Thursday, 17 June 2010

Asco: Council's response on Cushman & Wakefield contract.

The Virtual-Lancaster special report, "Bending Lancaster City Council to Its Will: The Asco File" posted on 24 May asked the City Council to answer 5 questions about its involvement with property consultants Cushman and Wakefield and their client Asco. The Council has replied this week in an unattributed response. The questions and the council's answers are as follows:

1.Q. When did Lancaster City Council contract with Cushman & Wakefield to find a trader to occupy the market hall?
A. Following the council’s resolution on the 9th December 2008.

2.Q. What were the broad terms of the contract?
A. In broad terms they followed the remit provided by the resolution made by the Council on the above date.

3.Q. Can you confirm that Cushman & Wakefield was paid at least £30,000 for its services, as suggested by the publicly available documents presented to City Cabinet on 23rd March 2010?
A. No payment has yet been made

4.Q. Can you confirm that the contract now been terminated/completed and state what Cushman & Wakefield has been paid in total for its services under this contract?
A. To all intents and purposes the contract has been terminated following the resolution not to pursue the single retailer proposal as all the work commissioned is no longer required.

5.Q. How was the cost to the taxpayer of the 'white box' refit to be capped at £500,000?
A. This information forms part of an exempt report under section 12A of the Local Government Act 1972 and as no resolution has passed to remove this exemption this information remains exempt from publication.

A further question was put to the council later:
6.Q. If the contract was terminated, when did that happen?
A. By implication after the decision made on the 31st March to retain the market.

The Lancaster Council Cabinet's resolution on 9 December 2008, referred to above, resolved:

"that approval be given to Officers to negotiate directly with retailers to try and procure a single retailer for the Market Hall on the basis that the preferred option would be that the current deficit is reduced to zero or, as an alternative, to report back to Cabinet should a single retailer be prepared to take up occupation of the Market Hall on the basis of the Council contributing an amount that is less than the deficit currently being faced by the Council."

In here, the council states, lies the remit to offer a major Council project management contract, specially made exempt from competition rules, to a company promoting a heavily over-extended retailer with a history of mismanagement, misrepresentation, bad debt and barely two months' of actual retailing in whose prospects said company had a self-evident financial interest.

Given the track record of Asco's founding director Ted Ward, detailed in the Virtual-Lancaster report; "Lancaster Market: Who are ASCO and who backs it?" it is unlikely that his venture would have got off the ground had he not engaged the world's largest property consultants, Cushman and Wakefield, to represent him, coating the running sore of his trail of ruined dupes with their prestigious gloss.

So polished was this gloss that:
even after all the local press had published details of Ward's horrendous history;
even after Ward's other company, Blackhurst and Ward, had gone into liquidation owing £600,000 obtained through misrepresentation;
even after news of the legal case being brought against Asco by its unpaid creditors reached the national business press; and
even after Cllr Thomas resigned from his post as leader of the Cabinet on 1 March saying, ""Publicly available evidence highlighting the risks involved in this proposal was not included in the exempt report delivered to Cabinet",
the council's chief executive, Mark Cullinan confidently declared:

Proposals of the sort involving Lancaster Market are put before Cabinet only after they have been rigorously scrutinised using professional means by the council’s officers, including the taking of external expert advice where necessary.

“These officers have years of experience in dealing with such matters and rumour and innuendo from the internet do not form the basis for providing sound alternative advice," he adds. “To enable them to make their decision, Cabinet members were presented with details of the company involved and a full analysis of the benefits and risks, both financially and legally, to the city council of letting the building to this single retailer.
"

And Council Director of Regeneration Heather Mcmanus was inspired to submit a report to the Council Cabinet dated 25 March 2010 dismissing the public outcry as 'speculation' and stating "the company has already entered into legal arrangements to develop four more stores besides Lancaster. The company now has credit ratings with major suppliers."

A month later Asco was put into administration and legal proceedings set in train, with criminal proceedings due to follow.
Meanwhile a stream of creditors, major and minor, who supplied goods and services to Asco to the tune of hundreds of thousands of pounds (and counting) has come forward. Asco's credibility came from the news that Cushman & Wakefield were negotiating around 30 new sites for for their stores, mainly with Marks and Spencers and the Coop. Each deal seemed to be validated by the others, creating a bubble company that drew investors in.

But Ted Ward was a financial black hole. He obtained loans and 'inducements' similar to the undisclosed sum that Lancaster City Council planned to offer Asco, ostensibly to run his business. Then he strung his suppliers along with empty promises. Where did all the money go? The Official Receiver is still trying to find out.

As if this wasn't enough, Ward had another property development company. Blackhurst & Ward went into liquidation in January owing over £600,000. Creditors of that company told how they had invested their life-savings in property deals that didn't exist and lost everything. In March 2010 he was disqualified from being a company director, but he must have seen it coming throughout the previous year and throughout his involvement with Cushman & Wakefield.

We don't know what Cushman & Wakefield got paid (or promised) by Asco for their prestigious escort service, or if they worked solely for the consultancy fees and contract brokerage commissions they may have negotiated from Asco 'partners' such as M&S. We have tried to contact them but haven't received any reply.

The McManus report for the council budgetted £60,000 over two years for their contract management fee with an additional £500,000 for them to disburse on refurbishment of the Market Hall for 'the proposed single retailer'.

We still can't get to the bottom of how the council officers' procedures repeatedly failed to protect them from a bubble investment scam already being exposed by reputable business and local news sources on the internet.
Exempting deals from public scrutiny and avoiding the rules for competitive tendering certainly helped. Ignoring Cushman & Wakefield's clear conflict of interest would have had something to do with it.

And doubtless that whole global megacorps thing comes across as really sexy. Nobody wants to hamstring the council in their efforts to enter into delicate soundings of potential opportunities. But their partnership is first and foremost with Lancaster.
Dismissing legitimate public and business warnings as 'innuendo' and 'speculation' served to indicate just how far out of the loop and into the bubble the council executives had been drawn.

What did stop it was public disclosure, public scrutiny and a deferment to a better-informed full council, who put a firm foot down on the hose of taxpayers' money that was about to be showered on Asco.

Lancaster may have dodged the bullet, but North West businesses extended Asco credit on the strength of their trumpeted deal with Lancaster City Council. That money is unlikely to be recovered and those businesses are suffering from their losses.

1 comment:

Lochinvar said...

It is heartening to find that investigative journalism is not dead in these northern backwaters.

Lancaster council's senior executives act like they are running the secret service, muzzling democratically elected councillors and hiding the details of questionable business dealings from public scrutiny.

It seems that while national government is now more transparent, local government is still in the hands of civil servants who operate in the shadows and refuse to account for their actions.

These so-called public servants have operated in a climate of unwarranted secrecy for too long and in the process, many millions of pounds of taxpayer’s money have been lost since the infamous Blobbygate affair. They seem to operate more like bankers than public servants and continue to get away with it.

In any other industry, a ‘near miss’ like the Asco fiasco, would suggest it would be prudent to re-evaluate operating procedures. Since our council shows no sign of addressing this obvious financial risk, a free press that serves the public interest should ask and demand answers. I would like to see Virtual Lancaster lead the way and start a campaign to demand that our council be transparent and accountable for the way they spend our taxes.