PAC questions why no disciplinary proceedings against former head of Civil Service

Disciplinary proceedings should have been considered against a former head of Northern Ireland’s Civil Service for alleged failures in what has been branded as one of the “starkest examples of incompetence and mismanagement” of public funding.

Stormont’s Public Accounts Committee will this morning publish a highly damning report into the Department for Enterprise Trade and Industry’s multi-million pound funding of a project aimed at establishing a bioscience and technology institute in Belfast 20 years ago.

The committee’s query over non-pursuit of Sir Bruce in a formal disciplinary process refers to when he was head of the Invest NI’s precursor, the Industrial Development Board. Sir Bruce subsequently became head of the NI Civil Service. He retired last year.

BTI: THE VISION

The Bioscience and Technology Institute (BTI) was established as a `not for profit’ company in November 1998.

Its primary objective was to provide biotechnology incubator facilities, through the development of a specialist centre at Belfast City Hospital.

It was intended that the company would be sustained by biotechnology companies renting laboratories in a new purpose-built centre.

BTI initially received £2.2m grant funding from three government bodies – DETI, Industrial Development Board (IDB), Industrial Research and Technology Unit (IRTU) as well as the International Fund for Ireland (IFI).

It received another £1.2m in the form of a loan from pharmaceutical millionaire Sir Allen McClay.

The location of the centre on the City Hospital site was fundamental to the success of the project, as it was hoped it would optimise interaction between the hospital’s doctors and scientists employed at the BTI building.

However in 2001, difficulties in progressing the City Hospital site within the required funding timeframe led to BTI purchasing an alternative £5m building, Harbourgate, on Belfast’s Harbour Estate.

The decision to relocate to Harbourgate, which was designed as a call-centre and not a science laboratory, saw the cost of the project rocket to £7.5m.

In what would prove to be a crucial error of judgement, BTI found itself £2.5m over budget without sufficient funds to complete refurbishment of the new headquarters.

As a consequence, the building failed to ever open as a laboratory, leaving BTI without any means of income.

The company went into insolvency in September 2005.

Weeks later Harbourgate was repossessed by the banks and sold-off for £4.5m – £500,000 less than BTI’s initial purchase price.

However in one of the most critical reports it has ever produced, the Public Accounts Committee includes:

• Questions why disciplinary proceedings were deemed not warranted against former Civil Service head Bruce Robinson

• Invest NI files may have been deliberately destroyed as part of a cover-up

• DETI operated a “culture of cronyism” and had a “cosy relationship” with a director at the centre of controversy

• Senior civil servants had a “management culture” of ignoring financial controls

• Government’s monitoring of millions in public monies paid to BTI project was “virtually non-existent”

• DETI chiefs had piecemeal/haphazard approach to alerting PSNI to potential fraud

• No effort was made to investigate retired civil servants implicated in the BTI debacle

• Concern that BTI’s £5m purchase of Harbourgate was not conducted “in good faith”

“STARKEST EXAMPLE OF INCOMPETENCE AND MISMANAGEMENT” – PAC

However it is the actions of seniors officials within DETI, IDB and Invest NI, who were supposed to monitor the £2.2m public funding, which has drawn the most severe criticism from the Stormont watchdog.

“One of the most worrying aspects of the project was the repeated failure, at a senior level within both DETI and IDB/Invest NI, to get a firm grip on matters,” the PAC report concluded.

“The committee’s impression is of a management culture, at that time, which acquiesced in ignoring the rules and circumventing their own controls.

“That is an appalling state of affairs.”

The report questions why DETI failed to take disciplinary proceedings against Mr Robinson, chief executive of the IDB at the time of the Harbourgate affair.

The report states that Mr Robinson was one of four officials who were the subject of an internal DETI review following the collapse of BTI.

The investigation into Mr Robinson’s conduct was based on his failure to ensure that the BTI project was assessed through an IDB Casework Committee process.

