Corrupt Council Fails To Prosecute Employees Over Car Loan Fraud

Taxpayers Defrauded By Council Officers

Following a request for information by Mr Webb under the Freedom of Information Act 2000 to North East Lincolnshire Council in respect of, amongst other issues, information relating to Council employee and member car loans, in response the Council disclosed that there had been one car loan payment default in the past 6 years to the sum of £10,000. Through further information requests, the Council also disclosed the 'debt' was that of one if its employees who received a car loan in April 2008 to the sum of £12,159 through the Council's Assisted Car Purchase Loan Scheme (the Loan Scheme). The Council granted car loans up to a maximum of £15,000 and 100% of the value of the vehicle with no deposit paid by the employee receiving the loan.

The Council also stated that this particular employee then left its employment without repaying the 'debt' of £10,000 of Council Taxpayers money and then consequently sold the vehicle without the consent of their former employer and left the country. Condition 12 of the Loan Scheme states:

"Any officer to whom assistance under this Scheme has been granted shall not to dispose of the vehicle without the previous consent of the authority at any time prior to the repayment of the full amount of the loan with interest accrued."

Furthermore, Condition 14 of the Loan Scheme states:

"As a condition of any assistance given under this Scheme an officer shall, if so required, execute a bond for the due performance of his contracted obligations of such reasonable amount as the employing authority may determine, alternatively the car shall be the property of the local authority until the final purchase instalment is paid."

Clearly, this former employee of the Council could not sell the vehicle without the Council's express consent until all of the loan default sum, including accrued interest, had been repaid. Consequently, the vehicle remained the property of the Council Taxpayer of North East Lincolnshire.

North East Lincolnshire Council's Anti-Fraud and Anti-Corruption Strategy Policy (Anti-Fraud Policy) states:

"Theft is stealing any property belonging to the council or which has been entrusted to it (i.e. client funds), including cash, equipment, vehicles, data.

A person is guilty of theft under the Theft Act 1968 if:

Section 1 – 'they dishonestly appropriate property belonging to another with the intent of permanently depriving the other of it'

For the purposes of this strategy fraud is considered to be any action taken by an individual, group or organisation which is designed to facilitate dishonest gain at the expense of, (or loss to) the Council, the residents of North East Lincolnshire or the wider national community."

The sale of the vehicle by this former employee of the Council is a criminal act of dishonest assumption of the rights of the true owner, namely the Council Taxpayer, of tangible property by treating it as their own with the intent to deprive the true owner to make a gain – a fraud that ceases to be a debt.

Also, within the Anti-Fraud Policy, the Council state its intentions in respect of fraud:

"The message must be clear and simple that the Council will not tolerate any fraudulent or corrupt activity. Every pound lost through fraudulent or corrupt acts is a pound stolen from the residents of North East Lincolnshire.

All Directorates will be required to address the risk of loss due to fraud and/or corruption through the Council's risk strategy and appropriate Directorate risk action groups.

The Council will seek the most appropriate sanction and redress against all those who commit fraud against the Council. We will publicise details of criminal convictions and provide statistical information in relation to disciplinary action to deter others who may have considered committing such offences themselves.

Failure to implement adequate system controls following a loss to fraud will be the subject of a report to the relevant Chief Officer and/or Audit Committee. The Audit Committee will receive regular reports from Internal Audit regarding system failures, proposals for action and feedback on the implementation of action plans.

The Fraud Investigation Team is responsible for investigating all allegations of fraud. The team will work with other local authorities and public sector bodies including:

Department of Health

Department for Work and Pensions

the Police

Her Majesty's Revenue & Customs

Border & Immigration Agency

Where appropriate, we will participate in data matching exercises and will share information using legislation or legal gateways available to us and our partners. The Audit Commission has drawn up a Code of Data Matching Practice for its National Fraud Initiative (NFI), which is recognised by the Information Commissioner as complying with Data Protection legislation.

The council will make full use of its statutory powers to obtain information regarding and will utilise the services of the National Anti-Fraud Network (NAFN) to support such information gathering.

The Fraud Investigation Team is charged with leading the Council's fight against fraud.

The team works to the Executive Director of Business Services and the Chief Executive and will be free to examine all allegations of theft, fraud, financial misconduct, corruption and other behaviour affecting the finances or integrity of the Council, its Councillors and employees.

They will be fully trained in criminal investigation and will be required to work within the parameters of the relevant criminal law and within the Council's Code of Conduct for Investigation Officers.

The team will investigate any allegation that may have a direct, or indirect, impact on the finances for which we are responsible. This will include cases where staff may have financial information relating to organisations which are, or have been, funded by the council or with whom the council have a contract.

The team will utilise the specific expertise of other units including Internal Audit, Benefit Fraud Investigation Team, Human Resources and Law and Democratic Services in all cases where appropriate to progress investigations. The team will also conduct joint investigations with other agencies to uncover the fullest extent of any offence.

We will utilise the Police in cases where their additional powers are required to secure evidence or recovery of funds or where the matter cannot be pursued in-house.

