Tory council investigated over finances: Report says authority lost large sums of money through 'irregular financial deals'

A FLAGSHIP Conservative local authority has lost several hundred thousand pounds in a string of allegedly irregular financial transactions involving senior officers. The Fraud Squad confirmed yesterday that it was investigating the allegations at Bromley Borough Council, south-east London.

A confidential internal audit report, leaked to the Independent, discloses that council officers repeatedly breached regulations, did not put contracts out to tender, allowed conflicts of interests to arise with private contractors, and made payments which the council did not authorise.

Bromley, which has a large Tory majority, has pioneered the privatisation of local social services. It was the first local authority to privatise children's homes and among the first to contract out care for the elderly. 'Bromley is held up as bastion of solid, wise Tory government,' Jim Dowd, Labour MP for Lewisham West, said. 'But when you look you find its anything but. Bromley is an embarrassment to the Government. It's not just a blind political vendetta. There was a flagrant disregard for financial disciplines.' Scotland Yard has confirmed that the investigation inspired by the internal report is not the only inquiry into Bromley. There is also an investigation into the allegedly fraudulent award of housing renovation grants. The internal report examines a series of contracts and one-off payments made by the Department of Social Services and Housing. Most of these relate to the provision of care for the elderly between 1988 and 1991. Mike Carpenter, the then director of the department, who currently works as a consultant to the Isle of Wight's social services department, declined yesterday to make any comment. Both Mr Carpenter, and the former chairman of the social services committee, Monty Blazey, are on police bail pending the outcome of a fraud squad investigation. Neither has been charged.

Internal investigators discovered that a company was awarded a pounds 380,000 contract to supply frozen meals. This company, which was not asked for references, cost pounds 50,000 more than other competitors. Officers of the authority awarded it after a tasting session.

There is no evidence that a second contract, worth pounds 500,000, for catering in residential homes for the elderly was awarded by tender. The company was approached directly by Mr Carpenter, according to the report. When the borough secretary queried the lack of a proper tender, Mr Carpenter used a special authority, called a Standing Order 40, to waive the requirements of the borough's financial regulations. This was allegedly a frequent practice.

The investigation was originally prompted by the activities of Johnson Kane, a local businessman associated with several companies seeking contracts with Bromley social services. One of these was called Bodylink.

In August 1989, according to an internal memorandum, also obtained by the Independent, Bodylink was bidding to supply residents in local residential homes for the elderly with a range of cosmetics. 'It is understood that this company is the only one in the market offering a service of this kind,' the memorandum, which records a meeting of the social services committee, said. Bodylink proposed to sell 'Body Shop-type products'. Mr Carpenter said that he had 'been having discussions with various companies regarding the difficulties experienced by older people in purchasing hair, body and skin care treatments'. The committee accepted the proposal. Mr Carpenter had agreed that Bodylink would share profits with the council if the enterprise proved successful.

Two years later in October 1991, the Fraud Squad asked the council to investigate payments made to companies associated with Mr Kane. Up until this point, normal council audits had apparently failed to pick them up. According to the confidential report, at least two payments were made from the council to Bodylink amounting to about pounds 2,300 - one of these was allegedly paid directly from the Director of Social Services and Housing's Amenities Fund. Under the terms of the council's arrangement, payments should have been coming the other way - from Bodylink to the council.

The discovery of these small payments prompted a wider inquiry. It was discovered that about pounds 10,000 was paid for consultancy services provided by Mr Kane on a scheme to place paid advertising on the side of social service department vehicles.

Auditors saw the eventual report and concluded that it did 'not appear to represent value for money'. It emerged that the contract was awarded without tender and that no cost estimates were obtained in advance.

Mr Kane was also a director of Albert Abela Limited, a London-based industrial catering company. In December 1989 he organised a trip the US for Mr Carpenter and Mr Blazey to view services provided in homes by Abela, which later bid for two social service contracts in Bromley. The flights were provided free. The officers say that they paid other expenses.

Full details of the trip, which was not authorised by the social services committee, only emerged a year later.

In October 1991, Mr Carpenter and Mr Blazey resigned their posts as a result of this coming to light.

(Photograph omitted)

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