Wi-fi’s dead — long live wifi!

The report to next week’s special cabinet meeting of Swindon Borough Council makes it clear that their venture with our money to bring wifi to the whole of Swindon is dead.

So far as the Council’s interests in Digital City is concerned, further legal and financial advice will be required in this matter following which it is suggested that the Chief Executive, in consultation with the Cabinet Member for Finance, be authorised to take such action as he considers necessary to protect and, if appropriate conclude, the Council’s interests in Digital City and ensure that the network assets deployed in Highworth are transferred in the first instance to the Council’s ownership.

Conclude the Council’s interests, i.e. dead, finished, failed. And do we get any apology for that failure? No. Far from it. In fact, reading the report you could be forgiven for thinking the project had been a success.

Despite Digital City having failed to make interest repayments since late 2010, the granting of the loan has still proved to be financially advantageous for the Council. Sums received in interest and arrangement fees total £10.5k, while investment of the sums advanced to the company would have generated £6.9k to date at the Council’s average investment rate of return.

Let’ forget, shall we, that the original proposal said that Digital City would have repaid its £450k loan from us, the tax payers of Swindon, in full within two years. Instead, lets just be grateful. for £10.5k.

In place of an apology, we get a new proposed scheme, between Swindon Borough Council, an unnamed investor “under the ultimate ownership of a Global Telecommunications Company with annual revenues in excess of $3b US.” and that company well known for successful IT projects, Capita. Capita already provides numerous services to Swindon Borough Council. The report gives no indication as to whether Swindon Borough Council would have to stump up more of our money for this deal to go ahead. It also tries to suggest that the return on this new investment will constitute a return on the investment in Digital City (UK) Ltd.

The financial return to the Council is, therefore, enhanced by its investment in Digital City and the resulting Highworth pilot and the Council will now get a return on its investment. This will equate to the loan advance of £400k plus interest by year five or earlier depending on revenue share and this financial benefit will continue to accrue in future years…. Through these arrangements with Capita, SBC has the potential to receive significant return based on sales targets being achieved over 5 years, part of which will be credited against the loan of £400k to Digital City, and accumulated interest. Current indications are that this amount is likely to be repaid over approximately 5 years.

5 years? That’s in addition to the 2 years over which the loan to Digital City (UK) Ltd was meant to be repaid. And unless this new investor is going to take over the assets and liabilities of Digital City (UK) Ltd, then to suggest that this is a repayment of the loan to that company is the most creative of creative accounting. As the report makes clear, no such takeover is envisioned.

The Council’s intention will be to secure an orderly extraction of our interests from Digital City, with its assets being transferred to SBC to ensure that the Highworth infrastructure is kept intact. To ensure this happens, it is suggested that the Chief Executive be authorised, in consultation with the Cabinet Member for Finance, to take such action as he considers necessary to protect and, if appropriate, conclude the Council’s interests in Digital City and ensure that the network assets deployed in Highworth are transferred in the first instance to the Council’s ownership.

So effectively, Swindon Borough Council will exercise its rights under the loan agreement with Digital City (UK) Ltd and take over the company’s network assets. It will then enter a new venture with Capita and an unnamed company. On that basis, the new venture will owe nothing from the first, despite what the report may try to suggest.

The report to Swindon Borough Council’s cabinet is written my Mr Hitesh Patel. Mr Patel is an ex-director of Digital City (UK) Ltd. Mr Patel was also an author of the original recommendation to councillors to invest in Digital City (UK) Ltd. Perhaps, then, it’s unsurprising that he writes about that investment in such glowing terms. But given how poor his advice was the first time around, and that he didn’t know he was already a director of the company he was recommending an investment in, would anyone with any sense really trust his advice again? But then, would anyone with sense have made the first investment? Answers to that on a no-questions-asked cheque for £450k please.

Wi-fi — whose approach was it?