Where an investigation involves an Employee of the Council the Fraud Investigation Team will have regard to the possibility of both disciplinary and criminal action being taken. To ensure the specific actions are taken at the correct time the Fraud Manager will ensure that Human Resources, Law and Democratic Services and Internal Audit are notified of all investigations involving employees in line with agreed procedures.

We will seek the strongest available sanctions against all who commit fraud against the Council, its clients or the public purse. This may include disciplinary action, prosecution, civil proceedings or a combination of all.

The decision to recommend any or all of the above sanctions will be made on a case by case basis, having regard to the Discipline Procedure and Prosecution Policy in place at the time.

We will use the Council's own legal team, DWP Solicitors and the Crown Prosecution Service, through the Police, to bring offenders to justice. As a deterrent, we will also publicise our successful sanctions in the local press.

The Council's anti-fraud and anti corruption policy sets out our aims and objectives with regard to tackling fraud and corruption and includes the Authority's prosecution policy statement. It states that we will seek the strongest possible sanction against any individual or organisation that defraud, or seek to defraud the Authority. The use of prosecution will be governed by the following policy and the principles of the policy shall apply equally to any fraud against the Authority or against funds for which the Authority has responsibility.

The objectives of the prosecution policy is to ensure that:

the council considers a full range of sanctions including criminal proceedings, in a just and consistent manner

sanctions are applied in an effective and cost efficient manner

the decision to prosecute is robust and transparent.

A range of sanctions are available to the Council. These include:

disciplinary action

civil proceedings

criminal proceedings (prosecution)

formal caution

administrative penalties.

In appropriate cases we will take more than one form of action. For example, where staff have defrauded the council we may take disciplinary, prosecution and civil recovery action.

One sanction available to the Council is criminal prosecution. We recognise that this is a serious step to take and the decision to refer cases for prosecution will not be taken lightly.

The ultimate decision on prosecution will be taken by the prosecuting body. In some cases this will be the Council's Law amd Democratic Services. In these cases the decision to refer cases to the prosecuting authority will be taken by the Fraud Manager.

Where an investigation has been passed to the Police to investigate, they will liase with the Crown Prosecution Service to make the ultimate decision on whether or not to prosecute."

However, when asked what steps it had taken in respect of this fraud, the Council stated that it had simply 'raised an invoice' and 'made follow up enquiries'. In view of these statements, the Council detrimentally failed to implement its Anti-Fraud Policy. Clearly, to protect the interests of the Council Taxpayer, a natural step forward would have been to immediately inform the relevant law enforcement agencies of the fraud with a view to recovering the vehicle on behalf the Council Taxpayer but the Council negligently failed to do so.

Additionally, to be transparent in this matter the Council should have produced a report detailing the activities of any internal audit into this fraud, which would be submitted to the Council's Cabinet together with a summary of any findings from that audit undertaken and a copy be enclosed within the Council's Statement of Accounts but again negligently failed to do so.

The Council also stated that the fraudulent sum was 'not specifically identified with the accounts but within the debtors balance on the Balance Sheet.' Clearly, the identification of this fraud is not apparent within the Council's Statement of Accounts or indeed anywhere else but deceitfully buried within an overall debt sum for which it is not. Evidently, this is a fraud by a Council employee that had only come to light in view of requests for information under the Freedom of Information Act 2000 and was therefore beyond the proper inspection and scrutiny of he Council Taxpayer.

As an 'accountable' public authority, the Council have not provided any prima facie evidence to substantiate any of their claims within its responses to the information requests. It would not be unreasonable to assume that such actions could be tantamount to an intentional concealment of the facts. Mr Webb offered the Council, through email communications with the Council's Deputy Leader, Councillor Keith Brookes, the opportunity of providing him with details of the stolen vehicle in attempt to liase with relevant law enforcement agencies and recover the vehicle, at his own expense, for the benefit of the Council Taxpayer.

However, this crooked Council remained silent in this respect and it became quite clear in other later correspondence that irrespective of any car loan agreement with any employee of this inept Council, they could not recover the vehicle since the Council's legal services made explicitly clear that all of the car loans cannot be secured on vehicles purchased under the scheme and nor can they be attached should the Council employee default on their car loan payments. Despite there is no statutory or Council requirement to provide car loans to employees and such a scheme was not aligned with the objectives of the Council, this ineffectual law department managed by Robert Walsh, the Council's Executive Director Business Services, were well aware that the car loan agreement, particularly Condition 14 of the agreement, was not worth the paper it was printed on. Consequently, this local authority simply handed large amounts of Council Taxpayers money to employees and casual workers through 'agreements' that were simply unenforceable and open to fraud. This is undoubtedly gross maladministration that was overseen by the Council's Solicitor Robert Walsh for many years.

It is quite clear that North East Lincolnshire Council had not taken any 'reasonable steps' to investigate this theft of Council Taxpayers money or indeed made any just attempt to recover it in accordance with its policies and procedures. Whether it is £1 or £10,000, this Council has a responsibility and civic duty to recover any money stolen from the Council Taxpayer and more so when one of its former employees commits an act of fraud. As of consequence, the actions of both the thief and the Council are both contemptible and an offence against the community.

