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Exclusive: Liverpool mayoral hopeful fails to answer serious concerns over links to company’s cash and loan transactions and to right-wing councillors involved

Right-wing councillors are part of Ann O’Byrne’s campaign – and leaked report on car park company raises questions that she has failed to answer despite promise to respond and sending intermediary. Publication of government report on council’s financial affairs is expected before mayoral election

Councillor and Liverpool city mayor hopeful Ann O’Byrne

A leaked internal report and a series of associated tweets have raised serious concerns about the links of one of Liverpool Labour’s would-be mayoral candidates to worrying financial transactions – and also, in spite of her positioning as a left candidate, her continuing closeness to two notoriously right-wing councillors who feature prominently in the leaked report.

The SKWAWKBOX has verified the authenticity of the leaked 2018 Liverpool City Council document titled “Report on the Beautiful Ideas Company” (BICo):

The title page of the leaked report

Councillor Ann O’Byrne is one of three candidates short-listed to stand as Labour’s candidate to replace the city’s previous mayor, Joe Anderson, who stepped down after being arrested as part of a corruption probe. As a former deputy mayor who has positioned herself to appeal to the left of the party and who has a significant campaign team, she is considered to have a strong chance of winning the selection.

However, the revelations of the BICo report – which include accounting failures, conflicts of interest, employment of a family member, lack of receipts for income and expenditure and more – have worried even allies on the council – and Cllr O’Byrne has failed to respond to the SKWAWKBOX’s multiple requests for comment, in spite of an initial promise to call back that was followed by the intervention of an intermediary, who eventually declared himself unable to answer the questions raised.

The report has also become the topic of a series of Twitter discussions that raises further questions about financial conduct.

Beautiful Ideas?

The council’s 2018 BICo report followed an investigation of the financial conduct of, and loans made by, BICo, after the ‘community interest company’ (CIC) was formed from a preceding CIC – inheriting more than £186,000 from its predecessor and receiving further funds from the operations of two car parks. By the end of the period covered by the report, the company had lent or given hundreds of thousands of pounds to other local companies – including more than £160,000 to entities linked to BICo directors and advisers – many of which subsequently failed or ceased trading.

The issues raised include a payment of £20,000 to a middle-company that was used to employ Ann O’Byrne’s daughter Rachel, also a councillor.

The report also criticises BICO’s car park operations, which were run on a cash basis and with no documents to show how much cash had been taken or receipts for expenses.

Ann O’Byrne acted as an adviser to BICo. A well-known right-wing councillor was also an adviser, while another was a director of BICo and signed off all the expenses criticised by the report – councillors who are now said to be involved in O’Byrne’s mayoral bid.

Conflicts of Interest

The report notes that, of the large amounts of cash handed out by BICo to other businesses, more than £160,000 went to organisations with close links to BICo directors and advisers and/or with offices at the same address:

‘Investment issues’

BICo also made loans and investments to companies that soon stopped trading or were not eligible for funds:

Investment Issues

A review of the investments suggests that they do not in every case meet the criteria of the funding and raise issues about the level of funding and whether the organisation funded was appropriate.

– Of the businesses that BICo invested in, at least 5 are in a precarious financial position or are not trading.
– The claims made by BICo for the impact of the investment on turnover and jobs created are based on figures prior to investment, and are misleading.
– Of the £396,300 invested, an estimated £190,000 has been invested in businesses that do [sic] appear to [be] trading, [are] close to administration or organisations that are running a project rather than a business. This accounts for 8 of the 19 investments.
– Although the investments are intended for businesses that have a social impact and are sustainable, there are only 6 investments that could fall into this category.

No receipts

BICo’s core business was the operation of two car parks – one in Smithy Street and the other being one of the closest to the Liverpool and Everton football grounds.

The football car park operated on a cash only basis, with no ticketing of cars using it and therefore no evidence of how many drivers paid for entry. But this is only one of a litany of issues identified by the leaked report:

No proper records of cash in, no proper records of cash out – and the report further notes that, in spite of being one of the nearest car parks to Anfield Stadium, the car park was almost never recorded as full.

