Thursday, 27 July 2017

Hotbed of financial shenanigans!


The number of investigations into alleged financial crimes, money laundering and even the bankrolling of terrorism on the tiny Isle of Man - the offshore haven where Scottish Borders Council selected a worthless investment fund to pay for a £21 million waste treatment facility - is at an all time high, with police and other agencies stretched to breaking point.

Not Just Sheep & Rugby has had reason to pay close attention to events on the island during the last two years following the spectacular collapse of the 24-year contract between the Borders local authority, the now bankrupt New Earth Solutions Group and the equally 'bust' Manx-based New Earth Recycling & Renewables [Infrastructure] fund (NERR).

As our readers know the NERR fund - chosen by SBC councillors to finance their waste management solution at Easter Langlee, Galashiels - is the subject of investigations by liquidators Deloitte. Several other investment funds in NERR's stable, overseen by the penniless Premier Group Isle of Man Ltd, are being examined by various insolvency experts on the orders of the Manx financial services authority.

The sheer scale of the potential for financial wrongdoing has been outlined in the annual report from Gary Roberts, chief constable of the Isle of Man which has 236 officers and back-up staff, and a budget of £12 million.

According to Mr Roberts: "Levels of demand in respect of financial crime are the greatest that the constabulary has known. A series of serious and complex frauds, as well as several high profile and particularly complicated money laundering cases, continue to challenge the constabulary's capacity and capability.

"Indeed, for most of the time demand outstripped supply in terms of investigative capacity. The constabulary has around 70 people permanently dedicated to investigating crime, a little over 20% of whom are allocated to financial crime matters. I could easily allocate all 70 to financial crime investigations and still not be able to meet all of my obligations".

On the other hand, recent disclosures of information by Scottish Borders Council has confirmed the authority was completely unaware that complaints concerning the Premier Group and its collection of investment funds had been lodged with Manx police and other authorities long before the Easter Langlee deal was signed.

The council apparently did not know or realise the managing shareholder of the NERR fund was an outfit based in the British Virgin Islands revelling in the name Premier Group Distribution Inc. [PGDI] and registered in the local offices of Mossack Fonseca of 'Panama Papers' fame.

We have also found evidence that warnings were being sounded concerning the claims made about the NERR fund as far back as 2008, fully three years before the SBC/New Earth contract was finalised. Potential investors were told to "be aware" before putting any of their money into NERR.

The disappearance of millions of pounds from the fund was a prime reason for the failure of the Borders project, yet none of the authorities capable of investigating the loss of £2.4 million of public money have lifted a finger.

Mr Roberts' concerns over financial crime appear to conflict with the views of alleged victims of Premier Group who had been campaigning for years in a bid to have their complaints taken seriously.

Reports prepared for members of the Manx Parliament claim at least three officers, including the chief constable, were provided with documents in support of allegations that Premier was "obtaining bank transfers by fraud".

The constabulary is said to have chosen not to investigate the claims on the grounds that Premier's activities had been conducted outwith the IoM legal jurisdiction.

In recent weeks John Bourbon, an ex-director of Premier Group and a former head of the Isle of Man regulatory authority has described the attention now being given to the company's funds as "a witch hunt".

Friday, 21 July 2017

Britain'sDNA - A Thing of the Past!

EWAN LAMB reports on the end of a colourful genetic journey

A clutch of ancestral DNA testing businesses set up in the Scottish Borders seven years ago and which made headline-grabbing claims about present day people's links to Romans, Saxons and Vikings while also attracting strong criticism from academics is to close less than two years after being taken over.

Thousands of individuals around the globe are believed to have had their DNA tested and analysed by The Moffat Partnership, established by Scottish author Alistair Moffat and a number of colleagues. Their clients included sports stars and show business personalities.

Operating under brand names including BritainsDNA, ScotlandsDNA, YorkshiresDNA and others, the partnership quickly attracted widespread interest from the media.

But when test findings were published and publicised in the press and on BBC radio there was an outcry from experts at University College London and beyond.

UCL even created a series of special web pages to challenge and contradict the claims of BritainsDNA. The establishment's staff explained: "The exaggerated claims made misled the public about what is possible from genetic testing. Some of their stories were ludicrous, which undermines the efforts of scientists who are more careful about the degree of uncertainty associated with their findings".

A time line charting the controversial progress of BritainsDNA states that The Moffat Partnership apparently had financial liabilities of £570,000 when it was acquired by Nottingham-based Source Bioscience Ltd in December 2015. BritainsDNA and its stablemates then traded under myDNAglobal, but continued to offer much the same range of tests.

The internet blurb declared: "Born from an innovative project bringing together historical analysis and genetic information from ancestral DNA testing, aims to provide new insights into the genetic origins of the British & Irish and those of British descent. For example, progressive steps have been made in discovering the tremendous diversity of our DNA, from the farthest reaches of Siberia, Africa and Indonesia, to the legacy of the Romans, Anglo-Saxons, Vikings and Danes.

"By taking a test you not only begin your own DNA journey, but you also play a valuable role in research into the genetic makeup and origins of a nation. With your help we can at last write a people's history of Britain & Ireland."

But in a no punches pulled critique published in December last year Buzzfeed News science writer Tom Chivers headlined his article: "This DNA Ancestry Company Is Telling Its Customers “Mostly Total Bollocks” About Their Ancestors".

He wrote: "While no one appears to take issue with the actual DNA testing carried out by BritainsDNA, a large amount of what it then goes on to claim about people’s ancestry is misleading, or generic in the sense that the same information is true of lots of people of European descent, in the opinion of scientists contacted by BuzzFeed News.

"Dr Adam Rutherford is a geneticist and the author of A Brief History of Everyone Who Ever Lived, a book published in September which alleges that BritainsDNA makes “meaningless”, “speculative” and “unsupportable” claims. He told BuzzFeed News that the descriptions of ancestors accompanying BritainsDNA’s genetic test reports are “eloquent, but mostly total bollocks”. 

The decision by Source Bioscience to terminate BritainsDNAs activities comes hard on the heels of a major shake up of the company's management with three of the directors who oversaw the takeover of The Moffat Partnership having their appointments terminated before being replaced by a trio of new bosses.

Messages posted on internet forums by employees and former employees of the company alleged - among other things - "The new board fired all the top bosses and some management. The quality employees have been leaving in droves and taking better positions elsewhere."

Another poster wrote: "Lots of crazy things going on at this company. With countless tales of office affairs, back stabbing and incompetence, this company is a made for t.v train wreck."

A recent response from the new Head of Marketing read as follows: " The mentality of 'back-stabbing' as you call it, must change and that can only come from those of us who are left. We all have a responsibility to stop this and work together. The ability to communicate across groups has grown immensely since the top 3 have left and a team work environment must ensue here."  

A recent set of accounts for Source Bioscience showed an overall operating loss for the last financial year although DNA genetic testing formed only a small part of the business.

Nevertheless, the following notice posted on the myDNAglobal website confirmed the service was to be withdrawn:

"Dear Customers, It is with regret that effective from 3rd July 2017 will no longer be accepting new orders. Whilst we have enjoyed offering this individual service it is unfortunately not something we are able to provide going forwards.

"All existing orders will be honoured – if you have recently purchased a test and have yet to return your sample please do so by 31 August 2017 so we can process your results.  Unfortunately we cannot guarantee that samples received after 31 August 2017 will be processed. For those customers who have already received their results these will be available to you via our website until 31 August 2018, after which they will no longer be available."


Wednesday, 19 July 2017

Governing without policies? Surely not

Our Guest Writer J.D. pontificates on a revealing leaked email

Residents of the Scottish Borders who bothered to vote in May's local government elections presumably cast their 'Xs' fully realising activists campaigning for the Conservative & Unionist Party and its candidates had only one policy to offer the electorate.

There was no manifesto setting out Tory priorities for the Borders should they perform well enough to take control of the authority's £267 million budget by ousting the rainbow alliance which wielded power up to May 2017.

Not a mention for local government essentials like education, roads or even the vexed question of waste management which the last lot fouled up big time.

Just a one sentence mantra repeated ad nauseum about avoiding a second Scottish Independence referendum even though the topic had nothing whatsoever to do with getting the bins emptied or making sure other local services would be delivered efficiently.

On the face of it the Conservatives have always seemed dab hands at slogans. A relatively recent selection plucked at random from cyber space includes 'No Indyref Two', 'Strong and Stable Government' and 'The Big Society'. But the last two certainly could hardly be regarded as vote winners!

However, 'No Indyref Two' both locally and across Scotland generally certainly did take a trick. So far as the Scottish Borders was concerned the motto hit home and as a result theTories now hold most of the levers of municipal power.

But there is no indication two months on from polling day as to their policy choices or even their priorities for the area they now govern in tandem with a collection of mainly 'Independent' councillors who prefer to keep their political lights under the proverbial bushels.

Even before the council elections there was no trace of a Tory blueprint for Scottish local government to set beside the offerings of the Scottish National Party, Labour or even the Lib Dems - once the big beasts in the Borders political jungle, but now sidelined and virtually irrelevant.