Throughout the entirety of Swindon’s wifi fiasco, Mr Bluh has been adamant that no tendering exercise was necessary nor appropriate, because it was not the council’s proposition, it was a proposal put to them by Mr Hunt. In the council chamber Mr Bluh has repeatedly been very clear, Mr Hunt approached the council, not the other way round. As long ago as December 2009 Mr Bluh said

[I]t is only recently we have been approached by Digital City UK who had a technical partnership with aQovia. They came to us because they wanted to set up services to sell in Swindon and we invested in them, so we have not disadvantaged any other businesses in Swindon.

Now Mr Hunt has given a version of events that differs somewhat. If Mr Hunt is to be believed, it was the council leadership that approached him.

What people do not appreciate is that I was talking for a long time about the concept, and the executive of the council approached me. We all looked at the risks and rewards and decided it was worth doing.

Given their track records — and that Mr Hunt believes his wifi proposal “was a good idea and it still is” — it’s impossible to guess whether Mr Hunt has had a lapse of memory, or Mr Bluh was lying. Of course, if the decision to fund this project had been done in a more open way, we wouldn’t be left to guess. But despite all the questions asked, Mr Bluh and colleagues continue to maintain excessive secrecy about the project, and honesty is in short supply.

Bluh’s wifi hindsight was others’ foresight

It seems that the current leadership of Swindon Borough Council are going through a rather ‘retro’ phase at the moment, claiming for themselves as original thoughts ideas put forward by others years ago. First there was Mr Perkins who claimed that creating a park on derelict town centre sites await redevelopment was his idea, whereas local residents suggested it in April 2008. Now it seems that Mr Bluh wants to get in on the act too.

Now, whilst it’s always refreshing — and all too rare — when a politician admits they got things wrong, Mr Bluh has a particularly unrefreshing way of admitting his errors. In fact he does so in a way that suggests he doesn’t accept he’s failed in any way at all. As long ago as December 2009 local residents — some that were members of his own political party — were pointing out how risky his decision to invest almost £½M of our money in a wi-fi start-up company was. A company lead by someone with no track record in the industry; a company where directors seemed not to know they were directors, and a company where the directors that did realise they were directors didn’t understand what their responsibilities are. So for Mr Bluh to now say,

We did all the due diligence but perhaps in hindsight we should have looked at the risk factors a bit harder.

is little better than an admission of total economic blindness. For Mr Bluh to only recognise with hindsight what others with just a little foresight have been telling him for almost two years is, though welcome, inadequate. And at the risk of stating the obvious, if they didn’t look at the risk factors hard enough, then they clearly didn’t do all the due diligence, only some of it.

We were prepared to take the risk and we felt it was a managed risk at the time and, with hindsight, perhaps it wasn’t the best risk.

Even if it were managed at the time — which is disputable — the council then chose to relax that management, disregarding concerns that were raised. Again, there’s no hindsight required here, all the evidence was available at the time, and pointed out repeatedly to Mr Bluh, but he wilfully chose to ignore it. Until he shows some signs of admitting that this isn’t just a matter of hindsight, but something he should have and easily could have avoided, there’s no reason to believe Mr Bluh won’t be squandering our money yet again.

Digital City (UK) Ltd, R.I.P.

Hard on the news that John Richard ‘Rikki’ Hunt has filed for bankruptcy, comes the news that Digital City (UK) Ltd is now in the process of being struck off the register of companies. So that’s £½M of Swindon taxpayers’ money gone, despite the assurances of the Messrs Bluh and Perkins that the equipment installed by the company and the use that could be made of that was worth more than the loan to them from Swindon Borough Council, that it was a no-lose proposition. How a patchy wireless internet service for Highworth, and nowhere other than Highworth, could be worth £½M is hard to see, but that is all we got for the money our councillors squandered on our behalf on this project.

Lest we forget, here are a few things said about this failed adventure with our money by Mr Bluh in December 2009.