Instead investigators found the BTI project was taken to the IDB Resource Group, an inappropriate mechanism and one which involved a much lower level of scrutiny.

The DETI official in charge of the internal review into the BTI affair told the PAC that after taking advice from departmental officials he had decided that disciplinary action against Mr Robinson was not warranted.

However the PAC report said that given the “serious and fundamental breach” of IDB procedures, it found it difficult to accept the conclusion not to initiate disciplinary proceedings against Mr Robinson.

WERE FILES DELIBERATELY DESTROYED IN COVER UP?

The IDB was just one of the DETI arms length bodies which helped to fund the BTI project.

Following the collapse of BTI, investigators tried to discover why the project had failed and what had happened to the £2.2m in grant aid which had gone to BTI.

However the PAC report says that investigators found a “worrying lack of documentary evidence” retained by government departments, most notably around IDB’s approval of BTI funding.

The report found that investigators were repeatedly unable to access several IDB files relating to the BTI project.

IDB later became Invest NI.

The PAC was “astonished” to find Invest NI officials had destroyed a potentially key file in the BTI affair four months after it had been requested by investigators.

It was later discovered that an Invest NI file review form, which could have identified the official who had approved the decision to destroy the file, was also destroyed without trace.

Expressing concern that evidence may have been deliberately destroyed as part of a cover-up, the PAC report states:

“This is a most unusual sequence of events and raises suspicions that papers might have been destroyed to intentionally remove evidence.

“Although Invest NI said that there is no evidence that there had been a purposeful and wilful destruction of the file, they were unable to provide a convincing explanation for what had happened.

“As a result, the committee has a deep sense of unease over this issue and is concerned that there may have been a deliberate cover-up.”

DETI HAD PIECEMEAL/HAPHAZARD APPROACH TO FRAUD?

The PAC report accused DETI of adopting a piecemeal/haphazard approach to alerting the PSNI to potential fraud.

BTI was found to have double-claimed £542,000 in grant aid from both DETI and IFI.

Despite IFI alerting it to the fraud DETI took no action.

DETI was found to have broken its own guidelines on two occasions when it incorrectly paid over more than £2m to BTI.

It also failed to check why BTI had failed to submit quarterly and annual progress reports; didn’t query why BTI failed to keep minutes of its first two years of board meetings and also failed to properly monitor BTI fund-raising efforts.

The report states that it was Allen McClay – and not any of the government departments – who uncovered the serious problems inside BTI.

The PAC report concludes the government departments’ failure to identify major problems in BTI was a “damning example of how poorly this project was being monitored.”

Despite the existence of comprehensive procedures for government departments to assess the risk within the BTI project, the report found:

“It would be difficult to overstate just how badly this project was handled, both by the funding bodies and by the BTI board itself.

“From beginning to end, the committee noted an appalling catalogue of negligence and ineptitude, the nature and extent of which could only be described as staggering.

“Procedures underpinning the proper conduct of public business were blatantly ignored.”

WHY WAS NO ONE SACKED?

Despite millions of pounds in public money being wilfully squandered, only two middle ranking officials from Invest NI were ever disciplined for misdemeanours five years after BTI had folded.

However the report questions why the actions of a number of senior civil servants in charge of the project were never investigated, including Mr Bruce Robinson.

“Given the significance of breach of IDB procedures, the committee finds it hard to accept that disciplinary proceedings against the former IDB Chief Executive were deemed not to be warranted.”

Mr Robinson subsequently went on to become the head of Northern Ireland’s Civil Service.

An internal investigation of failings in the BTI affair failed to consider the conduct of retired DETI and Invest NI officials, claiming there were “now effectively beyond the reach of the disciplinary processes.”

Expressing concern at the failure to investigate the actions of the former civil servants, the report states:

“It is most unfortunate that several of those senior officials seemingly most culpable for the shortcomings in this case could not be subject to a disciplinary investigation, by virtue of their having retired from the public sector.”