Perhaps the Borders Tories didn't expect to be part of the new administration at Newtown St Boswells. Or if they did harbour ambitions of power and influence then they appear to have been ill-prepared for such an onerous responsibility.

The Borders press corps has this week uncovered the contents of a meant-to-be confidential email from brand new council leader Shona Haslam in which she invited suggestions and ideas from colleagues of every political persuasion for consideration going forward.

Instead of a preelection manifesto we are to have a post-election Governing Document which is due to be finalised for submission to a full council meeting in late August. A new way of doing local government in one corner of Scotland? Or a desperate plea for help from an administration without much of a clue on how to proceed? The choice, dear reader, is yours.

Maybe this has become global Tory policy for it smacks of Theresa May's recent appeal to her opponents to be constructive rather than destructive, and to provide her with ideas on how to fill an apparent policy vacuum. It looks as though Councillor Haslam isn't the only one who may have been staring at a blank sheet of paper over the long hot summer.

In her message seeking consensus Leader Haslam declares: "Party politics rarely comes into local government" [really?], adding that her offer to work together was "not just words".

But from the reaction so far from the SNP opposition on SBC it would appear Councillor Haslam's blandishments may have fallen on stony ground while her 'no politics' message simply lacks credibility.

The Tories' "No Indyref Two" chant could not have been spiced more liberally with political invective, so perhaps the Borders local government scene will not be as anodyne over the next five years as many of us had feared. No sign of consensus breaking out just yet.

It is hard to imagine what might have happened if the SNP and the others had joined the fun and helped the winners of the election to finalise their Governing Document with its 'high level priorities, expected outcomes and impact, and key performance indicators'.

The Plain English Campaign would have had a field day for a start, given that sample of impenetrable jargon.

But with all 34 members of SBC singing from the same hymn sheet (a.k.a. Governing Document) there would have been no need for scrutiny and no opportunity to lambast proposals.

There was certainly little or no opposition and a decided lack of scrutiny when the previous administration embarked on a vanity project or a daft scheme unwanted by local taxpayers.

Perhaps by refusing to participate in a one-party local government state the group of SNP councillors still sitting on SBC can provide the Borders with a worthwhile and representative opposition in the event of that Governing Document holding out the prospect of any crackpot notions. Watch this space.

Wednesday, 12 July 2017

New Earth fund liquidators may chase third parties


The offshore investment fund which pumped over £39 million into a firm of insolvent waste management contractors commissioned by Scottish Borders Council has recouped just £364,967 of the losses thanks to a derisory 1.5 pence in the £ dividend from the administration estate.

Details of the 'windfall' are included in an update for creditors and investors in the Manx-based New Earth Recycling & Renewables [Infrastructure] fund (NERR) from joint liquidator Alex Adam, of insolvency specialists Deloitte. The NERR investment vehicle, part of Premier Group (Isle of Man) Ltd. was meant to supply the £21 million needed to develop and construct a waste management facility to deal with Borders household rubbish.

But instead of funding the project at the site of the Easter Langlee tip on the outskirts of Galashiels between 2011 and 2015, NERR was too busy propping up cash strapped New Earth Solutions Group (NESG), the waste 'specialists' handed a £80 million contract by Borders councillors.

The local authority and its collection of expensive consultants appear to have been completely unaware that NESG was millions of pounds in hock to banks and unsecured creditors while NERR was providing millions of pounds in management fees for Premier Group directors who also had a major stake in NESG.

The outcome of the Galashiels fiasco was a £2.4 million loss of taxpayers' money with an undisclosed financial disaster for NESG also likely to have run into millions. The Group crashed into administration last year after the Borders contract was terminated: NERR is being liquidated and Premier Group is being dissolved.

Mr Adam's investigations into NERR, according to his newly published report, are focusing on specific issues "where we believe a claim could be brought against third parties".

He says: "We have continued, in conjunction with our legal advisers, to review the information we have obtained from a variety of sources, with the objective of determining whether there are good prospects of bringing, and ultimately winning, actions against third parties.

"However, we do not wish to prejudice any potential claim by providing further detail at this stage. Whilst we are focusing on those issues which we have identified as having the greatest prospects of success we have not discounted other possible claims".

It should be remembered that the collapse of NERR, which once claimed a valuation of more than 290 million American dollars, and whose controllers told Scottish Borders Council that cash was pouring into the fund at the rate of £6 million per month, means 3,249 investors and shareholders have virtually no chance of recovering any of their money.

Mr Adam explains that shortly following the winding up of NERR he submitted a claim to NESG administrators Duff & Phelps for amounts outstanding to NERR in relation to the loans made to NESG.

"That claim has recently been accepted by the administrators who have paid a first and final dividend of 1.5 p in the £ to all unsecured creditors in the administration estate", the report shows. "As a result the company (in its capacity as a creditor) received a distribution of £364,967.

Mr Adam goes on to state: "For clarification, the dividend paid by NESG is a realisation in the liquidation estate of NERR which equates to less than 0.1% of the estimated shortfall to creditors and investors (before the costs of the winding up) of the company and two related funds shown in the directors' statement of affairs.

"As the costs incurred to date exceed the dividend received, the receipt of the dividend will not result in a distribution to creditors or shareholders of NERR. We still believe that any substantial recovery will depend on identifying and then successfully pursuing claims against third parties".

So the financial horror show linked to Scottish Borders Council's disastrous dalliance with NESG, NERR and Premier Group continues with the potential for more disturbing if not sensational disclosures yet to come.

The toothless watchdogs tasked with monitoring public authorities' conduct in spending other people's money may not be interested in this particular scandal with its distinctly shady undertones. The regulatory authorities may not wish to hold anyone to account for the loss of that £2.4 million.

However, Not Just Sheep & Rugby will continue to analyse and report future revelations just as we have done since the Easter Langlee deal was abandoned with extremely costly consequences in February 2015.

Wednesday, 5 July 2017

Was council's workforce wisdom 'sold' for £12 million?


A dramatic decline of 35 per cent in the number of staff aged 40 or over at Scottish Borders Council has coincided with an aggressive campaign to encourage early retirement and to promote severance or exit packages within the authority over the last seven years.

The loss of more than 1,600 'older heads' has occurred between 2009 and 2016, at the same time heralding a rapid 33 per cent influx of under 40s, including almost three times as many employees who are under 30 (up from 121 to 344).

The latest headcount of 4,140 at SBC is made up of 3,078 over 40s (74.3%) along with 1,062 younger staff members (25.7%). Those statistics can be compared to the 2009 figures which showed 4,770 out of 5,566 staff (85.7%) had passed their fortieth birthday with just 796 (14.3%) under 40.

And back in 2009 there were even 603 over 65s on the payroll. Today that number is stated to be 69.

The marked shift of the age profile in a relatively short period of time was revealed in a response to a Freedom of Information request (FOI number 10,185) which was published on the council's website in May. It appears to have slipped past virtually unnoticed, yet the data should be of interest to employment demographers and population scientists.

The full lists of figures for 2009 and for 2016 in brackets by age group are as follows: under 20: 0 (16); 20-29: 121 (344); 30-39: 675 (702); 40-49 1,249 (1,170); 50-59: 1,887 (1,476); 60-65 1,031 (363); over 65: 603 (69).The end result is that the average age of council staff has dipped from 52 to 47 over the seven years covered by the statistics.

Whether this trend has affected standards of service to SBC's 'customers' or has impacted on the delivery of local government functions is a matter for those who come into contact with the range of departments which come under the control of the local authority.

Spending cuts and alterations to services have undoubtedly taken their toll with members of the Scottish public often expressing dissatisfaction with their local government service in general.

Self-assessment of performance by SBC and its fellow local authorities tends to be up-beat with an optimistically positive spin attached to the statistics. The fact remains that over 600 complaints a year are logged on the Borders council system even though a significant proportion are dismissed as unworthy of investigation at an early stage in the complaints process.

Meanwhile the shedding of more elderly - and presumably experienced - members of the workforce has been achieved at a considerable cost to the public purse.

Research by Not Just Sheep & Rugby shows SBC has spent some £12.177 million on 481 early retirement and redundancy packages since 2010. The average cost of these 'golden goodbyes' works out at £25,300 with a number of them well above £100,000.

After the cull of staff began in earnest around 2009 Audit Scotland had this to say in its audit report on the council's 2009/10 annual accounts:

"As part of the business transformation programme the council made a number of staff positions redundant during 2009/10. The council also offered some early retirement to staff both on an individual and group (Teachers) basis. The council has reviewed its policies pertaining to Early Retirement, Voluntary Severance and Compulsory Redundancy in the light of the emerging severe economic constraints the council must address in the immediate future. Furthermore recruitment, agency staff and overtime have all been identified as areas of reduced spend to meet cost saving plans.

 The report went on to warn: "A decrease in the workforce may result in service disruption and deterioration in quality of service. We will continue to monitor the workforce planning proposals and the consequent impact in 2010/11."

In a response outlining its planned management action, SBC claimed:"All retirements and redundancies are planned and managed to ensure knowledge transfer and to minimise potential disruption. Responsible officer:  T Logan, (director of resources)".

However, the use of exit packages accelerated during the next three financial years. In 2010/11 94 employees left with £2.358 million between them. The exodus became a veritable stampede in 2011/12 when 138 leavers picked up £3.579 million, and a further 75 posts were sacrificed on the alter of 'cost saving' in 2012/13 involving expenditure of £1.888 million of public money.

The 2011/12 books included details of the controversial total payment of more than £318,000 made to departing chief executive David Hume, including £103,000 as compensation for loss of employment.

Audit Scotland later observed: "The previous chief executive left the Council under the voluntary severance / early retirement scheme in place. As part of our audit, we considered the process for this and concluded that this was in line with the Council’s standing orders.

"We note that this was undertaken through the Council’s emergency powers but, while the previous chief executive’s departure was reported to a subsequent meeting of the full Council, no formal reference was made to the circumstances . In accordance with the terms agreed with the previous chief executive, his departure was initially referred to as “retirement”.

"This may have created a misleading impression and, with hindsight, it may have been preferable to have agreed to describe the departure as “early retirement under the voluntary severance scheme” as used in subsequent press releases."

A former council insider who looked at our findings remarked: "I find this interesting as some dead wood has been pruned. However I do feel some people who performed well and enjoyed the job have departed for the wrong reasons because job descriptions have been changed and other factors introduced to encourage their departure.

"For example this has involved qualified experienced people who were performing well in Planning, Economic Development and Technical Services but were probably too good at their job and stood up for what was right".

Monday, 3 July 2017

Who do they think they're kidding?


A policy document produced barely a year ago by Scottish Borders Council declared that informed openness was at the heart of the local authority's approach to information management.

The April 2016 production entitled Information Governance Policy also claimed that SBC was committed to creating, managing and keeping records that document its principal activities.

One of the exceptions to those rules appears to have been any or all of the information linked to the Easter Langlee waste management farce starring SBC, its contractor New Earth Solution Group and a collection of private consultants who scooped up hundreds of thousands of pounds in fees in a four-year drama which cost taxpayers dear. At least £2.4 million, in fact with no punch line at the end of the comedy of errors.

Virtually any shred of evidence in council files which might hint at incompetence or simply bad governance has been either completely concealed from public view or has been so heavily censored with black ink to render the information unreadable and unfathomable.

Since the policy document was published its contents have been shown to be worth little or nothing so far as this issue is concerned.

Time after time 'informed openness' has been concealed by a wall of silence to thwart any Freedom of Information request aimed at finding anything out about the New Earth fiasco.

FOI requests have also shown that far from writing things down in a diligent manner, the council has admitted on more than one occasion that written records were not kept when asked about a particular aspect of the saga.

The most notable of these failures to minute proceedings may have concerned the fact finding mission by a large delegation of officials and councillors of every political hue to NESG headquarters near Bristol in October 2014. Apparently no written records were kept and no reports were produced after the party returned from their two-day jaunt to the south-west of England at taxpayers' expense.

It later transpired the Borders expeditionary force had gone to the wrong waste treatment facility. The Avonmouth plant was completely different from the one planned at Galashiels and they should have visited a research and development establishment at Canford, Dorset instead.

Anyone interested in getting at the truth in the SBC/NESG affair will have taken heart from the two recent decisions by different Scottish Information Commissioners who both dismissed the council's refusal to divulge reports and other documents and ordered the authority to comply with requests.

These were both humiliating defeats in the theatre of FOI, and a victory for persistence and doggedness. Unfortunately, as this publication has said on a number of previous occasions, those who are supposed to keep watch over local government spending do not regard the loss of £2.4 million as a significant issue worthy of investigation.

But at least Commissioner Agnew and Commissioner Keyse have done their best to lift the smokescreen which descended at council HQ the day the ill-fated contract had to be shredded.

As Ms Keyse says in her decision notice issued last week: "The Council has not explained why information relating to its own matters is still sensitive, or why this information is excepted from disclosure".

It is hard to fathom some of the reasons for secrecy promoted by SBC during investigations by the SIC.

For example: "The Council considered that the withheld information was industrial as it contained details about the technology processes proposed by NESG, the level of technological testing and proving which had taken place, and the extent to which technological solutions had not yet been achieved.

"The Council stated that information which details the project, and where it has failed, and why it should not be pursued, is information of high commercial sensitivity".

This was SBC's stance despite the previous financial collapse into administration of NESG and the liquidation and total insolvency of its funding partners.

To finish: a couple of extracts from that discredited Information Governance Policy.

[1] "Through our commitment to sharing information, SBC intends not only to fulfil any legal obligations, but also to promote a spirit of openness and accessibility. SBC will fulfil its legal obligations with effective and timely responses that protect individuals' rights while promoting a spirit of openness and accessibility in our responses through a commitment to share information".

[2] "Non-compliance with this Information Governance policy could have a significant effect on the efficient operation of the council and may result in financial loss, reputational damage and an inability to provide necessary services to our customers".

We will leave our readers to decide whether - in this particular case - those lofty sentiments are worth the paper they are written on.

Sunday, 2 July 2017

Did council fall for claims of fund's bosses?

DOUG COLLIE reports on the contents of more newly released documents

Scottish Borders Council was told an "environmentally friendly" investment fund was attracting cash at the rate of £6 million per month, and there would be plenty of money to finance a brand new waste treatment facility for the region to be developed by contractors New Earth Solutions Group.

But behind the sales patter, including a stupendously impressive graph sent to the council in March 2013, the managers and controllers of the Channel Islands registered New Earth Recycling & Renewables [Infrastructure] Fund (NERR) were siphoning off millions of pounds in fees.

These payments, which were being transferred from NERR to its Isle of Man parent Premier Group Isle of Man Ltd, totalled more than £22.7 million over the space of two years, sufficient to cover the £21.5 million capital cost of constructing the Borders waste project at Easter Langlee, Galashiels.

Another set of reports and letters which have been released by SBC under Freedom of Information contains extremely positive facts and figures relating to NERR's financial well-being.

The documents include a letter outlining NERR's state of health and its intentions towards the Borders waste centre.

A separate communication between NESG and the council appears to reveal that NERR had invested £1 million into the scheme to cover predevelopment costs. It is not known whether this £1 million should be added to NESG's multi-million pound losses and the £2.4 million of taxpayers' cash which SBC squandered on the failed venture.

A 2012 letter from David Whitaker, a director of the NERR fund to Chris Cox, managing director of NESG - Mr Whitaker was, at the time, also director of NESG and of the project company set up to deliver Easter Langlee - outlines how well NERR was allegedly doing. It is the first NERR correspondence to be released as a result of a FOI request.

According to Mr Whitaker: "The NERR investment fund is experiencing growing interest via its two feeder funds from UK and overseas investors who recognise that it offers growth potential and diversity as part of their investment portfolio or pension fund, as well as being an environmentally friendly investment.

"The Feeder Funds have raised in excess of £95m of cumulative subscriptions since Summer 2008 – of which around £65m has been invested into NES and its projects to-date and substantial funds remain available for further investment. These Funds are currently raising £50m on an annualised basis to invest into NES’ projects via NERR."

He explained that the fund's long-term business model was to provide up to 25% of the capital requirements of NES’ projects. Mr Whitaker continued: "However, given the current financial climate and the Funds’ impressive performance, NERR is prepared to adopt a flexible approach to funding NES’ projects whereby it is willing to provide 100% of the funding to deliver projects, with the intention of refinancing assets within the first three years or so of operation".

The letter added that NERR had a target rate of return of 15%, which reflecteds the fact that NERR was neither a bank nor a venture capital investor. NERR was an infrastructure investor that provided gap funding.

At the conclusion of the letter Mr Whitaker grants consent for a copy of his letter to be given to SBC.

It is unclear whether Borders councillors and their paid officials attempted to verify the claims made in that NERR letter or the similarly bullish contents of a so-called funding update in March 2013 from NESG finance manager Shaun Gomm.

He explained how NERR funds had raised over £166 million in cumulative subscriptions since its launch in 2008. And NERR had raised £30 million in the last five months with "significant new business being generated in the UK, Europe and Asia".

The letter to council project director Ewan Doyle, which is marked strictly private and confidential, includes a current cash balance for NERR as of March 2013.

But for some reason Scottish Borders Council blacked out the figure before release of the document even though NERR is in the hands of liquidators. The increase in the balance from December 2012 has also been redacted

The fund may have had a nominal value of £166 million at one point. But the hard truth is that 3,250 investors, along with SBC, have lost all of their money.

This latest portfolio of information made public for the first time indicates that NESG and NERR were both telling SBC in 2013 that there would be no difficulties in funding the Borders project. Yet by the time the entire contract was torn up and abandoned two years later the money was not - and had never been - in place.

Friday, 30 June 2017

Council unaware of complaints against funders


Scottish Borders Council was unaware of numerous complaints lodged by investors against the controllers of a group of offshore funds, one of which was supposed to finance a £21 million waste treatment facility to process the region's domestic rubbish.

The admission is included in a response to a Freedom of Information request in which SBC was asked if it had known at any time that Premier Group (Isle of Man), the managers of the New Earth Recycling & Renewables [Infrastructure] Fund (NERR) had been the subject of allegations from disgruntled shareholders since 2004 - more than seven years before a contract was signed between SBC and New Earth Solutions Group (NESG).

According to SBC: "The Council was unaware of any alleged complaints".

But the complaints against Premier Group - now in liquidation along with NERR - were well documented and available on web sites. The allegations were of serial failings by the directors of Premier Group, and claims they had designed and promoted a succession of "dubious" funds over 15 years.

The local authority has released several documents relating to NERR after being asked for information regarding the financial checks made by council officials or elected members as to the competence of NERR to deliver the treatment plant at Easter Langlee, Galashiels before a contract variation was approved in October 2012 to include unproven gasification technology.

Newly released reports and letters show two alternative methods of funding the project were under consideration in early 2013 involving financial input of £20 million  from the Co-op Bank with the rest of the capital to come from NERR. Alternatively, if bank funding could not be secured then NERR was prepared to bankroll the whole deal.

But neither cash source materialised: the collapse of NESG meant the company owed Co-op Bank over £50 million while NERR investors and shareholders are virtually certain to lose everything following the fund's liquidation. At the same time parent company Premier Group is also being dissolved.

However, a 2013 financial review prepared by consultants for SBC was largely upbeat. The report concluded: "Overall, the financial standing of the New Earth Group appears to have strengthened modestly since the signature of the original Project Agreement.

"While still loss-making, this reflects the fact that the Group is in start-up phase and investing heavily in new facilities and contracts. According to the Directors’ Report, its performance is in line with expectations, and the Group is continuing to be strongly supported by NERR, its principal funders."

In fact NESG had recorded an operating loss of £6.5 million in 2012, up from £5.9 million the previous year. It has since transpired that the millions of pounds provided to NESG from NERR was to keep the waste treatment company going.

Elsewhere in the consultant's report it is stated: "The [NESG] directors' report includes confident statements regarding the Group’s market position, stating that 'policy and fiscal support for the two sectors that the Group is active in – waste management and renewable energy – remain strong and attractive.... In contrast to many operators in the waste sector, the Group has a proven track record of funding its growth and new projects during a time of financial austerity and a sharp contraction in the availability of project finance,' drawing particularly on NERR.

The report goes on to state that "during the last 12 months, the Group has developed and demonstrated its own suitable treatment technology, which is patent protected and has been branded as New Earth Advance Thermal (NEAT).

This was the technology brand which Borders councillors appear to have been so impressed with that they sanctioned its inclusion in the contract variation even before NEAT had started development trials. The failure of the gasification and pyrolysis system was one of the two main reasons the Borders project failed, losing taxpayers at least £2.4 million in the process. The other was the inability of NERR to come up with the money.

The highly ambitious and eventually undeliverable Energy Recovery Facility (ERF) planned for Easter Langlee was meant to provide power for over 400 homes, industrial premises and council buildings in and around Easter Langlee with surpluses being sold to the National Grid.

According to the report just published New Earth Solutions were telling SBC in 2013 that the plant would be generating energy sales worth £2.31 million by 2016/17. Under a profit sharing agreement the council could expect to receive £61,880 in that year. There would then be similar payments throughout the 24 years of the contract.

The report says: "The prospect of additional income from this source provides a financial incentive to the Council to work with Project Company to ensure that it enters into a Power Purchase Agreement (PPA) on the best possible terms available in the market, and develops a robust, financially viable and economically beneficial heat off-take plan."

As it turned out the entire project, including the planned district heating plan, proved to be an expensive white elephant with negative consequences for the Borders environment.



Thursday, 29 June 2017

Second crushing defeat for secrecy


Another concerted attempt by Scottish Borders Council to cover up information linked to their costly and disastrous waste management project has been foiled yet again by the Scottish Information Commissioner [SIC].

The latest setback for the local authority - it appears more than 80 documents were withheld from Freedom of Information requester Bill Chisholm - follows a similar defeat in April when the then SIC Rosemary Agnew ordered SBC to release six reports which had been heavily censored to hide vital facts and figures.

When those documents were finally made public earlier this month they showed that elected members at SBC sanctioned a Deed of Variation with contractors New Earth Solutions Group (NESG) before a series of technological trials had even been initiated at a research and development centre.

The brand of technology was to have been used in the construction of a £21 million "cutting edge" waste treatment centre at Easter Langlee, Galashiels, to deal with Borders household rubbish.

But as has been well documented in these columns the entire project collapsed in disarray in February 2015 when it was realised the technology did not work and the scheme could not attract funding. As a consequence SBC had to write off at least £2.4 million of taxpayers' money while the now bankrupt NESG are believed to have lost several millions too.

Since the Easter Langlee plans were abandoned, leaving SBC's waste treatment strategy in tatters, the council has repeatedly refused to disclose information under freedom of information.

They have claimed on every occasion that to divulge reports and documents would harm NESG and its partners even though all of them are either in administration or being dissolved by insolvency experts. Despite previous SIC decisions dismissing this stance SBC has continued to cling to the 'commercial confidentiality' clause in the doomed contract.

But in a damning decision notice issued to Mr Chisholm this week, the current information commissioner Margaret Keyse has instructed the local authority to release the information it withheld. They have been given until a date in August to comply with her orders.

The original FOI request in this case was lodged with SBC in May 2016, and it has taken over a year to resolve the issue of the council's refusal to supply the documentation they were asked for.

Ms Keyse' 18-page 'judgement' describes how the council was late in responding to the request, then provided reports some of which the requester considered to be irrelevant. There was no index supplied with the CD containing limited information, and the reports were not in chronological order.

The Commissioner explains: "Having considered the documents that fell within scope of Mr Chisholm’s request (calculated by the Commissioner to be 201 in total), it was not clear what information had been withheld or disclosed from some of the documents. In a series of discussions with the investigating officer, the Council clarified what information had been withheld."

She added: "The investigating officer found that some of the withheld information had been published on the internet by another Scottish public authority. The Council was asked to comment on this. It did not respond directly to this request".

In rejecting SBC's arguments yet again the SIC points out: "Having considered the information which the Council has withheld in this case, the Commissioner is not persuaded that it is all covered by the confidentiality agreement in the contract.

"The Council has not explained clearly why the parts of the documents containing withheld information are covered by the confidentiality clause. It has not explained why the information is commercially sensitive, and has provided only general arguments in relation to the harm that would, or would be likely to be caused by disclosure."

The Council stated that disclosing the withheld information would place it in the public domain. The information was considered to be of market value. It could be used not only for the advancement and exploitation of the innovative technology, but for future contract bids within the waste industry.

The Council submitted that it was impossible to determine a timescale as to when specific harm would occur, if the information was disclosed. However, as soon as it was placed in the public domain, it would strip the owner of the benefit to which they were entitled, as owner. Therefore, to that extent, the harm would be immediate.

Ms Keyse observes: "There also appears to be little consistency about what has or has not been withheld. For example, information about the time taken to test the waste processing system has been withheld throughout, except in one document where it was disclosed.

"Not all the withheld information relates directly to NESG, and the Council has not explained why information relating to its own matters is still sensitive, or why this information is excepted from disclosure".

In investigating this case, the Commissioner’s staff spent several weeks reviewing the information withheld from Mr Chisholm and trying to establish why, in the Council’s view, it was considered to be sensitive, especially where similar information had been disclosed.

The Commissioner concluded there was comparatively little information in the withheld documents about the financial status of NESG or details of the technology it was developing which had not already been published.

Mr Chisholm argued there was an overwhelming case for release of all information relating to the Council’s dealings with NESG, given the loss of at least £2.4 million resulting from the collapse of the project. Mr Chisholm argued that the Council should have been aware that NESG was on the brink of insolvency when a Council delegation carried out a “due diligence” visit to NESG’s headquarters in October 2014.

He commented that when the Council entered into the contract with NESG, taxpayers were told it was a £65 million contract over 24 years which would divert 80 per cent of waste from landfill, provide heat and power for hundreds of homes in Galashiels, and make the Council the leading waste management authority in Scotland.

Instead, the Council had written off £2.4 million of public money on a project which could not be funded and did not have the necessary technology to guarantee success. Mr Chisholm told the Commissioner that the Council is now at, or near, the bottom of the Scottish recycling league.

"The Commissioner accepts that there is significant public interest in understanding what steps the Council had taken to ensure that the project was robust. There is a strong public interest in understanding the measures that the Council had taken in order to limit its financial exposure in a project which had been on-going for four years and had involved substantial sums of public money", concludes Ms Keyse.

She continued: "In the Commissioner's view, disclosure of the withheld information would serve the public interest in informing the public about the actions and decisions taken by the Council, the basis for those actions and decisions, and the reasons why the project failed. As noted above, the project had involved many years of work, and substantial sums of public money. The integrated waste management project would have had a direct effect on the residents in the Council area.

"The Commissioner has given weight to the particular circumstances of this case, which incurred the Council investing substantial time, money and resources, in a project that ultimately did not come to fruition. In these circumstances, the Commissioner finds it is legitimate for the public to seek to understand what happened, and in the public interest for this understanding to be as complete as possible".


Wednesday, 28 June 2017

Hike in homeless across southern Scotland


The number of applications to services for the homeless across Scottish Borders, East Lothian and Dumfries & Galloway rose sharply in 2016/17 at a time when appeals for help nationally fell by two per cent.

The statistics, published by the Scottish Government this week, reveal a 23% spike in applications to Dumfries & Galloway Council (up from 668 to 820), a 12% rise in East Lothian (681 to 766) and a 10% increase in Scottish Borders (623 to 686). The Borders figure was the highest recorded since 2011/12.

Meanwhile the number of households living in temporary accommodation in the Borders rose from 82 to 87, far above the 2002 figure of 35 households. At the same time the number of children living in temporary accommodation went up from 38 to 41.

The temporary accommodation statistics for Dumfries & Galloway showed a significant improvement, down from 240 households to 199 with 73 children included in the latest figures compared to 76 in 2015/16.

However, in East Lothian households in temporary accommodation increased from 410 to 440, with the number of children involved up from 184 to 251.

In February, in answer to a Freedom of Information request, Scottish Borders Council confirmed it was renting 85 properties from Registered Social Landlords (RSL) and 49 from Private Sector Landlords (PSL) in meeting its statutory homeless duty.

Total rents paid to RSLs in 2015/16 was £310,000, and to PSLs £253,170. The equivalent figures for 2016/17 are  £316,934 and £233,264.

A research report by Shelter Scotland into evictions by social landlords in Scotland between 2012-2016 revealed a 13% increase in evictions by Scottish Borders Housing Association, the main landlord in the region following a whole stock transfer of council housing in 2003.

In 2015/16 SBHA instituted 535 proceedings against tenants, 68 were taken to court, decree was granted in 44 cases and 17 evictions occurred.

East Lothian's eviction rate increased by 162.5% between 2013/14 and 2015/16 from eight to 21. At the same time RSL Dumfries & Galloway Housing Partnership completed 33 evictions, a 2.9% reduction from 2013/14. There were 925 notices of proceedings, 297 tenants were taken to court and decree was granted in 58 instances.

The Shelter Scotland report concludes: "From the evidence and analysis, it is apparent that landlords, especially local authority landlords, are increasingly making use of eviction actions in response to rent arrears. In the years leading up to 2013/14, there was a decrease in the use of eviction action. However, since then the number of evictions has risen.

"Between 2007/08 and 2013/14, evictions fell by 52 per cent, while over the course of 2013/14 to 2015/16 evictions have increased by almost 25 per cent. Shelter Scotland is concerned that this upward trend will continue unless clear changes to policy and practice are made.

"With the significant changes to the backdating of housing benefit and the introduction of the benefit cap in 2016, it has become even more important for the rest of the social rented sector to learn from their examples. Social sector landlords should seek to actively engage with their tenants and try to prevent rent arrears as much as possible by providing help and advice when needed.

"The increasing uncertainty regarding the UK economy following Brexit is likely to further impact social sector tenants. It is therefore vital that the policies and practices of social sector landlords reflect the challenges that their tenants face and adequately address them in a way that reduces rent arrears and, ultimately, helps tenants to stay in their homes."

Tuesday, 27 June 2017

Common Good revisited: still under-performing?


The nine Common Good funds in the Scottish Borders received only £69,000 from a combined investment portfolio of £2.7 million in 2016/17 while the common land and property in a former Scottish burgh just a few miles away  recorded a £600,000 return for its trustees.

The £69,000 figure represents a 2.5% investment 'dividend for Scottish Borders Council, administrators of the funds in a year when the council's own pension fund achieved a 21.5% return

Serious concerns were voiced four years ago over the alleged poor management of the Borders funds with a dismal financial performance and a failure to fully exploit the valuable assets granted to local burgesses and freemen by various charters of the Scottish kings over 500 years ago.

While the Common Good lands and properties in Duns, Galashiels, Hawick, Jedburgh, Kelso, Lauder, Peebles and Selkirk appeared to be in the doldrums in 2013, the single fund managed by the Berwick-on-Tweed Freemen Trustees was chalking up impressive financial achievements.

At that time SBC announced that the £2 million cash balance in their funds was to be transferred to a “private firm of global fund managers.”

Berwick, one of the four original Scottish burghs founded in 1125, received its common from the monarch in 1491, around the same time as several of the other towns in the Scottish Borders.

The trustees at Berwick have 2,550 acres of land under their control with a value of £6.508 million, according to the charity's latest available accounts (2015/16). The fund generated more than £600,000 from investments and was able to devote more than £500,000 to "charitable activities".

A new set of accounts covering 2016/17 for the now nine Borders Common Good funds - Innerleithen has been added to the list since 2013 - allows a modern day comparison to be made with Berwick-on-Tweed.

Between them the funds, amalgamated into a single charitable trust several years ago by SBC, have land holdings in excess of 5,000 acres including three Selkirk farms extending to 1,300 acres, 800 acres of farmland at Hawick and a 1,700 acre common at Lauder.

Total income from investments in the last financial year added up to £69,000 made up of £66,000 from the £2.7 million investment portfolio in the Newton Real Return Fund plus £3,000 in bank interest from the "Scottish Borders Council loans fund".

The council charged  £48,000 for 'governance costs' incurred in administering the trust - the same figure was levied in the previous fiscal year - and Common Good donations to worthy causes totalled £171,00 (£89,000 in 2015/16).

When the various deductions were made from the funds net income last year was a decidedly unimpressive MINUS £139,000 compared to PLUS £433,000 the year before. The bottom line was a reduction of £149,000 in the net movement in funds against an additional £503,000 for 2015/16.

Total funds carried forward fell from £13.895 million to £13.746 million.

Meanwhile over in Berwick-on-Tweed a seemingly highly efficient regime saw total funds carried forward increase from £21.687 million to £22.024 million. In March 2011 the Berwick fund stood at £17.9 million, so there has been considerable value added since then.

In a section headed Plans for the Future, the report carrying the Borders accounts declares:" The Common Good Funds will continue to maintain their heritable assets and will look to maximise their income from any of these assets which are let commercially. Where assets are used by third parties towards the Common Good of the Burgh then rental levels may reflect this aspect of the tenants’ activity."

The Common Good agenda item for this week's committee meeting appeared alongside SBC's draft accounts for 2016/17 which we have already reported on, and the local authority pension fund.

There was much better news for members of the pension fund than the slim pickings for the Common Good trustees who happen to be all 34 members of the council.

The SBC Pension Fund accounts reveal: "Strong three-year annualised investment performance of 10.9% - 0.9% above benchmark; 2016/17 Strong one year performance to March 2017 with investment returns of 21.5% in the year to a benchmark of 19.5%."

It means the pension fund now has £654m in net assets, an increase of £112m on 2015/16.

Sunday, 25 June 2017

Another ‘under-spend’ at council HQ yet debts climb by12%


Scottish Borders Council has declared a wafer thin under-spend on its £261 million revenue budget for the fifth year in succession while at the same time running up more than £21 million of extra external debt during the 2016/17 financial year.

The situation is outlined in draft annual accounts which will be presented to councillors later this week.

Research by Not Just Sheep & Rugby staff has confirmed that in every fiscal year since 2012/13 the council has recorded an under-spend of less than one per cent, demonstrating an apparently remarkable control on expenditure over scores of different budget headings.

This time round the books were closed with a miniscule 0.05% (£128,000) ‘in the black’ figure. The corresponding returns in previous years were 2012/13 0.30%; 2013/14 0.18%; 2014/15 0.16%; and 2015/16 0.49%.

The report containing the latest set of unaudited accounts claims under the heading Highlights of the Year: “Against a very difficult financial background, the Council has achieved a great deal during 2016/17 as follows: signed a 13-year contract with CGI to establish a digital services partnership;

“Achieved £8.9 million of planned Financial Plan savings on a permanent recurring basis; Delivered £261.6 million of revenue spending within budget; Delivered Capital Investment of £51.5 million on schools, flood protection, roads, lighting and other assets; Supported a successful first year operation of the new integrated Sport & Culture Trust (Live Borders)”.

However, for some reason, the accelerated rate of borrowing does not feature among the highlights. A few pages further on Borders residents are told: “External Debt: The Council’s external debt as at 31 March 2017 was £197 million. Additional long term borrowing was undertaken during the year amounting to £12 million.

“Short term borrowing for cash flow purposes was also undertaken with £9 million outstanding at the end of the year. The average rate of interest paid on outstanding external debt was 6.2%”.

One wonders if the many extra millions borrowed are taken into account when calculating that 0.05% "under-spend".

In fact the total debt figure had soared by 12.1% from its level of £175.25 million in March 2016. And no less than £11.879 million of taxpayers’ cash was required in 2016/17 just to service SBC’s portfolio of loans.

There was a hefty bill too for the long-term PFI scheme which delivered new secondary schools a decade ago in Eyemouth, Duns and Earlston. The accounts show there will be a service charge of £6.024 million in 2017/18 plus an additional £2.66 million to cover interest. The total cost of the Initiative will be more than £238 million, including an eye-watering £34.7 million in interest charges.

The ‘Remuneration’ section of the accounts will no doubt be of special interest to many of those who take the trouble to scrutinise the authority’s financial house-keeping.

For example: the number of employees at SBC who earn £50,000 or more increased from 115 to 125 last year. And the top 13 senior employees received total remunerations of £1,002,622 (up from £989,519 in 2015/16).

But the exit door at Newtown St Boswells appears to have been less busy; 2016/17 saw 23 exit packages for departing staff at a total cost of £430,745. In the previous financial year SBC offloaded 71 staff members who took £2.233 million with them.

The report concludes: “The operating environment for the Council continues to be very challenging with financial and economic influences such as increasing demands on services, reducing Scottish Government funding, low interest rates and cost pressures from pay and price inflation all affecting the Council’s finances. The Council, despite these challenges, remains financially sound and well placed to serve the people of the Scottish Borders in the future”.

No doubt the people of the Borders can also anticipate another wafer thin under-spend when March 2018 comes round. The level of external debt may be more difficult to predict.

According to monthly lists of loans displayed on the Public Works Loan Board website SBC borrowed £8 million over 10 years on February 24th 2017, the money to be applied to expenditure 'within one month'.

And on April 26th 2017 the local authority borrowed another £10 million over 10 years. This time the cash was to be applied to expenditure 'immediately'.

Friday, 23 June 2017

Will May keep this gravy train running?


Farmers in the Scottish Borders and elsewhere must be hoping at least one Tory manifesto policy survives the political carnage which has seen many of the party's flagship pledges ditched and shredded.

Gone even before a deal with the DUP could be stitched up were promises to introduce more grammar schools, to legalise foxhunting in England and Wales, to levy a 'dementia tax' on folk requiring care, to deny many pensioners their winter fuel payments along with the removal of the triple lock on the state pension. All conveniently abandoned to keep a lame duck prime minister in power for a while longer.

However, the well worn Hammond/May mantra "we must live within our means" continues to get regular air time, and there was nothing in the Queen's Speech this week to suggest there would be extra billions for education, the NHS and for other suffering public services.

So if there is no spare cash floating around The Treasury, where will the estimated extra £9 billion come from to deliver the Tories' commitment to guarantee the current level of financial support for British farmers post-Brexit? In other words, to extend the Brussels Common Agricultural Policy's (CAP) 'dripping roast' from 2019 to 2022. Or will this solemn promise be quietly buried too?

Last year more than 154,000 UK businesses collected in excess of £2.86 billion in subsidies, slightly less than the £3.185 billion which supported 183,000 separate recipients the previous year.

In 2016, more than 26,000 different Scottish rural businesses received a CAP payment from EC funds. The hand-outs were worth over £647 million, and a significant proportion of the money was used to promote environmental projects and schemes aimed at resisting climate change.

Research carried out by colleagues at Not Just Sheep & Rugby would suggest the Government will have to come up with more than £150 million over three years if farm related businesses in the Scottish Borders and North Northumberland are not to suffer financial losses once the CAP gravy train hits the buffers.

In the twelve months to October 2016 1,191 agri-linked entities across the region received £47.2 million following the 2015 statistics which showed some 1,300 businesses pulled in around £63 million from EU funds.

The loss of such a significant level of subsidy would blow a large hole in the Borders economy. According to tourism experts the money spent in the region by visitors on food, drink and accommodation is worth £65 million a year to hotels, restaurants and pubs. So the complete removal of CAP benefits from the Borders would be on a similar scale.

An economic profile for the Scottish Borders, produced by Scottish Borders Council in 2013, stressed: "It is critical for the local economy that CAP reform continues to deliver support for an innovative and competitive agricultural sector. Total income from farming in Scotland is less than subsidies received (£589 million income against subsidy of £633 million, so industry dependency on direct support is high".

Here is a postcode breakdown of the farm payments which found their way into the Scottish Borders in 2016, including some of the main beneficiaries:

TD1 - GALASHIELS - 49 businesses received a total of £2.304 million (2015 £3.620 million): including L G Litchfield, Bowland Farms £295,441; T & J Elliot £136,594; Torwoodlee & Buckholm Estates £127,536; Mrs C M Reid £126,541.

TD2 - LAUDER - 46 businesses received £1.664 million (£2.260 million); including W H Sharp & Son £108,415; W M Barr & Co £106,633; Firm of Sutherland £100,105.

TD3 - GORDON - 21 businesses received £1.671 million (£2.141 million): including G McDougal (Bassendean) Ltd £256,585; J & T F Macfarlane £484,213; Haddington Farms £152,502; R W Morris & Co £127,816.

TD4 - EARLSTON - 21 businesses received £1.067 million (£1.157 million): including Fans Farming £172,367; J W Fullerton & Sons £192,533; Hamish Morison Farming Ltd £120,450; Messrs R & J Scott Aiton £110,078.

TD5 - KELSO - 163 businesses received £7.249 million (£9.450 million): including C G Greig Farms Ltd £258,886; Balgonie Estates Ltd £197,634; Floors Farming £231,378; James Mitchell & Partners £187,847; Lochtower Ltd £128,629; D & D W D Thomson £151,835; Messrs J Jeffrey £168,460; Playfair Farms £129,882; T W & T B Edgar Ltd £203,876.

TD6 - MELROSE/ST. BOSWELLS - 64 businesses received £2.016 million (£2.922 million): including Mertoun Estate Farms £173,218; Messrs Maxwell (Faughhill) £112,067; Scottish Borders Council (Woodlands) £97,252.

TD7 - SELKIRK - 83 businesses received £2.858 million (£4.909 million): including BQ Farming Partnership Ltd £212,248; Langholm Farms Ltd £182,256; Sir F M Strang Steel £146,152; W N Douglas £113,440.

TD8 - JEDBURGH - 86 businesses received £3.153 million (£4.270 million): including Firm of Nisbet Mill Farm £190,896; R G Barbour & Sons £177,815; Robert Neill & Partners £135,589; Messrs A A Scott £121,019; J W Ogilvie & Partners £107,560.

TD9 - HAWICK/NEWCASTLETON - 171 businesses received £5.204 million (£8.389 million): including G W & M Richardson £106,813; H & M Farms £180,262; R H Brunton & Co £101,738; R J & T J & M T Feakins £183,718; S H & P M Shirley-Beavan £115,093; W S Davies & Son £108,370.

TD10 - DUNS/GREENLAW - 24 businesses received £907,000 (£1.871 million): including J C & K C Constable Ltd £104,239; John Mitchell & Co £106,899; The Firm of James Orr £129,683.

TD11 - DUNS/ABBEY ST. BATHANS - 126 businesses received £5.987 million (£8.017 million): including A M & A Calder Farms Ltd £168,885; C A Ramsay Partnership £119,164; Catchelraw Trust £150,923; Charterhall Farm £101,631; Ellemford Farming Ltd £120,556; Harehead Farms £170,380; Macfarlane Farms Ltd £220,361; R & J McDonald £212,752; R P Cowe & Co £107,057; W Arnott & Co £131,160.

TD12 - COLDSTREAM - 19 businesses received £759,000 (£1.162 million): including Ladykirk Estate Farms £152,584.

TD13 - COCKBURNSPATH - 16 businesses received £403,000 (£1.355 million): including J P H Wight & Co £78,596.

TD14 - EYEMOUTH - 55 businesses received £1.725 million (£1.583 million): including Eyemouth Freezers Ltd £319,313.

TD15 - BERWICK-ON-TWEED - 162 businesses received £6.902 million (£7.527 million): including A T Barr & Co £143,870; G H Millar (West Foulden) Ltd £106,810; Conundrum Farm Partnership £102,787; J A Frater £103,867; J E Armstrong & Son £166,147; Joicey Partnership £291,497; R T de Plumpton Hunter £184,552; Penmar Farming £443,295; R C Reed £136,936; Sunwick Farm Ltd £106,427; The President Estate Farming Partnership £240,133; Todd Farms £129,154; W L Douglas & Son £281,638.

EH45 - PEEBLES - 48 businesses received £1.515 million (£2.278 million): including Glenrath Farms £111,828; J P Campbell & Sons £212,171.

Wednesday, 21 June 2017

Creditors of SBC contractor will get 1.5p in the £


The mountain of debt which finally engulfed Scottish Borders Council's waste management contractors New Earth Solutions last year may have been as high as £116 million, it has been revealed.

And non-preferential creditors who previously thought they might recoup between four and eight pence in the pound will get just 1.5 pence in the pound while claims from unsecured parties have rocketed fourfold from £9.1 million to a staggering £36.289 million.

The latest financial statistics in the New Earth Solutions Group disaster are disclosed in a progress report to creditors by joint administrators Sarah Bell and Philip Duffy, of insolvency specialists Duff & Phelps.

Yet again it must be emphasised that members of Scottish Borders Council either failed to check on or were completely unaware of the company's fragile monetary state throughout the lifetime of a four year contract.

The fact that the local authority even considered doing business with such a debt-ridden Group simply beggars belief. The council decision to hook up with NESG cost local taxpayers at least £2.4 million, and the urgently needed waste treatment facility at the heart of the deal was never even started.

Documents seen by Not Just Sheep & Rugby show that NESG was heavily in debt to banks in 2011 when SBC sanctioned its original multi-million pound deal, but was also in hock to its associated off-shore fund New Earth Recycling & Renewables [Infrastructure] plc or NERR prior to a contract deed of variation being signed by councillors in October 2012.

The Duff & Phelps report shows there is insufficient funds from sales of assets to pay off the secured creditor (Co-op Bank) in full. The Co-op was owed £41.8 million.

Next in the pecking order of so-called secured creditors came NERR, the now bankrupt Isle of Man investment fund chosen by SBC to bankroll the £21 million waste plant at Easter Langlee, Galashiels.

According to the report: "NESG was historically funded via quasi-equity from NERR. [The fund] provided the Group with funding for ongoing trade as well as capital improvements. The funds were provided under a debenture created on September 19th 2011.

"As at the appointment (of administrators) the indebtedness to NERR totalled in excess of £39 million. As NERR's security is subordinated to the Co-op's debt there is no prospect of any distribution being made to NERR under its security".

Hundreds of investors and shareholders in NERR who lost everything now know their money went to prop up the struggling NES Group even though they had been told the fund invested in new waste recycling facilities in the UK.

So did the millions of pounds which NERR handed over to NESG in September 2011 mean the "green" fund could no longer finance the Scottish Borders project?

Within three months of the debenture being finalised New Earth informed SBC that a conventional facility to treat the region's rubbish could no longer secure bank funding. Surely the paying public have a right to know the full facts relating to the disastrous contract failure.

Duff & Phelps had expected to conclude the administration of NESG this month with a move to dissolve the business and remove its name from the Register of Companies.

But the report explains that a request has been made to extend the administration by twelve months to June 2018.

"The extension is necessary following the requirement of the joint administrators to include a provision for a significant non-preferential claim", says the report. "The claim is currently the largest submitted within the administration.

"However, it has not yet been possible to conclude the position in respect of this claim and therefore the extension will be required to conclude the adjudication of this claim".

There is no indication in the report as to the identity of the claimant or the amount being sought. A further progress report is likely to be issued in the near future.

Tuesday, 20 June 2017

Workers seek £109,000 from failed building firm


A group of 15 former employees of a Borders building company which crashed into administration late last year are taking the firm to an employment tribunal in a bid to claim over £100,000 in so-called protective awards.

The trade union representing workers who lost their jobs at long-established Galashiels builders Murray & Burrell is basing the case on the alleged failure of the company's management to consult prior to the appointment of an administrator.

Meanwhile it has been revealed that claims from ordinary creditors, estimated at £800,000 in November 2016 has now climbed to almost £2 million which means previous indications that all creditors would be paid in full may have to be scaled back once a final reckoning is reached. It now also seems unlikely that any funds will be returned to shareholders.

The information is contained in a progress report to creditors from administrator Richard Gardiner which sets out a series of developments since his appointment last November.

Mr Gardiner reports: "The sale of the company's plant, equipment, motor vehicles and stock realised more than my agent had anticipated and debtor collection to date has far exceeded my own expectations with further amounts still to be collected."

The sale of the yard from which the company traded has been completed for £167,000. Mr Gardiner anticipates the sale of the firm's development site at Craigpark Court, Galashiels will change hands for £540,000. Proceeds from the sale will go towards paying secured creditor Assetz Capital Ltd, the business which holds a bond and floating charge over all Murray & Burrell's assets, and which was owed £727,000 at the end of May 2017.

Mr Gardiner's report also shows employee claims will be in the region of £34,000 for arrears and holiday pay and £187,000 for notice/redundancy pay.

He adds: "However, in February 2017 I received notification that 15 of the employees, acting through their union, are seeking protection awards against the company for what they claim was a failure to consult. Having discussed the matter with the directors and legal agents, the decision was taken to vigorously defend the claims and a hearing date is awaited from the Employment Tribunal. It is estimated that if the Tribunal were to make the awards in full these would amount to some £109,000."

The report shows the sale of the company yard for £167,000 was to the Trustees of the Alexander Kemp Pension Scheme. Mr Gardiner explains that Mr Kemp is a former director of Murray & Burrell and the husband of Sally Kemp who is a director of the firm.

A number of asseys remain to be released, including a development site at Buckholm Corner, Galashiels which has been valued at £750,000 to £1 million. That valuation has been challenged by the firm's directors who also have an interest as representatives of the two major ordinary creditors, ASM Developments (owed £564,000) and Waukrigg Developments (£231,000).

"This land had been on the market with another agent prior to administration, but there had been little interest", writes Mr Gardiner. "From discussions with various agents it would seem that there is currently little interest for plots of this size in the Borders area".

D M Hall, the agents who valued the Buckholm Corner site have agreed to 'revisit' their assessment prior to fully placing the property on the market. The directors have also suggested the possible appointment of a joint marketing agent to reach out to potential purchasers from overseas.

Mr Gardiner also explains that following a review of old planning applications in the Borders area on which no development has commenced, Scottish Borders Council had indicated an intention to remove this land from their Development Plan.

"As the intention is to sell the land for development I instructed my property agents to lodge a defence and this has been submitted to the council in order to preserve the value in the land", he states.

There has also been little interest in a site at Lilliesleaf valued at between £200,000 and £275,000.

The development of nine houses on Craigpark Court land had commenced prior to administration. Two properties had been completed, one of them having already been sold and the second being used as a furnished show house.

This site was subject to "an onerous Section 75 planning obligation" (developer contributions) which could potentially put off prospective buyers or lead to reduced offers.

"The purchaser (of Craigpark Court) ius a provider of social housing and is thus usually exempt from Section 75 obligations".

In a section of the report entitled Prospects for Creditors, Mr Gardiner says: "My staff continue to receive and log claims from (ordinary) creditors. Ordinary claims are currently projected to be in the region of £1,996,000 but I would stress that, to date, no formal adjudication has been carried out on any claims and this is merely an indicator based on the creditor list provided by the company and claims received to date".

The estimated financial position of the firm included within the administrator's proposals published in January suggested that, based on the asset values provided by the directors at the time, a dividend of 100p in the pound would be available to creditors.

But according to the new report: "The level of dividend will depend on the final sales values that can be achieved for the various land and properties and, whilst I still anticipate that a substantial dividend could be available to ordinary creditors, I am unable to provide an estimate of the timing or quantum of such dividend until such time as the outcome of asset realisations is known. However, creditors should be aware that the assets remaining to be sold are likely to take some considerable time to sell".

In a message to shareholders, Mr Gardiner says the anticipated surplus in the estimated financial position of the company included with the January proposals indicated that there might be funds to be returned to shareholders.

He warns: "However, this now seems unlikely given the potential lower returns from the sale of assets, the costs of the administration and interest accruing on creditors' claims".

A note headed Directors' Conduct, the administrator says in terms of the Company Directors Disqualification Act 1986 and the insolvent companies (Report on Conduct of Directors) (Scotland) Rules 1996 he is required to prepare a report regarding the conduct of the directors who held office in the three years prior to his appointment.

"This report has been submitted but I am unable to divulge the contents of such reports", concluded Mr Gardiner.

Monday, 19 June 2017

Ticking all the wrong boxes!

EWAN LAMB reports on the Borders' latest waste management performance

Hidden away in a 44-page annex of a report to be considered by Borders councillors this week are four ticks in separate boxes, indicating that the local authority is on target and in line with national trends when it comes to waste recycling and landfilling.

Hardly surprising that Scottish Borders Council has awarded itself four out of four passes when it is allowed to mark its own homework book.

The annual and quarterly performance reviews show that in 2016 SBC managed to recycle 39.07% of the rubbish it collected, up from 36.89% the previous year. At the same time the tonnage of garbage being buried actually increased although the overall percentage dropped from 62.2% to 60.7%.

However - perhaps conveniently - there is no mention of how SBC is doing compared to national averages or when their data is set alongside other Scottish local authorities who form a 'Family Group' for bench-marking purposes.

The Scottish Government's recycling targets continue to be missed by a country mile in the case of Borders. The aim was to achieve 50% re-use of waste by 2013, 60% by 2020 and 70% by 2025.

There seems little chance those ambitious heights will be reached by SBC following the complete collapse of its waste management strategy, the abandonment of a project which was designed to divert 80% of rubbish from landfill, and the recent decision by its own members to turn down a planning application for a waste transfer station.

According to this week's report to the influential SBC Executive: "Over the last four quarters there has been a small but consistent increase in recycling rate observed. This is thought to be related to the introduction of food waste kerbside collections, and in an increase in garden waste collected at the recycling centres.