This is a commercial decision, in the new world in which we all live more and more commercial decisions will be made. An opportunity was put to us, and we were asked if we wanted to invest…. This is a commercial venture that will bring commercial return. The only affects on capital budgets will be if this loan does not get repaid in full…. To get a reasonable level of council tax and to go forward we have been required to find savings and efficiencies. We are doing everything that is humanly possible to keep this ship afloat.

The ship was holed below the waterline before Mr Bluh squandered our money on it, and is now sinking rapidly to the bottom of the ocean. There were many that brought this to the attention of our arrogant council leadership at the time. They wilfully chose not to listen. Now it will be us, the council taxpayers, rather than those councillors personally, that will be paying for their financial stupidity.

The fall and fall of Rikki Hunt

Once upon a time, not so long ago, the likes of Mr Bluh and Mr Perkins were fond of telling the people of Swindon what a great person they thought Mr John Richard ‘Rikki’ Hunt was. How they thought he was a great person to be leading a company to which they had loaned almost £½M of Swindon taxpayers’ money because, in their view, he was a very experienced business man from which Swindon would benefit.

Of course not all experience is equal. Eddie ‘The Eagle’ Edwards had much experience of ski-jumping… and of coming last. Mr Hunt has now managed the same feat as a business man, going bankrupt to the tune of over £1M, including over £400,000 to the tax-man. As he filed for bankruptcy on 8 March this year, it also puts some perspective on his apparent generosity in ‘gifting’ to Swindon Borough Council his stake in the failed wi-fi company for which he had convinced the aforementioned gullible councillors to part with our money. It would have been no financial loss to him, only to his creditors.

Mr Hunt’s involvement with wifi company Digital City (UK) Ltd was via a consultancy company he set up for that purpose, Avidity Consulting Ltd. That company is now in the process of being struck off the register of companies. How much Avidity received from Digital City — and so indirectly from Swindon taxpayers — for its consultancy services has never been revealed. Also of note, before anyone is overcome with sympathy for Mr Hunt’s predicament, is that his wife, Laura Hunt, is not bankrupt, remaining a company director. For the Hunts, Rikki’s bankruptcy may be little more than a minor business inconvenience, rather than a case of serious financial hardship.

Rikki Hunt cuts and runs

In a move that will come as no surprise to those that have studied Mr John Richard ‘Rikki’ Hunt’s business history, he’s now done a runner from Digital City (UK) Ltd — the wifi network company he set-up — leaving behind almost £½M of overdue debt to Swindon Borough Council. It’s not the first time he’s abandoned a company having lead it to financial disaster, as local football fans know only too well.

As ever on matters related to this shoddy deal, Mr Perkins is on hand, trying to make things sound better than they really are. As usual, most of what Mr Perkins has to say is deceptive. If you’re looking for an honest analysis of the situation, Mr Perkins is not the person to turn to.

He had a lot of problems to overcome which he didn’t appreciate you’d have when involved with the public sector.

Don’t forget — as Mr Perkins seems to have done — that Mr Hunt is very familiar with working with Swindon Borough Council, having been a director of both The New Swindon Company and Swindon Commercial Services.

It’s very difficult for a partnership to go forward when you’re dealing with public money and scrutiny, which quite rightly, there should be.

It seems Mr Perkins has forgotten all the abuse and spite he has vented in the council chamber at anyone daring to question this deal over the last eighteen months.

We’ve learned a lot from this, and I’m sure Rikki Hunt has as well.

I’m sure Mr Hunt has learned a lot… such as how easy it is to get gullible councillors like Mr Perkins to part with taxpayers money, then walk away after eighteen months leaving others to clear up the debts.

With Swindon Borough Council now bunging £610,000 in the direction of its Recreation Centre to right off debts, Highworth will have been the lucky recipient of over £1M of Swindon taxpayers’ money. You could be forgiven for thinking that the local blue nest put keeping their rural voters happy above dealing with the council’s dire financial position. To quote Mr Bluh in the latest edition of Swindon News:

Boiled down, if we are to have a hope of balancing our books, we have two challenges ahead of us. The first is to become as efficient as possible in the way we operate. The second, perhaps more controversially, is to reduce what we currently do.

