Charity ignored warnings about pounds 7m deal: Steve Boggan reports how the Salvation Army defied advice to avoid an investment scheme

THE SALVATION Army was told by respected investment advisers to steer clear of the deal that led to an alleged pounds 6.3m fraud, but the charity ignored the advice and kept the loss from members.

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.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk