Insolvency Service rubbishes latest Frost claim

by EWAN LAMB

The UK Government's Insolvency Service has distanced itself from claims by bankrupt businessman Martin Frost in which he alleged systematic fraud theft and collusion by liquidators and administrators linked to his companies was probably the 'worse' case of its kind so far as the insolvency authority was concerned.

Mr Frost, who is no longer able to hold directorships of businesses after he was declared bankrupt by a judge last October continues to circulate "newsletters" to shareholders of firms in the Avocet Group, including Omega Infinite PLC [now in compulsory liquidation].

In his latest missive sent out in his name earlier this week, Mr Frost renewed his verbal attacks on Omega liquidators Begbies Traynor, and on Ms Emma Porter, of accountancy firm Aver, who is administrator of insolvent Avocet subsidiary Orrdome Farms Ltd. Creditors of those two businesses are said to be owed millions of pounds.

Mr Frost wrote: "Last weekend I received requests from Omega shareholders and others if they could still sell their Omega shares or buy in and join the class civil and criminal actions against Aver, Begbies Traynor and others. I passed these wishes on and the answer back is yes: the beginning of March shall witness the cut-off point."

He then went on to make this somewhat sensational claim with the text highlighted in vivid red: "It is understood from the UK Insolvency Service that this is probably the worse (sic) example ever of systematic fraud, theft and collusion perfected by insolvency practitioners. You have been robbed of over £200 million in value."

But the allegations did not stop there. He added: "On the Scottish farms, Aileen Orr [a member of a Berwickshire farming family] in conjunction with Ms. Emma Porter of Aver has stolen or seeks to directly steal some £14 million from you.

"From the Scottish farms, Aver and Begbies are responsible for the theft & loss of a further £15 million.
Globally, Aver, Begbies and others have caused you a loss of over £200 million."

Mr Frost has aired these allegations regularly since the insolvency practitioners were appointed to the cash-strapped businesses, one by the court, the other by a major creditor. But all of the parties subjected to his claims have dismissed them as completely groundless.

Meanwhile, as Not Just Sheep & Rugby reported last July, Mr Frost's business activities at Omega are the subject of a continuing investigation by....the Insolvency Service.

So we decided to ask that agency to comment on Mr Frost's reference to the service in his newsletter. 

In response, a spokesman for the Insolvency Service told us: "Our enquiries are on-going. And we cannot comment on the newsletter other than confirm that those comments in red within the newsletter cannot be attributed to the Insolvency Service."

One keen observer of the Avocet saga commented: "If, as Frost says, Aileen Orr, Begbies Traynor and Ms. Porter have stolen £200 million from the company, one wonders why they continue to live so modestly? One would expect the thieves' homes to be filled with fine art, expensive antiques, rare books, and cases of fine wine and champagne."

Midlothian's waste is coming, but don't tell CELRA!

by DOUG COLLIE

A collection of confidential correspondence obtained via Freedom of Information has revealed the background to a highly controversial plan which would have resulted in 125,000 tonnes of Midlothian's household refuse being 'imported' for treatment in the Scottish Borders.

And emails generated during the preparation of a joint tender for the work by Scottish Borders Council and waste treatment contractors New Earth Solutions (NES) show efforts being made to keep the information about the Midlothian bid from residents living close to the Easter Langlee landfill site at Galashiels.

These events took place in 2011 and 2012, but hundreds of documents and thousands of emails associated with the council's disastrous liaison with NES were kept secret by a six-year confidentiality agreement signed by the parties when their partnership ended in abject failure in 2015.

The paperwork is now being released by SBC although the names of many of the individuals involved in the unsuccessful attempt to deliver a £23 million treatment plant at Easter Langlee to deal with Borders rubbish have been blacked out. The venture cost council taxpayers at least £2.4 million.

Emails show SBC and NES were working on their bid to dispose of and treat Midlothian's annual output of 25,000 tonnes of garbage only a month after the council signed a 24-year deal with NES in April 2011. 

If successful the Midlothian contract was expected to generate hundreds of thousands of pounds in revenue over five years for the joint bidders with the imported waste being landfilled until the ill-fated treatment plant was up and running.

Prior to a bidders' day organised by Midlothian Council, a redacted email written on May 11th 2011 said: "It just depends on the strategy and whether we maintain an element of surprise but not letting the competitors see NES there. We will also need to have a discussion around the commercial arrangements. 

"I appreciate that these need to work for both parties which would mean the Council receiving more than just the extra tonnage revenue going into Easter Langlee. I have met with officers this morning to have a brief discussion around commercial structure for the Council and we are agreed that this needs to be a win/win situation otherwise there is little point in pursuing the tender jointly."

Most if not all of the people living at Coopersknowe and that part of Easter Langlee closest to the council 'tip' had been strongly opposed when proposals to increase activity at the site was mooted in 2010 in the shape of a planning application from the council's own Technical Services Department, later joined by NES.

The Coopersknowe Residents Association - soon to become the Coopersknowe & Easter Langlee Residents' Association or CELRA - submitted written objections to the application in March 2010.

It was claimed the statement that there would be no increase in traffic did not account for future growth, consequent commercial activities arising from it and that recycling material would have to leave the site. 

The objectors contended: "Detailed traffic statements should be provided including projections and serious questions as to whether the [C-class] road is suitable for construction traffic and the volume and nature of traffic using it, with a range of issues including blind bends, lack of pavements and lighting, a pinch point, verge damage, camber the wrong way, narrowness at key points, and impacts on disabled access from existing houses.

"Dust and mud issues will be aggravated and vibration increased. There will be staff parking and visitor parking so there will be extra traffic and roads will further deteriorate. The road cannot cope and to suggest the number of HGVs wont increase is devious in the extreme."

But when the application came up for a decision on April 11th 2011 members of SBC planning committee gave the proposals the green light. The contract with NES was signed four days later.

There was clearly concerns within the council about how local residents might react to the prospect of an additional 25,000 tonnes of Midlothian waste passing their front doors should the joint bid succeed.

An email - again redacted and dated May 20th 2011 - warned: "Chaps, The Council has a meeting scheduled with CELRA on Monday, at present there is a risk that representatives from the Council may raise the point that NES/SBC will be bidding for Midlothian's waste.

"Obviously there were concerns raised at the meeting last week due to confidential/commercial issues amongst others. Can NES draft a note ASAP so that we can demonstrate to the Officers that we cannot divulge this information due to ........ (i.e. commercial/confidential matters etc.)

As soon as we have this we can brief the Officers/Councillors and demonstrate we have something on record to this effect."

A day later another email stated: "(Blank) has suggested that SBC/NES set up a 'war room' at Scott House with a representative from NES there. We will then be able to gather information on demand.”

However, relations between council and contractor as they developed their bid appear to have become strained fairly quickly.

A message copied to Ewan Doyle, the SBC officer in charge of the Easter Langlee project on May 23rd declared: "I am concerned that NES may not be fully committed to a bid with SBC and may only be going through the motions. They have still not come through with a formal offer to SBC yet."

And the following day an email from Mr Doyle included this passage: "If this is a joint bid then whatever NES put in it the Council are also liable to provide! NES could go out of business in 2 years and leave us in a situation with no waste treatment service (as we are going through retendering), but we still have to deliver to ML [Midlothian].

In a further email to Mr Doyle dated May 25th the sender wrote: "Personally I am not happy with the approach NES are using. I think it is too dis-jointed and messy, with a number of risks around the two separate drafting of documents being contradictory and thus increasing risks of lower scores and unknown risks to the Council. 

"NES clearly want to limit SBC's input and they are clearly not understanding our issue of exposure, they appear to have the 'wrong end of the stick' in relation to this and I cannot seem to get (blank) to accept this. If I did not know better I would suggest we maybe being managed out of the process. i.e. the Council withdraws due to frustration and unknown risks."

The bid saga would drag on until February 2012 when NES wrote to SBC's Rob Dickson to confirm that New Earth had received a contract award letter from Midlothian Council. The contract was for the disposal and treatment of all of Midlothian's residual waste for 15 years. with alternative landfill arrangements in place of Easter Langlee.

By 2016 NES Group was completely insolvent: the Borders facility was never built, and Midlothian made other arrangements on the waste treatment front.