At the moment, they appear to be doing neither.

Offline

Just as I was writing that Digital City (UK) Ltd had been lead to failure, it was drawn to my attention that their website has gone offline, replaced by a standard domain parking page. An internet service provider without an internet presence is clearly not one that’s going to get far.

Bailing out before a bail out

It is normal practice in any private sector company for the executive to have shares either in that company or, is a subsidiary of some larger organisation, in the parent company. For companies traded on a stock market it is often mandatory for the directors to own shares in their company. That way it ensures that their own well-being is most likely to be guaranteed by them ensuring the well-being of their fellow shareholders. A director without shares in their company — according to the accepted logic — is more likely to perform acts of reckless self-interest that damages the company that employs them.

So when Mr John Richard ‘Rikki’ Hunt claims he is going to ‘gift’ his 30% stake in his failing wifi company Digital City (UK) Ltd to Swindon Borough Council, should that be seen as an act of generosity? No. Given that the company has been unable to keep up its loan repayments to the council, and that it has failed almost every target it has set itself, its debatable whether those shares are worth anything anyway. And now Mr Hunt wishes to remain chief executive of the company he’s lead to failure, yet without the financial incentive almost every other company deems essential to ensure a chief executive does their best for the shareholders. That would seem to be a recipe for financial disaster, though Mr Hunt seems to already have achieved that in a fairly comprehensive manner.

Mr Hunt claims that his company was damaged by public criticism.

There has been a lot of effect on the business with the public noise and debates that have gone on… the kind that is politically damaging to us and the aggression towards the project.

Is political discussion really a surprise when he went looking for funding from politicians? And lets be clear, there has been no ‘aggression’ towards ‘the project’, only to the secretive way in which the decision was made to pour the money of Swindon taxpayers into a company that on the evidence available to those taxpayers at the time had no track record in its industry, no credible plans, and no understanding of the market it was entering. The criticisms remain valid, and the taxpayers of Swindon are currently £½M poorer as a result.

The responsibilities of a director

When Mr Perkins was appointed as a director of Digital City (UK) Ltd last year, I was told by Mr Bluh that he was selected to represent Swindon Borough Council on the company’s board because of his skill and experience in business. The company of which Mr Perkins is a director has failed to make payments on its loan from the council… and that failure pre-dated by a month Mr Perkins claiming that payments were still being made. According to Mr Perkins, that’s all fine and dandy.

I was asked in December whether it was up to date with its payments, and I said yes — because that’s what I had been told. When I made that statement it was correct, based on the information I had at the time.

Perhaps it’s time that Mr Perkins reminded himself of his obligations under the Companies Act 2006.

(1) A director of a company must exercise reasonable care, skill and diligence.
(2) This means the care, skill and diligence that would be exercised by a reasonably diligent person with—
(a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company, and
(b) the general knowledge, skill and experience that the director has.

At the moment, Mr Perkins’s diligence in checking his facts before making public statements about Digital City (UK) Ltd appears to be falling far short of reasonable expectations.

It’s as though I’d never been away…

Sometimes, returning from a long absence is like awakening from a hibernation: everything is new and fresh. A new beginning. But then there’s times like now when it seems that nothing’s changed.

So what’s not new? Fanciful predictions that the old College building will soon be demolished continue to be peddled by our less-able councillors. Now — as last summer — Mr John Richard ‘Rikki’ Hunt, is begging for money for his tin-pot wifi company that’s taken almost £½M of our money and delivered virtually nothing in return, failing on its commitments whilst it does so.

And the unifying feature of it all? Mr Perkins spouting unadulterated rubbish. For example, Mr Perkins on the old College site:

We’ve been in discussions with the developer for the last few weeks. If that goes through, we’ll start removing the college from Swindon. Hopefully it’ll be going ahead by April.

