The report, by John Hendy QC, accuses Jeremy Shaw, a former mayor of Tower Hamlets in east London, and fellow councillors John Snooks and Betty Wright, of allowing stallholders in markets throughout the East End, including Petticoat Lane, to sub-let pitches illegally.
Mr Hendy was brought in last year by the council to investigate complaints that market inspectors took a cash bribe of between pounds 2 and pounds 5 a day to give unlicensed traders a pitch in preference to those on the waiting list.
Stalls in Wentworth Street and Middlesex Street, known as Petticoat Lane, can earn up to pounds 1,000 a week and competition for a good pitch is fierce. Mr Hendy says Mrs Wright illegally sub-let a pitch for her use under the name of her 'aunt', Hetty Hart, 79, and 'acted wholly improperly and ignored her duty as a council officer in seeking the advancement of her own financial interest'.
The report, released yesterday, says Mr Shaw knew that Mrs Wright sought to 'evade the rule against illegal sub-letting'. Mr Shaw is also charged with interfering with the actions of Richard Ward, a former senior council officer, who tried to root out illegal trading. The councillor instructed him to tell council solicitors not to oppose the appeal against the revocation of Mrs Hart's licence.
'The instruction to Mr Ward was a very serious breach of his duty as a councillor,' the report says. 'It was an unwarranted intrusion into a matter which was the exclusive domain of proper officers and was an act done not in the interests of the borough, of which Mr Shaw was a leading member, but with the intention of benefiting another councillor.'
The report was commissioned by Tower Hamlets' markets panel, chaired by Mr Snooks, but he is said to have 'undermined the council's fight against corruption and attacked officers who promoted that fight'.
Peter Hughes, the council leader, said if the allegations were correct, the councillors must resign. However, Mr Snooks denied the allegations. The other councillors were unavailable for comment.