Borders transport needs shunted, say officers

by DOUG COLLIE

A lengthy wish list of improvements needed to bolster the Scottish Borders' transport network have been largely ignored in a draft strategy covering south-east Scotland, according to a team of high ranking local government officials.

Now members of Scottish Borders Council are being urged to challenge the perceived urban bias and over emphasis on Edinburgh's needs set out in the strategy prepared by the South-east of Scotland Regional Transport Partnership (SUStrans).

In a hard-hitting assessment of the proposals contained in the 120-page strategy document, the Borders group headed by John Curry, Infrastructure and Environment at the council make it clear they do not like a reference in the document that "Scott Borders is the ‘Hinterland’ [of the region]. Also the correct name is the ‘Scottish Borders’".

The authors of the Borders response, to be considered at a full meeting of SBC this Thursday are Ian Aikman Chief Planning Officer;  Dan Cathcart Localities Transport Officer; Ewan Doyle Workforce Mobility Manager;  Gordon Grant Team Leader;  Graeme Johnstone Lead Officer; Erin Murray Research & Policy Officer, and Brian Young Infrastructure Manager.

These officers state: "From this review it is clear that the draft strategy does not properly represent the Scottish Borders and should be significantly changed to reflect more rural challenges and solutions. 

"It is proposed that Scottish Borders Council submit a structured response through the SEStran consultation portal and a detailed response to clearly articulate the areas where change is required in the draft strategy. Without an honest and detailed response the final strategy will not reflect the challenges and ambition of the Scottish Borders, leaving the region without the leverage to support cross boundary and local transport projects that are vital for our communities."

Borders councillors are then told: "SEStran’s programme for approval of the final Regional Transport Strategy indicates the ambition to seek approval from their board in March 2022. It is proposed that the Council requests a written response from SEStran on how they have actioned the Council’s comments so that we can consider the Council’s approach to being involved in the final approval process."

The territory covered by SEStrans takes in the eight council areas of Scottish Borders Clackmannanshire  City of Edinburgh East Lothian Falkirk Fife Midlothian and West Lothian. In total the SEStran authority covers 8,400 square kilometres with a population of 1.6 million.

In their 26-page review of the draft strategy the Borders team say: "There needs to be more differentiation between urban and rural areas. The document seems to be heavily skewed to urban challenges and solutions. 

"There is no recognition of the role that rural regions make to the overall transport network, other than travelling into Edinburgh. The draft strategy needs to acknowledge the important linkages of the region to the south into northern England; west to Dumfries & Galloway, South Lanarkshire and Glasgow; and north into Perth & Kinross and beyond. These corridors and linkages provide important opportunities for the SEStrans region and the Scottish Borders.

"There needs to be support for the development/delivery of the Borders Railway extension, improvements on the existing line and action to maximise the integration of Reston Station into the east coast mainline so that it supports the community and a modal shift. There is a clear opportunity to support these strategically important infrastructure projects".

It is also suggested there should be more emphasis on the correlation between good transport and good digital connectivity. Digital equality across the region will support an integrated and connected transport network especially in rural areas.

The final strategy should have significantly more emphasis on increasing public confidence in public transport following the national messaging to avoid public transport during COVID 19. There is also a lead role to play in behavioural change and public education to support sustainable transport choices to help deliver the strategy vision.

Borders officers go on to say: "There is a significant number of actions within the draft strategy without clarity on ownership, how they will be funded, delivered or programmed. The document would benefit from being shortened, especially in comparison with other regional strategy documents such as the Regional Economic Strategy, the Indicative Regional Spatial Strategy for the South of Scotland and the Edinburgh & South East Scotland City Region Deal Regional Prosperity Framework."

In a specific reference to electric vehicle [EV] charging the report to council declares: "The current model of Local Authority led EV charging infrastructure is not sustainable in the long term as the infrastructure created a high resources demand for operation and maintenance support, with regular technology updates and customer support. This has led to high instances of inoperable charging infrastructure that affects public confidence. 

"With the anticipated growth in demand, the private sector delivery and operation model needs to be developed in urban and rural areas to facilitate a transition to companies that have the experience and resources to deliver a network to meet the future demand."

