

28   WE 2 Back

29   WE 3 Back

30   WE 4 Back

31   WE 5 Back

32   WE 6 Back

33   WE 7 Back

34   Not included in the written evidence Back

35   WE 9 Back

36   Not included in the written evidence Back

37   WE 8 Back

38   WE 1-7 Back

39   WE 10 Back

40   WE 11 and 8 Back

41   Sir Bob Russell confirmed in his letter of 22 January 2012 that his shareholding was 100 of 244 shares, or around 40% of the total (WE 29). Back

42   Not included in the written evidence Back

43   Not included in the written evidence Back

44   WE 18 Back

45   WE 12 Back

46   WE 15 Back

47   WE 13 Back

48   WE 14 Back

49   WE 20 Back

50   WE 22 Back

51   An e-mail of 18 July 2012 from the same official showed that the rent increase was effective from May 2005 and not April 2006 as previously stated (WE 57). Back

52   WE 17 Back

53   See WE 37 for the final version of this letter as sent to the Fees Office.  Back

54   WE 21 Back

55   WE 19 Back

56   WE 16 Back

57   WE 23 Back

58   Not included in the written evidence Back

59   In fact, as explained by Sir Bob Russell in his response of 22 January, the original value was £250 a share. Sir Bob Russell therefore paid £25,000 for his shares, and his sister-in-law £500.When the company decided to subdivide the shares, the number of shares increased, but not their total value. Sir Bob Russell acquired no further shares above his initial investment (see WE 29). Back

60   WE 24-28 Back

61   WE 25 Back

62   WE 26 Back

63   WE 27 Back

64   WE 29 Back

65   WE 15 Back

66   WE 24-28 Back

67   WE 16 Back

68   WE 31 Back

69   WE 32 Back

70   WE 9 Back

71   WE 13 Back

72   WE 14 and 15 Back

73   WE 34 Back

74   WE 35 and 36 Back

75   WE 37 Back

76   WE 17 Back

77   This description is not in the draft (WE 17) provided by Sir Bob Russell on 8 January. Back

78   WE 38 Back

79   WE 39 Back

80   Not provided by the Director-General Back

81   Not included in the written evidence Back

82   WE 18 Back

83   WE 40 Back

84   WE 33 Back

85   WE 57  Back

86   WE 34 Back

87   WE 37 Back

88   WE 13 Back

89   WE 9 Back

90   In considering the factual accuracy of the draft factual sections of this memorandum, Sir Bob Russell commented: "The recollections of the Director-General are inconsistent with my memory of discussions from the beginning of 2002, notably borne out by my letter of 31 January 2002 to the Fees Office (WE 13). It simply is not good enough for him to concede that something I had said was "entirely possible" and then to seek to distance himself from the advice I was given at the time by making reference to "one possible explanation". My letter of 31 January 2002 is crucial-it confirms my recollection; there is nothing to confirm what the Director-General is seeking to portray ten years later!" Back

91   WE 35 and 36 Back

92   WE 18 Back

93   WE 41 and 32 Back

94   WE 42 Back

95   WE 9 Back

96   WE 13 Back

97   WE 43 Back

98   WE 9 Back

99   Not included in the written evidence Back

100   WE 44 Back

101   WE 13 Back

102   Sir Bob Russell has contested this evidence-see paragraph 68 (WE 46) and paragraphs 75 to 80 (WE 53). Back

103   WE 15 Back

104   Sir Bob Russell has contested this evidence-see paragraph 68 (WE 46) and paragraphs 75 to 80 (WE 53). Back

105   WE 45 Back

106   WE 17 and 37 Back

107   WE 46 Back

108   WE 14 Back

109   WE 15 Back

110   WE 24 Back

111   WE 47 Back

112   WE 48 and 50 Back

113   WE 49 Back

114   WE 51 Back

115   WE 52 Back

116   WE 48-51  Back

117   WE 45 Back

118   WE 53 Back

119   WE 44 Back

120   Sir Bob Russell confirmed in his letter of 22 January that his shareholding was 100 of 244 shares, or around 40% of the total (WE 29). Back

121   Not included in the written evidence Back

122   Not included in the written evidence Back

123   Not included in the written evidence Back

124   WE 54 Back

125   WE 55 Back

126   WE 9 Back

127   WE 11 Back

128   WE 53 Back

129   WE 4 Back

130   WE 13 Back

131   WE 53 Back

132   WE 32 Back

133   WE 13 Back

134   WE 13 Back

135   WE 37 Back

136   WE 13 Back

137   WE 32 Back

138   WE 18 Back

139   WE 13 Back

140   WE 56 Back

141   WE 57 Back

142   WE 58 Back

143   Not included in the written evidence Back

144   WE 32 Back

145   WE 57 Back

146   WE 9 Back

147   WE 24 Back

148   WE 25 Back

149   WE 26 and 27 Back

150   WE16 Back

151   WE 13 Back

152   WE 9 Back

153   WE 18 Back


 
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© Parliamentary copyright 2012
Prepared 10 September 2012