Would that be April 2012? As the rather more rational Mr Bawden notes, we’ve heard this all before… many times.

We were talking about it when I stepped down. Now five years later, we’re still talking about it! It’s no good saying: it’s all the economy. Until two or three years ago, the economy was going like a rocket…. I get more and more frustrated walking around the town centre, I feel we just don’t really know what to do with it.

Quite. But hey, we’ll soon have yet another person at the council’s expense — over £45,000 of expense — puffing out a smoke screen about grand plans for nothing much in the town centre, when Forward Swindon appoints a new Head of Communications and Marketing.

Mr Perkins on wifi is no more logical, despite his alleged business acumen.

No business in its first year is completely trouble free and most of Highworth is still operating and the technical problems are mostly sorted out.

Given that Digital City (UK) Ltd originally claimed that their wifi in Highworth would be fully functional by 15 January… last year, even someone as politically warped as Mr Perkins should be able to see that’s as shining an example of failure as one could ever hope to see. They may brand themselves as ‘Get Signal’, but in Swindon getting Digital City (UK) Ltd’s signal is one thing you’re guaranteed not to do.

However, things don’t always go as you plan in business, particularly when you are dealing with something that is innovative.

As many have noted — but Mr Perkins and his colleagues choose to ignore — there’s nothing innovative about wifi. Seemingly the only thing innovative about this project has been the company’s ability to pull the wool over the eyes of the likes of Mr Perkins and walk away with £½M of our money whilst delivering almost nothing in return.

Mr Perkins also flatters himself when inviting people to talk with him.

I wish people would come and talk to us if they have a problem, but it has to be in a positive way. Going through reports to find things that are not 100 per cent right is not helpful — business doesn’t operate like that.

As anyone who has seen Mr Perkins in the council chamber will know, taking a positive approach with him is not something he rewards. Mr Perkins in the council chamber has just one mode of operation, a loud-mouthed, bad tempered yob, shouting down anyone he disagrees with, spitting with fury and hatred.

Swindon Borough Council has repeatedly waived the conditions it applied to its loan to Digital City (UK) Ltd. If Mr Perkins isn’t happy with the council being legitimately held to account over how it’s spent our money, then he really shouldn’t be a councillor.

When is a wifi investment not an investment?

We have been told repeatedly by Mr Bluh that Swindon Borough Council’s decision to give Digital City a loan of almost £½M of our money was an ‘investment decision’. Indeed, the powers under which the decision was made with the involvement of most of the council’s cabinet were delegated powers for investment decisions. So it is rather surprising that the council has recently provided the following response to a Freedom of Information request.

Council officers were not asked to investigate possible investment into Digital City (UK) Limited. Officers were only asked to consider the provision of a loan.

So if in the council’s now stated view this was not an investment, how legally could the decision to make the loan have been made under delegated powers applying only to investment decisions?

Unaudited

After last night’s disgraceful performance by Swindon Borough Council’s Scrutiny Committee — when the wifi deal was approved based on a report circulated to committee members before he weekend but kept secret from the public — it is no surprise that the Audit Committee meeting tonight was equally weak. Illustrating the worthlessness of the tawdry deal between Mr Bluh and Mr Montaut, the representative of the Audit Commission present at tonight’s meeting made clear that regardless of whether the council invited the Commission to investigate, the Commission itself would decide for itself whether it would do so.

With the arrogance that we have now come to expect from Mr Bluh, he dismissed concerns raised by Mr Martin and Mr Moffatt that the security obtain by the council for the loan was woefully inadequate. Mr Bluh may believe that the installed network — however little of that there might be — would be worth more than £450,000, but as noted later by the council’s own Director of Finance “It is early days and I wouldn’t want to put a value on it.”