 

Excessive arrangement fee "highest I've seen".

by DOUGLAS SHEPHERD

A consultant working for Scottish Borders Council on their ill-fated £23 million waste treatment project claimed the arrangement fees for loans from an Isle of Man fund chosen to bankroll the scheme were the highest he had seen for any funding package he'd been involved in.

The extensive collection of email traffic associated with the proposed waste plant at Easter Langlee, Galashiels is being made public for the first time, having been protected by a six-year confidentiality agreement signed by the project partners in 2015 when the job was abandoned.

Not Just Sheep & Rugby has already published details from some of the 300 documents released by SBC in response to a Freedom of Information request. We have also continued to take a keen interest in a lengthy investigation by liquidators into the affairs of the controversial Manx "environmentally friendly" investment fund New Earth Recycling & Renewables [Infrastructure] Ltd., known as NERR.

This was the financial outfit which was supposed to come up with the cash for the Borders project after NERR's partners New Earth Solutions Group (NES) were awarded a £65 million contract to deal with the region's rubbish over 24 years from 2011.

But, as readers will know, NERR failed to find the money while NESG could not get their advanced thermal treatment [ATT] technology to work satisfactorily. The Galashiels venture collapsed in 2015 when SBC finally pulled the plug after spending at least £2.4 million without a brick being laid. Soon after both NESG and NERR became insolvent with huge debts.

NERR is now the subject of a report by liquidators which has been lodged with the Isle of Man's High Court of Justice, detailing factors in the run up to the company's collapse "which warrant further investigation."

As we reported in November, NERR joint liquidators Alex Adam and David Craine told hundreds of creditors who are owed an estimated £220 million: "We have sought legal advice as to whether it would be possible to share the contents of the report with creditors and investors however we are advised that, as it is a report to the court, it is confidential and cannot be shared."

Within a year of landing the SBC contract NES asked for it to be radically altered, claiming the original concept of building a stand alone Materials Recovery Facility (MRF) at Easter Langlee was no longer viable. Instead they wanted an ATT [advanced thermal treatment] incorporated to make the deal worthwhile.

After months of behind the scenes negotiations during 2012 councillors signed the Deed of Variation (DoV), allowing the revised scheme to proceed. Unfortunately it never did. But it is now clear there were serious reservations about some of the changes, including the updated funding model.

While the identities of many of the individuals sending and receiving emails at this time have been redacted in the versions provided under FOI it is clear that NERR's fees were a matter of concern for Nevin Associates, the consultants paid £143,000 by SBC for financial advice for the waste treatment plans.

In August 2012 - before the DoV was sanctioned - Nevin Associates told the council: "I've now undertaken a comparison between the updated NES project financial model submitted by (name redacted) on Tuesday, and the original April 2011 Financial Close model."

After pointing out there had been a lot of movement on capital costs, tonnages and third party revenue streams, the consultant wrote: "Yet despite all of these movements, the Project IRR (Internal Rate of Return) is identical to that in April 2011! It doesn't take Sherlock Holmes to work out that it is just possible that the model has been massaged to come out with the same answer!"

In a detailed assessment of the new financial arrangements Nevin states: "For the record, among the most significant movements are the following:

"1. The capital cost of the MRF seems to have fallen slightly in real terms, from £12.886 million in April 2011 to £12.609 million today.

"2. The capex (capital expenditure) of the ATT also seem to have fallen, from £6.765 million in April 2011 to £5.466 million today – and in addition we have far less detail of how this is made up, with the largest single element being ACT/power equipment at £4.5 million, but no breakdown of this cost.

"3. However, this is balanced by an increase in professional fees and funding costs. Professional fees have risen from £500,000 to £1.061 million, and in addition under "funding costs" there is a provision for £751,000 of advisers costs, so effectively it would appear that advisers’ costs have increased more than threefold.

"4. In addition, the arrangement fees payable to NERR have risen from £650,000 in April 2011 to £957,000 today (a 47% rise in about 15 months), most of which is made up by an £825,000 (5%) arrangement fee on the Class 2 Loan Notes. This is the highest arrangement fee I have seen in any funding package in which I've been involved, and does seem excessive.