Instead, the reported average number of cars paying to use the 320-plus-space car park was only 196:

The car park is used for football matches and other events held at Liverpool and Everton football grounds. Accounts show the car park is virtually never full. The car park capacity is around 320, although the average use is 196 per game. The highest use recorded for last season is 328, which was for a Liverpool Legends game, otherwise the records show a consistent under capacity for every match. For example 12 out of 23 matches at Anfield had fewer than 270 cars.

And the council also discovered that both Ann O’Byrne and her daughter had worked at this cash-only car park, with no record to indicate whether they were paid for doing so:

There is evidence that Councillor Ann O’Byrne was working at the car park. Although there is no suggestion or evidence that she was paid for this, what is clear is that she had the opportunity to see how the car park was being run first hand. Yet there is no evidence that she raised any issues over the running or management of the car park that were raised by audit in November 2017.

Councillor Rachel O’Byrne was also active on the car park, and although there is no evidence that she was being paid, she was also employed at Stanley Park CIC through funds raised through the car park.

Bad investments

The report notes problems with a high proportion of the investments and loans made by BICo from its funds – and that all of them were signed off by the same right-wing councillor acting as a director of the company:

Examples of Poor Investment Decisions

Positivity Inc
In 2016/17 this had a turnover of £15.074 for delivering “yoga, mindfulness and creative outdoor activities”. The main income of the company appears to be from this and other Council funds, through the Mayoral Neighbourhood Fund, Mayor’s Fund and the Youth Grant. It is not clear how this will generate additional, independent income outside of grant aid from Council funds. This is an organisation doing worthy work, but it is not clear how it is a sustainable business, and appears to be a project rather than business funding.

Stanley Park Investment
BICo made the decision at a board meeting on October 8th 2015 to invest £20,000 in Stanley Park so that it could “operate Stanley Park as an open air events venue and curated cultural space”. Councillor [X] (Chair of the Board) and Councillor Ann O’Byrne (Advisor) were present. The funding was not paid directly from BICo to Stanley Park, as the CIC was not set up then. As a result the money was invested via Hestia Careers.

The actual investment paid to Hestia Careers was £20,000 for a Community and Park Animation Manager, and an invoice from Hestia Careers is dated January 11th 2016. Councillor [X] authorised the payment in an email on January 15th 2016. There does not appear to have been a competitive bidding process for this investment, as the other investments were supposed to, and the money was intended to transfer to Stanley Park Liverpool CIC, which was incorporated on April 2nd 2016.

There was an advert placed for the position of Community and Park Animation Manager in the November, and Rachel O’Byrne was subsequently appointed as the Community and Animation Park Manager, early in 2016. She was a Councillor for Allerton and Hunts Cross ward at the time.
Mayfair Home Furniture

BICo made two payments totalling £50,000 in 2017. £30,000 was a loan and £20,000 was for working capital. The consultant supporting BICo investments could not say what the payments were for

This is a company that was trading via Instagram and Facebook. The last posting on Facebook was July 25th 2017 and the Instagram account is also dormant. It seems that within months of making the payment, the company stopped trading.

The consultant confirmed that this investment could be transferred to Mersey Regeneration. This is a building/developer company and has the same directors as Mayfair Home Furnishing. But it is a separate company, and there are no records of an application by Mersey Regeneration to transfer the funding. This appears to be a decision made by the Board. It is not clear why the investment has not been returned to BICo.

Coming Home Liverpool

The company was established to buy and refurbish houses. It received £30,000 from BICO. It has only built one house and the company is not planning any further development. The 2 original Directors have resigned, and Erika Rushton and Paul Dickson were appointed to the Board.

This still holds £14000 of BICo money and has a small monthly rent form the house it refurbished. It is not clear why the £14,000 has not been returned to BICo.

Accounting failures

BICo had never been audited for its investment activities or the due diligence of the councillors involved, at the time of the leaked report. A 2017 audit of the car park business concluded that:

  • cash payments needed to have an audit trail
  • there needed to be a verifiable record of cars using the car park
  • BICo needed to pay business rate
  • BICo needed to pay VAT

Before the audit, the company was paying no business rates or VAT.