Unfortunately for Swindon taxpayers, Mr Bluh seems to believe that he knows better than his professional council officer advisers. He behaves like an elected mayor in what is meant to be a cabinet run council, trusting that cabinet so little that he overruled the advice of the Borough Solicitor that there was a better way to make the decision on the wifi deal, simply to avoid telling most cabinet members about it.

During tonight’s Audit Committee meeting Mr Martin noted that if the council was intent on doing similar deals in future, it needed to ensure that it has officers as capable and “as sophisticated as those we do business with” to ensure the deals adequately protect the council’s interests. In his view, the deal done with the other partners in Digital City (UK) Ltd gives no assurance that the council will ever see its share of any profits there might be: the other partners could easily consume any profits in salaries and charges and the council — having only a minority stake in the company — would be unable to stop that.

But capable and sophisticated council officers are of no value if they are ignored. For as long as arrogant people like Mr Bluh are in charge, Swindon taxpayers’ money will continue to be put at what many perceive to be undue risk.

A letter to the Audit Commission

Forget disreputable deals between Mr Bluh and Mr Montaut on referring Swindon Borough Council’s wifi deal to the District Auditor, this is what the auditor should be examining. The letter below was submitted to the Audit Commission in February.

Transactions between Swindon Borough Council and Digital City UK Ltd.

Background

Swindon Borough Council has provided a loan of £450,000 on commercial terms to Digital City UK Ltd (registered no. 06990831). In return for that loan it has received a 40% equity stake in the company. If the loan is repaid within 2 years, Avidity Consulting Ltd (registered no. 06990825) has an option to purchase 5% of the company’s shares from the council for £1. Avidity Consulting already has a 25% stake in the company. The other shareholder is aQovia UK Limited (registered no. 06846037), which holds the remaining 35% of the company. Digital City UK Ltd is intending to install wireless internet across the entirety of the borough of Swindon.

The decision to make the loan was made by three council officers with the approval of two councillors who are members of Swindon Borough Council’s cabinet.

I have a number of concerns in relation to this undertaking.

1) Both Digital City UK Ltd and Avidity Consulting Ltd were incorporated on 14 August 2009 as ‘off-the-shelf’ companies. They became active on 22 September 2009 and 21 September 2009 respectively. They thus have negligible track record. aQovia UK Limited was incorporated on 13 March 2009, appears to have become active on 16 September 2009 and thus also has limited track record.

In these circumstances, considering the lack of history, trading records and accounts for Digital City UK Ltd, Avidity Consulting Ltd and aQovia UK Ltd, I would expect Swindon Borough Council’s due diligence to pay particular attention to the plans of Digital City UK Ltd. Much of the information in relation to this has been withheld by the council on grounds of commercial confidentiality. However, in a Cabinet Member Briefing Note to Councillor Mark Edwards (Cabinet Member for Finance and Benefits) and Councillor Roderick Bluh (Leader of the Council and Chair of the cabinet), dated 12 October 2009, that was made available to Swindon Borough Council’s Scrutiny Committee meeting of 14 December 2009, it is stated that:

“The success of the company, particularly in the early stages, and consequently the potential for Swindon Borough Council to achieve a return from its shareholding will depend to a large extent on the success of the marketing campaign. A formal marketing plan has not yet been developed, but a Brand Consultant and Marketing Specialist have been informally assisting the project and will be formally engaged once the company is live.”

It thus appears that at the time the decision to invest £450,000 was made, the plans of Digital City UK Ltd were not yet well formed. Furthermore, the response by the council in relation to diligence (in the minutes and annex to the minutes of that Scrutiny Committee meeting), appear in tone, in my view, to be dismissive rather than suitably detailed.

2) The Managing Director of Digital City UK Ltd is Mr John Richard Hunt (commonly known as Rikki Hunt). He is also owner of Avidity Consulting Ltd which is providing consultancy services to Digital City UK Ltd, and a non-executive director of Swindon Commercial Services Ltd (registered no. 06969563) which is Swindon Borough Council’s direct services company and the main contractor to Digital City UK Ltd for installation and maintenance of its wireless network.