"5. We need to confirm with (redacted name) whether NES are still actively pursuing bank finance – which would definitely be cheaper than NERR finance, both in terms of the interest that would be charged – with a 12% rate payable on the NERR Class 2 Loan Notes, and an 8.75% interest rate payable on the Class 1 Loan Notes – and in terms of the arrangement fees – with an arrangement fee of 5% payable on the Class 2 Notes, and 3% on the Class 1 Notes.

"6. Following from this, I presume that we are still entitled to a share of any refinancing gains as provided in the April 2011 PA [Project Agreement]. In which case it is definitely in our interest to push for bank financing in place of NERR."

Consultants galore! Here's what they're for

by DOUG COLLIE

Scottish Borders Council has awarded contracts worth more than £200,000 to consultants who will help shape the region's 'Net Zero' strategy and investigate the development of a so-called Active Travel Route between the railway stations at Tweedbank and Reston.

Three separate contract award notices were published by the council this week although the information posted on the Scottish Government's Public Contracts website was difficult to interpret.

The description given to a £105,900 award for specialist firm Atkins stated simply: "To undertake a feasibility study to support net zero across the region and build the network of active travel infrastructure to support rural accessibility."

So Not Just Sheep & Rugby contacted SBC to request more details as to how the money would be spent.

A helpful SBC spokesman told us: "Scottish Borders Council have received funding from the South of Scotland Enterprise (SOSE) to undertake a feasibility study for a new active travel route between the existing Tweedbank Railway Station (Borders Railway) and the new Reston Station (East Coast Railway) – circa 53km.

"The route that has been initially identified for this is the former railway line that originally linked the station locations, and runs through the heart of the region connecting towns and villages such as Earlston, Greenlaw, Duns and Chirnside. This aligns with the Eastern Borders Green Route proposal from March 2021.

"The consultant will undertake a review of this route to identify the adaptation required to create an active travel route for walking, wheeling and cycling based on the best practice standards set by SUStrans.

"The feasibility study will identify and quantify the works required for infrastructure, bridges, DDA access, accommodation works etc, while identifying landownership (including purchase cost) and all permissions likely to be required. The feasibility study will breakdown the route to deliverable chunks between key nodes so that the whole route can be delivered over multiple phases and through multiple funding streams.

"The feasibility study should also identify complimentary routes for active travel connections to Destination Tweed Project, the Coast to Coast cycle route, key tourist destination, key employment zones, key education zones and adjacent towns and villages. Atkins have been appointed and the end date for the feasibility study is fixed at 31 March 2022."

The second and third contracts handed out by the council are linked.

A notice with a £55,000 price tag declared: "To appoint a Project Manager to manage the Consultancy Team delivering a Feasibility study which will provide direct strategic support to all sectors across the region and will lead on to maximising the commercial opportunities for the region and minimising the expenditure for the public sector, business and residents."

And a contract valued at £85,000 has gone to a different firm to "appoint a Consultant to deliver a Feasibility study which will provide direct strategic support to all sectors across the region and will lead on to maximising the commercial opportunities for the region and minimising the expenditure for the public sector, business and residents."

Again we asked SBC for an explanation, and we were told: "Funding has been secured from the UK Community Renewal Fund to develop and deliver a feasibility study on EV [electric vehicle]charging across the Borders.  The approach to EV charging has been fragmented and delivered through the Local Authority, forward thinking businesses and individuals utilising Government funding to stimulate small pockets of EV vehicle use across the region. 

"This project is looking to undertake a region wide, cross sector assessment of supply, demand and commercial opportunities to create a strategic delivery model for EV charging infrastructure.  This Feasibility study will provide direct strategic support to all sectors across the region, which will lead on to maximising the commercial opportunities for the region and minimising the expenditure for the public sector, business and residents.

"With the clear commitments to deliver Net-Zero there are a number of key targets to hit over the coming 24 years.  This will require a significant change in Local Authority, business and citizens travel habits and adoption of sustainable travel options like EV vehicles.  To enable this to be a reality, the Scottish Borders is starting from a very low level of provision and has to undertake a comprehensive review of how demand will develop across the region, how the electricity grid can cater for the demand and the commercial models available to deliver the infrastructure equitably across the region. 

"To deliver Net-Zero across the region we need an overarching strategic feasibility study that provides real opportunity for the region to deliver change, tangible benefits and maximize the private sector opportunities for the region.

