According to sources within the Salvation Army, all three lay members of the investment advisory board were voicing strong opposition to the deal from April to October last year, by which time officers secretly knew of the charity's disastrous involvement.
The Salvation Army's announcement last week that it had issued writs against the financier Stuart Ford, his company Tilen Securities, and Gamil Naguib, an associate, was the first the committee members knew of the charity's participation. Salvation Army sources have established that Mr Ford and Mr Naguib persuaded senior officers within the charity to allow them to invest millions in standby letters of credit, which can be traded at a profit. But the bank which supposedly issued the letters, the Islamic Pan American Bank, is untraceable and dollars 8.8m of dollars 10m (pounds 7.14m) entrusted to the two men has disappeared.
The group of three lay investment specialists - Dr Kevin Carter, group investments director of Providence Capital, John Padovan, former deputy chairman of Barclays de Zoete Wedd, and John Renshaw, former deputy chairman of John Laing - was first given details of Mr Ford's plans at its inaugural meeting last April and objected. It is understood Mr Renshaw and Mr Padovan wrote to the charity expressing doubts about the plausibility of the investment. Sources say Mr Padovan had run checks on Mr Ford and Tilen Securities and found that neither was registered with the Securities and Investment Board.
Dr Carter made his objections verbally and repeatedly, including during a meeting on 6 May 1992 when Mr Ford presented his plans, without documentation, in the presence of Col Grenville Burn, an officer responsible for fund-raising who has since been suspended. One or all members objected at meetings in April, May, July and October but permission is believed to have been given by Commissioner John Larssen, the UK Territorial Commander, to Col Burn and Col Ivor Rich, the business administration manager, to open an account at ASLK-CGER Bank in Antwerp with dollars 10m in charity funds.
Unknown to them, by September at the latest, the money had been moved to Banque Continentale du Luxembourg, from where all but dollars 520,000 had vanished. Even then, the advisers were objecting to the involvement of Mr Ford and Tilen Securities, but they were not told their objections were in vain.
'The first we heard that the deal was done was last week,' Dr Carter said. 'We had expressed our disapproval throughout . . . right up to October.'
A charity source said: 'Ford was promising returns of between 50 and 100 per cent per year by buying standby letters of credit at a discount before their maturity date and then holding on until they matured to gain the full return. The advisers said the scheme would not work; if making money was that simple, then we would all be millionaires.'
It is understood that about pounds 400,000 of the money has been invested in a Scottish airport project and about pounds 800,000 was used to refinance a hotel in the Kyle of Lochalsh.Reuse content