DETI’S “COSY RELATIONSHIP” WITH TERESA TOWNSLEY

There was no formal procedure to deal with the handling of conflicts of interest with BTI board members.

“Many of the unresolved conflicts, involving certain board members and their close relatives, must have been obvious to senior management within DETI and its agencies, yet nothing was done to address them.”

In one incident £68,000 was paid to a chartered accountancy firm owned by Teresa and Michael Townsley to administer the start-up of BTI.

This was despite the fact that Teresa Townsley was also a director of BTI.

Highlighting the clear conflict of interest in Teresa Townsley’s dual roles, the report states:

“This points towards a culture of “cronyism” within the upper echelons of IDB and a “cosy relationship” between DETI and one of its most prominent public appointees.”

In November 2011 Mrs Townsley told The Detail that she denied any allegation of wrongdoing

HARBOURGATE AND THE £100,000 FINDERS FEE

The Harbourgate building was purchased for BTI by an unidentified property dealer, who was paid a substantial finder’s fee.

The property finder had been engaged by Thomas Armstrong, BTI’s solicitor.

However, with the exception of Teresa Townsley, no other BTI board member was aware of the property dealer’s identity or role.

While the property dealer was not known to the BTI Board, he and the seller had known each other for many years.

Despite the BTI Board not having issued him with any instructions the property dealer bought Harbourgate for £5m on their behalf with no formal, independent valuation of the building and no indication of its market value.

The PAC report describes as `bizarre’ the property dealer’s claim that he was not given any budget for the negotiations but the purchase price he negotiated with the seller was the same as BTI’s available £5m budget.

The sale of Harbourgate yielded a £2.31m pre-tax profit for the seller, including a non-taxable £1.3m subsequently channelled through an option release mechanism set up in the Isle of Man.

Raising concerns about the apparent lack of value for money bargaining on behalf of the taxpayer, the report states: “PAC is far from assured that the acquisition of Harbourgate was conducted at arm’s length and in good faith.

“The lack of transparency around the sourcing of the premises and the negotiation of the purchase price is deeply disturbing.”

NO DIRECTORS DISQUALIFIED

Following the collapse of BTI in 2005 DETI concluded that only Teresa Townsley should be subjected to disqualification proceedings.

DETI/DFP referred the Townsleys and a third accountant to the Chartered Accountants Regulatory Board (CARB) for alleged professional misconduct relating to the BTI affair.

While CARB said it was still considering disciplinary action against the Townsleys, no action was taken against the third accountant as CARB ruled that DETI/DFP had failed to provide sufficient evidence in a “clear and comprehensive manner”.

DID GOVERNMENT MAKE DOUBLE BLUNDER OVER HARBOURGATE?

Following the collapse of BTI the Harbourgate building was sold to a private development company in 2005.

A short time later DFP entered into a tenancy agreement with the development company to rent the premises for 15 years at a cost of £11m.

However the PAC questions whether the DFP tenancy was real value for money?

“Given that the building as a whole could have been acquired from BTI for less than half that sum, the committee is concerned that a more advantageous deal for taxpayers might have been possible before the sale of the building to the private development company.”

Describing the BTI fiasco as one of the starkest examples of incompetence and government mismanagement it has ever examined, PAC chairman Paul Maskey said:.

“It would be difficult to overstate just how badly this project was handled, both by the funding bodies and by the BTI Board itself.

“From beginning to end, the committee noted a catalogue of negligence and ineptitude, the nature and extent of which could only be described as staggering.

“Well established procedures, underpinning the proper conduct of public business, were blatantly ignored; and key lessons from earlier failures were not taken on board.

“There are many aspects of the way in which this project was handled that the committee finds profoundly disturbing.”

He concluded: “Perhaps what is most disappointing about this project is that despite its promise, through a combination of apathy, incompetence and a disregard for proper administration, it was an unmitigated failure.

“This is a most unsatisfactory ending to a venture that had so much potential.”