 

Turner & Townsend have been appointed as Project Manager for this contract, Mott MacDonald have been appointed as Master Planning Consultant, 6-9m timescale to complete work."

Offshore fund's £600,000 'arrangement fee' for Borders loan

by DOUG COLLIE

Private and confidential papers linked to the £23 million failed Scottish Borders waste treatment project show the local council was to be charged up to 12 per cent interest by the Isle of Man investment fund chosen to bankroll the scheme.

And a three per cent fee for setting up the 15 year loan would have netted the directors of New Earth Recycling & Renewables [Infrastructure] Ltd. or NERR in excess of £600,000.

These are among the figures contained in "secret" documents which were protected by a six-year confidentiality agreement signed in 2015 by Scottish Borders Council and their incompetent contractors New Earth Solutions (NES) a company which had Isle of Man-based NERR as funding partners. It was a partnership which soon became insolvent.

A so-called funding solution for the Borders venture assembled by NES and NERR in January 2011 - three months before councillors signed up to the disastrous £80 million waste treatment deal - makes interesting reading. 

The proposals outlined would disintegrate within a year when the plans for the facility at Easter Langlee, Galashiels had to be radically altered. Even that did not prevent the project from total collapse in 2015 costing SBC and its local taxpayers at least £2.4 million.

New Earth's funding solution together with NERR's loan conditions are among dozens of reports released by the council in response to a Freedom of Information request.

The NES letter to SBC says: "Our current funding solution remains to source 97.5% of the project capital expenditure requirement from our funding partner NERR and for NES to provide the remaining 2.5% via pinpoint equity".

But by 2016 NERR together with a number of other investment vehicles promoted by Premier Group (IOM) Ltd. had called in liquidators with allegations that the environmentally friendly fund had been "a scam". Premier too became financially insolvent.

NERR remains under investigation on the Isle of Man while hundreds of investors worldwide have been warned they may never get back any of the £200 million handed to NERR management.

That funding solution, presented to SBC after NES was chosen as the council's preferred bidder, states: "The funding requirement for the Scottish Borders project will be in the region of £21.5 million. Project construction is programmed to commence in autumn 2011.

"NES is hoping to close projects with a total capital expenditure in the region of £95 million during 2011 with Scottish Borders representing both the first and highest priority".

The upbeat message was supported by letters from the directors of NERR: it was later revealed that at least £24 million from the Manx fund had been used in a vain bid to prop up the failing NES Group by covering its debts. 

The identity of the NERR executives is not revealed in the copies of correspondence supplied by SBC as their names have been redacted.

According to the document: "The NERR investment fund is experiencing growing interest from UK and overseas investors who recognise that it offers growth potential and diversity if held within their investment portfolio or pension fund as well as being an environmentally friendly investment.

"NERR's feeder funds, the Premier Investment Opportunities Fund Protected Cell Company plc and the Eclipse Investment Fund Protected Cell Company plc are targeted at experienced investors and institutional investors respectively".

But in fact it turned out that many financial advisers were persuading individuals with no experience of investing to plough large sums from their life savings or pension pots into NERR with promises of huge returns which never materialised.. 

A significant number of people have won compensation from agents after taking cases to the financial regulators. Other claims aimed at recovering cash remain outstanding while NERR's liquidators continue their investigation into the fund's activities.

SBC was told in 2011: "The funds have raised in excess of £58 million of cumulative subscriptions since summer 2008 of which £46.5 million has been invested into NES and its projects to date. These funds are currently raising £35 million-£40 million on an annualised basis to invest into NES projects via NERR".

The fund planned to charge 12% interest on £16.13 million of mezzanine funding for the Borders plant and 8.75% on a further £4.3 million, both loans to run for 15 years.

The newly released paperwork also includes a series of 'proof of funds letters' provided by NERR fund managers Moore (also based in Douglas, Isle of Man) during 2013 showing sums held on account at BNP Paribas Securities Services.

However, it appears SBC members were unaware that Premier Group - NERR's promoters - had taken £6.9 million in fees from the fund's proceeds between 2009 and 2014 with a further £16.46 million for "sales and marketing" alongside £750,000 in management fees. These fees were apparently based on the net asset value of the fund.