Welsh agency's links with Tesco attacked: Chris Blackhurst reports on threatened legal action by a rival retailer over a supermarket development deal

THE WELSH Development Agency has become embroiled in fresh controversy - this time over its close links with Tesco, the store group.

Dr Gwyn Jones, who last month resigned as the WDA chairman, also sits on the Tesco board and David Malpas, a WDA director, is Tesco's managing director. Dr Jones joined the Tesco board in January last year and serves on the company's influential remuneration committee that determines the pay of senior executives.

A recent Commons Public Accounts Committee report criticised the WDA for a lack of financial controls and accountability. Among the instances highlighted were the hiring of a man as marketing director with convictions for fraud, payments to model agencies and redundancy settlements that did not need to have been made. Now, a retailer is threatening to take the agency to court over a deal involving Tesco. And at the same time, Rhodri Morgan, Labour MP for Cardiff West, is calling for the WDA and Tesco to sever their links.

Tesco has relocated 600 staff from its Hertfordshire headquarters to new offices in Cardiff. But Mr Morgan said: 'In spite of the new jobs brought to South Wales by Tesco, many people are uneasy about the number of close relationships that existed between Tesco and the WDA.'

Tesco made pre-tax profits of pounds 581m last year. In its latest accounts published yesterday, the WDA revealed it had provided pounds 7.9m for the development by Spenhill Limited, a wholly-owned Tesco subsidiary, of a 115-acre site at Nantgarw near Swansea in Mid-Glamorgan. Spenhill plans to turn the former surface mine into an industrial park. Of the pounds 7.9m, the bulk, pounds 6.4m, went on improving the infrastructure and pounds 1.5m was spent on building factory and office units.

The National Audit Office, which prepared the WDA's accounts, made a point of stating that both Dr Jones and Mr Malpas declared their interest in Nantgarw to the agency's board.

Another deal involving the WDA and Tesco could become the subject of a legal action. A rival store chain, Co-operative Retail Services, is furious at the way in which Tesco won the right to develop a supermarket site in Aberdare, Mid-Glamorgan.

The CRS claims it had received permission to develop the six-acre site from its joint-owners, the WDA and Cynon Valley Council. But sources close to the CRS said that the pair apparently later changed their minds and, unknown to the CRS and its property adviser, Landmark, put the site on the market, where it was promptly bought by Tesco.

Alan Hedley, of Landmark, has written to the National Audit Office about the deal and the CRS is considering legal action. 'The circumstances behind the situation have given us cause for concern,' a CRS spokeswoman said. 'We've consulted our legal representatives and we're continuing to hold the situation under review.'

Tesco said any writ from the CRS would be 'vigorously pursued'.

Mr Morgan added: 'It may all have been above board but I would be much happier with a greater separation between the company and the agency. The inter-locking of directorships between David Malpas and Dr Gwynn Jones seems to be undesirable for a company like Tesco that is doing a great deal of business with the WDA. Business does not just have to be done, it has to be seen to be done. That is well-nigh impossible when you have inter-locking relationships of this kind.'