Steering

The report states that Ann O’Byrne, along with the two right-wing councillors, ensured that the investments went into their preferred areas:

A damning summary

The report’s summary conclusions make worrying reading:

SUMMARY

  1. The poor quality of many of the investments, the lack of due diligence and the conflicts of interest, suggest that there has been at the very least the ineffective use of public funds and potentially the misuse of public funds.
  2. In at least half of cases, investments have not met the criteria for funding that was laid out in the Cabinet paper in July 2015.
  3. There is insufficient clarity over what the investments were required for, and the decisions and monitoring have been too informal.
  4. The car park is not being managed to appropriate audit standards, as there are still insufficient records to reconcile with any certainty the number of cars using the site, with the weekly takings
  5. The income from the car park is lower than expected, because it is reported to have hardly ever been full. Either the car park is being run incompetently or more cars park there than are reported
  6. Councillors [X], Ann O’Byrne and [Y] have not met the standards of accountability and due diligence that are to be expected in the administration of public funds, and of companies that the Council has an interest in. They must have been aware of issues surrounding investment decisions that are detailed in this report, but on no occasion were they brought to the attention of internal Council audit or to Cabinet. As the guardians of public funds, they have failed in their duty of due diligence.
  7. Councillor [X] failed to honour his commitment for BICo accounts to be open and transparent.
  8. Councillors [X], O’Byrne and [Y] steered the investments towards companies and areas that they wanted to see investment. As a result the investment decisions are not as random as the ‘Dragon Den’ process had suggested. There also appears to be a breach of protocol that those responsible for making the awards, to also be involved in some way in the selection of companies to receive investment.
  9. The appointment of Rachel O’Byrne as the Community and Animation Park Manager is concerning, because of the involvement of senior Councillors, including her Mother the serving Deputy Mayor in the decision to award funding, and the way it was funded through Hestia Careers
  10. The Council audits were limited in scope and should have included a review of investments and the role of Councillors on the Board.
  11. Other Directors have been appointed to the Board and use their work address. This raises an issue as to the whether there is a requirement of the employers to conduct scrutiny on the operation of a Board in line with their own corporate interest.

£241k on car-park ‘admin’

A Twitter thread relating to the leaked report alleges that the BICo car park spent £241,000 on ‘admin’ – an amount that seems astonishing for a small cash business:

Government report and fears of scandal

Local councillors have told the SKWAWKBOX that a government investigation into the council’s financial dealings is expected to report before the mayoral election, especially because a different ‘purdah’ date – the date at which information that might influence election outcomes cannot be published – is later for Local Government Secretary Robert Jenrick.

This probability and the issues around the leaked council report have triggered such concern that, according to council insiders, even councillors who have backed O’Byrne so far are in a quandary, fearing that the successor to a mayor who stepped down after a criminal arrest may also have questions to answer – and that if she is selected and the Jenrick report is published, Labour may be forced into an election with a candidate under a cloud.

Right or left?

In the leaked council report on the activities of BICo, Ann O’Byrne’s name appears frequently alongside the names of two of the city’s well-known right-wing Labour councillors. In spite of O’Byrne’s campaign positioning as a left-wing candidate, the SKWAWKBOX has been told that both of these councillors are significantly involved in her campaign.

Rule-breaking’ crowdfund

Despite not yet having won selection, Ann O’Byrne set up a crowdfund with the JustGiving website to raise funds for her campaign. After objections from members of the public who believed that such a fund set up before selection would breach electoral rules, JustGiving shut down the fundraising page:

Cllr O’Byrne has now reportedly set up a new fundraising page with a different platform.

Failure to comment and an intermediary

SKWAWKBOX tried over a two-day period to obtain comment on these issues from Cllr O’Byrne. In an initial conversation, during which SKWAWKBOX stressed the gravity of the issues raised in the report and the importance of putting her comments on record so that Labour members could make an informed decision ahead of the selection vote, she said that she had to go to a meeting but would call back later in the day. No call came.

Instead, an intermediary close to the O’Byrne campaign contacted SKWAWKBOX to discuss the issues. However, after a number of conversations across several calls, the intermediary said that he was unable to provide answers except that Cllr O’Byrne insisted that she had nothing to hide – and that he would therefore have O’Byrne get in touch to answer on her own behalf.

The intermediary was asked about the involvement of the two right-wing councillors in her campaign and did not dispute the reports.

Despite several attempts to reach the councillor and messages left underlining both the imminence of publication and the seriousness of the issues in question, she had not made contact by the time of publication. The failure to respond means that Labour members risk being in the unenviable position having to make a decision on whom to select as their mayoral candidate without input from Cllr O’Byrne on her side of the story.

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