"The tonnes of waste going to landfill have increased slightly over the period of the past four quarters. This could be related to economic activity. However, over this same period there has been a small but consistent decrease in the percentage of waste going to landfill.

Statistics for 2016 for all 32 Scottish local authorities will not be published by the Scottish Environment Protection Authority (SEPA) until September. But the 2015 data gives a snapshot of SBC's record compared to its brothers and sisters in that Family Group.

The Borders landfill figure of 62.2% for 2015 was only exceeded by Eilean Sar (Western Isles) Council on 64.8%. The other figures for the Group were Aberdeenshire 56.1%; Highland 54.6%; Argyll & Bute 48.7%; Shetland 22.0%; Dumfries & Galloway 29.3%; Orkney 23.9%.

The 2015 proportions of so-called other diversions from landfill (not including recycling) show SBC close to the bottom of the league. This section of the waste management figures comprises waste disposed of by incineration, recovered by incineration or managed by other methods.

The percentages for the Family Group were Dumfries & Galloway 43.5; SBC 1.79; Aberdeenshire 0.13; Argyll & Bute 17.4; Orkney 51.2;Eilean Sar 13.9;Shetland 68.8; Highland 0.9.

A fleeting reference to the "new" Easter Langlee waste transfer station merely tells us: "As planning consent was refused the project is now delayed and likely to incur significant additional cost".

Based on all available data the box ticking exercise which allows SBC to claim it is on target or in line with national trend or showing a long-term positive trend seems virtually meaningless.

Saturday, 17 June 2017

Uncovered: consultant's report on failed waste project

DOUGLAS SHEPHERD on first 'expert' paper to emerge from council's secret files

The role played by a team of at least twelve 'specialist' consultancy firms in the disastrous Scottish Borders Council/New Earth Solutions waste treatment project has never been publicly explained since the venture collapsed over two years ago with the loss of millions of pounds of taxpayers' and investors' money.

Experts in the fields of technology, finance and the legal sector were commissioned by the local authority to guide councillors and officials through the minefield of public procurement. Between them these firms collected around £1.6 million in fees, but at the end of four years SBC had nothing to show for that generous expenditure.

Now, for the first time, a consultant's report linked to the Easter Langlee waste treatment project has found its way into the public domain as an appendix to a larger confidential report submitted to a private council session at the dawn of the contract in 2011.

The report from financial consultants Nevin Associates - they were paid a total of £143,000 by SBC over the lifetime of the contract - examines the financial implications which might flow from the non-development of an energy from waste facility (Advanced Thermal Treatment or ATT) alongside a proposed conventional treatment plant.

In particular Nevin looked at various scenarios and how they might affect the solvency or insolvency of New Earth Solutions (Scottish Borders) Ltd. (NESSB), - known as the project company - which was specially set up to carry out the Easter Langlee project.

According to the report: "The construction of the ATT plant is not absolutely essential for service delivery. NES have confirmed that they can still deliver the service as specified in the contract by treating residual waste through a Mechanical Biological Treatment (MBT) plant and then securing an off-take contract for the solid refuse fuel (SRF) produced by the MBT process with a merchant plant outside the Scottish Borders".

Nevin Associates added that while NES intended developing an ATT facility at Easter Langlee, the process that New Earth envisaged using was still being trialled on demonstration plants, and although results appeared to be positive "it cannot yet be confirmed that the technology will prove to be feasible".

That clear marker appears to have been repeatedly ignored by councillors and officers alike for the inappropriately named NEAT technology never proved itself.

The investigation concluded that even if the generating capacity of the ATT plant turned out to be lower than forecast, the solvency of the project company would not be jeopardised, and would be in a position to continue delivering the contracted services.

Nevin went on to examine the likely outcomes for the NESSB if the ATT did not proceed at all, and off-take contracts for the SRF had to be secured. NES had indicated the off-take cost of SRF would equate to £65 per tonne.

Financial modelling showed that if the project company paid an off-take price of £54.01 a profit of £3.25 million would be generated over the project period, and NESSB would "remain solvent (just)".

Under an off-take price of £46.88 the profit over the 24-year contract period would fall to £2.378 million and NESSB would only be marginally solvent. Nevin commented: "Shareholders might not walk away, but to maintain solvency might have to accept suspension of sub-debt interest payments for a period".

NES had named a number of potential facilities that could accept SRF from Easter Langlee including one in Dumfries and another in THe Netherlands. According to Nevin: "It will be noted that some of these potential off-take facilities could have fairly significant transport costs associated with them".

The question therefore arose, wrote Nevin, of what the financial position of the project company would be if it had to meet a SRF off-take cost of £65 per tonne.

When two scenarios were analysed one concluded it was likely interest payments on subordinated debt would need to be suspended for a period while the other warned NESSB would run out of cash and become insolvent.

"In terms of the overall probability of project company insolvency if the ATT plant does not go ahead: The project team assessed that there is a 10% chance of the ATT plant not proceeding as a result of either technical or commercial failure with a somewhat higher risk that the implementation of the ATT plant could be delayed for these reasons.

"In the event of contract termination because project company becomes insolvent, the provisions of the project agreement are that the council will re-tender the contract and pay project company an amount equal to the adjusted highest compliant tender price in full and final settlement of all project company's claims against the council".

Should SBC be unable to re-tender the contract because of a lack of bidders then the council would be required to compensate NESSB for an amount equal to an independent expert's determination of the estimated fair value of the contract.

Friday, 16 June 2017

Controller of bankrupt recycling fund breaks silence


One of the businessmen who presided over a fund which was supposed to bankroll Scottish Borders Council's £21 million waste treatment plant has spoken for the first time since the debt-ridden investment firm went belly up almost twelve months ago.

But far from offering more than 3,200 investors in his worthless New Earth Recycling & Renewables [Infrastructure] plc or NERR an explanation or an apology - they face losses totalling in excess of £290 million - John Bourbon has branded an investigation into the fund's activities as "something of a witch hunt".

The NERR fund was part of Isle of Man based Premier Group which managed and controlled a range of investment vehicles all of which are either about to be dissolved or are teetering on the verge of insolvency. It is now the subject of a probe by the Isle of Man Financial Services Authority (IOMFSA).

Mr Bourbon, a former chief of the Manx financial regulator before joining the board of Premier Group, and his colleagues, collected tens of millions of pounds in fees from NERR and its associates before the Group also crashed late last year.

Between 2011 and 2015 NERR had the role of funder for the Scottish Borders project at Easter Langlee, Galashiels. But financial backing for the waste management plant never materialised, and since the collapse of the project in 2015 it has become clear that NERR strung SBC along with a variety of excuses.

As we reported recently, Premier Shareholders' Group (PSG), which represents some of the hundreds of investors who lost their savings in Premier's funds, has established that the NERR fund was the most lucrative in terms of fees earned for the parent company which was, in turn, controlled from the tax haven of British Virgin Islands.

In an interview with Manx-based journalist Adrian Darbyshire, of Isle of Man Today, Mr Bourbon addressed allegations of mis-selling and other dubious practices which have been levelled at his Group by PSG and others. A dossier of evidence running into many pages is due to be presented to members of Tynwald (the Manx Parliament) within a matter of weeks.

The dossier accuses Premier of paying large commissions to unqualified and unlicensed agents who then targeted pensioners by claiming the funds were 'low risk'. PSG goes on to allege that shareholders were trapped by punitive exit fees, often up to 30%, and they could not access their money after the funds suspended withdrawals.

But Mr Bourbon dismissed PSG's claims and told his interviewer it was unlikely that anyone with significant investments in his funds were unaware of the risk. All fees and charges were clearly set out in the documentation used to promote the funds, he explained.

He made the extraordinary claim that a greater number of people had made a profit from the New Earth fund which loaned cash for the development of waste plants in the UK before it was wound up by the Isle of Man regulators in July 2016. Those loans were made to New Earth Solutions, the contractors handed a multi-million pound contract by SBC. NES is also insolvent and in the process of being wound up.

A further 189 investors are believed to have lost £61 million in NERR's sister entity Eco Resources Fund which ploughed cash into bamboo plantations in Central America and South Africa.

Mr Bourbon is personally fighting moves by the Eco Resources Fund liquidator to have the fund wound up with an adjourned court hearing due to take place next month.

He told Isle of Man Today the fund retained the potential to produce returns for investors for years to come if it is refinanced.

"With the right liquidator, it would be possible to refinance the fund, pay off creditors and financial indebtedness by 2023 and be left with an asset which produces $25 million per annum for investors for the following 60 years", said Mr Bourbon.

Mr Darbyshire's article, which was published online today has already attracted many angry comments.

One writer declared: " Perhaps Mr Bourbon can explain why the Premier group appointed unqualified, unregulated and unlicensed 'agents' (calling them professional financial advisers) to sell experienced investor funds to inexperienced pensioners - some living alone aged over 80. These 'agents' vanished at the first sign of trouble, but Premier kept the money that they received and refused to hand it back. The PSG has absolutely NO record of Premier returning any money."