Unfortunately, the Deputy Leader stated he was powerless to take the matter any further and suggested that Mr Webb should take it up with the Leader of the Council, Councillor Andrew De Freitas. However, Councillor Andrew De Freitas believes he is immune from paying parking fines whilst parking his vehicle in contravention of parking byelaws on Council property, believes the incompetent losses of millions of pounds of Council Taxpayers money is 'boring' to the Councillor Taxpayer and also fails to respond to the concerns of citizens. In view of this, Mr Webb believed there would be little or no point in contacting this defunct Member of the Council and instead, passed his findings to the Audit Commission.

After enquires by the Audit Commission, the Council then undertook an internal audit, which should have been implemented many months earlier when the fraud became apparent as discussed earlier. The internal audit found:

"Although the car loans system is being updated, the controls are not yet fully embedded, resulting in both financial and reputational risk from inappropriate loans being awarded. This has resulted in some weak points that are currently being addressed, which include:

Incomplete file documentation, such as proof of purchase, independent inspection, proof of registration, and insurance documentation not being on file;

Granting of new loans to people who still have existing loans for previous vehicles which have been sold or used as trade in on new vehicles.

In one instance the total loan granted exceeded the value of the new vehicle purchased;

No credit scoring/ consideration of employee salary when awarding loans; and

Monthly reconciliations between the car plan and payroll systems have only been completed up to October 2009."

Furthermore, contrary to Mr Webb's request for information that only one car loan was buried as 'debt', the audit also found three other outstanding loans were also handed over to the Council's Recovery Team, which raised additional concern in the manner in which loans were granted and included:

A loan granted to a casual employee, being repaid on instalment;
A loan agreement not signed, resulting in the full loan of £8,926 being proposed for write off after the Recovery Team had made numerous attempts to recover the loan and the circumstances had been checked with enforcement; and
A loan being granted to a debtor with a history of bad debt, this loan will be recovered at £26 per month for the next 21 years.

Unbelievably, this corrupt Council hands over money to individuals who are not full time employees, allows another Officer to steal a further and staggering sum of £8,926 from the Council Taxpayer without signing a loan agreement and another employee is permitted to repay £6552 over a period of 21 years since they have 'a history of bad debt'. The internal audit also discovered that employees and casual workers were never subjected to credit scoring or at the very least considered their salary before awarding any car loan amount. It is also evident from the audit that this suborn Council never properly oversaw the scheme for a considerable amount of time, lacked awareness as to the total costs of operating the scheme, provided insufficient operational resources that ultimately led to incomplete loan documentation, yet at the same time they possessed substantial resources to make extravagant payments to employees and casual workers who requested a car loan from the scheme that they had no statutory duty to maintain whatsoever.

A local newspaper recently reported that: "Council bosses are warning tax dodgers they will be 'relentlessly pursued' after a Grimsby woman was jailed for failing to pay up." Yet disturbingly, these same 'bosses' that include the Council Leader, Councillor Andrew De Freitas, Chief Executive, Tony Hunter, and the Executive Director Business Services, Robert Walsh, failed to provide warnings to thieves they employ or relentlessly pursued them when they absconded with thousands of pounds of Council Taxpayers hard earned money. Additionally, nor do these 'bosses' permit citizens who are suffering financial hardship and who consequently struggle to pay Council Tax in times of austerity, to make alternative repayment arrangements over a significant and absurd number of years through a scheme where there is no statutory duty to maintain that scheme.

We have no doubt that these 'bosses' further insulted the citizens of the borough by also providing this thief, who applied for and received £10,000 of Council Taxpayer's money whilst off sick from work (probably on full pay) and who incredibly was also under investigation on a separate disciplinary matter, with a employer's reference before taking the money with him to start a new life in New Zealand instead informing the relevant bodies both here in the UK and New Zealand of this fraudster's crime against the citizens of the borough.

It is plain to see that Council Leader, Councillor Andrew De Freitas, Chief Executive, Tony Hunter, and the Executive Director Business Services, Robert Walsh shield fraudsters from prosecution and recklessly squander Council Taxpayers money in a self-serving scheme flawed with unenforceable conditions and ludicrous financial terms whilst treating hard working and decent citizens with utter derision. It is also clear that Tony Hunter, who receives a salary of £150,000+ per year plus benefits and a pension, and Robert Walsh, who is not far behind him at £120,000+ per year plus benefits and a pension, have no sense of reality beyond their ivory towers and continue to remain unaccountable for their complete failure in their respective duties and responsibilities to intervene in accordance with Council's policies and procedures and to protect the Council by ensuring that any actions carried out by their employees remain within the law and do not give rise to misconduct and/or maladministration.

It is about time that the maggots within the fabric of this Rotten Council that feed off the goodness of the Council Taxpayer in North East Lincolnshire are made responsible and consequently removed from their posts to protect not only the public purse from flagrant abuse but also the integrity of and to safeguard the Council from any further reputational risk.