Mr Hunt is also Chair of Swindon Strategic Economic Partnership (SSEP), which is charged with implementing some of the council’s social inclusion objectives under the Swindon Local Area Agreement, including the Swindon Digital Challenge proposal, and a non-executive director of The New Swindon Company Ltd (registered no. 04509901) of which Swindon Borough Council is a major funder, and a board member of the Swindon Partnership which is tasked with producing the Swindon Local Area Agreement.

By virtue of his close association with Swindon Borough Council and in particular the SSEP, Mr Hunt may have been in receipt of privileged information in relation to the council’s and SSEP’s plans for widening access to the internet. As a consequence of this it is possible that a conflict of interest could occur in his company’s approach to the council. Under Section 175 of the Companies Act 2006, a director has a duty to ensure that they avoid a situation in which they have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. In light of that Act and of the sixth of the Seven Principles of Public Life, I would expect, given Mr Hunt’s close connection with Swindon Borough Council that, as part of its due diligence, the council would ensure that no such conflict had occurred. However, the information made available to the public by the council provides insufficient evidence that this assurance was obtained.

3) Mr Hitesh Kumar Patel was appointed director of Digital City (UK) Ltd on 26 September 2009. Mr Patel is also Group Director Business Transformation and in that capacity one of the authors of the Cabinet Member Briefing Note to Councillors Edwards and Bluh, dated 12 October 2009 and mentioned in (1) above, that recommended providing the loan of £450,000 to Digital City (UK) Ltd. There is no mention of this directorship in the briefing note, nor in any of the other information presented to Swindon Borough Council’s Scrutiny Committee meeting of 14 December 2009. As Mr Patel’s directorship pre-dates his advice to Councillors Mark Edwards and Roderick Bluh, in the absence of further information to the contrary this would appear to present a conflict of interest which, under the Seven Principles of Public Life, Mr Patel had a duty to disclose.

4) It has been repeatedly stated publicly by the council leader, Roderick Bluh, in comments reported in the local press that this was a delegated ‘investment’ decision, and this is also mentioned in the Cabinet Member Briefing Note shown to the Swindon Borough Council Scrutiny Committee. Mr Hitesh Patel has also stated that the decision to provide the loan was made by the Director of Finance (Mr McKellar), the Director of Law and Democratic Services (Mr Taylor) and himself, the Group Director Business Transformation.

The delegated authority for such a decision originates from resolution (5) at Minute 28 of the Cabinet meeting of 23 July 2008, subsequently ratified by full Council on 13 November 2008.

“That the Treasury Management performance for 2007/08, be noted, and the Council be recommended to approve the proposed change to the Annual Investment Strategy, as detailed in paragraph 2.6.7 of the joint report (In respect of joint venture arrangements, to permit the Director of Finance and the Director of Law and Democratic Services, in consultation with the Cabinet Member for Resources, to invest in such schemes provided that the overall terms of the arrangement are suitably advantageous for the Council, subject to the Soft Loan Accounting requirements contained in the 2007 Statement Of Recommended Practice.).”

with paragraph 2.6.7 of the ‘joint report’ being

“In order to pursue its regeneration objectives, the Council is planning to enter into a series of joint venture arrangements with private sector partners. There may be circumstances in which it is advantageous in financial and risk terms for the Council to consider acting as banker for a scheme, subject to the terms and exposure being acceptable. In this context, it is proposed that the annual investment strategy is amended to permit the Directors of Finance and Law and Democratic Services, in consultation with the Cabinet Member for Resources, to invest in such schemes provided that the overall terms of the arrangement are suitably advantageous for the Council, subject to the Soft Loan accounting requirements contained in the 2007 Statement Of Recommended Practice.”

Whilst the decision may have been within the letter of this resolution, it does not appear to have been within its spirit. The decision was not made in pursuit of regeneration objectives, but, according to the Cabinet Member Briefing Note, primarily in support of social inclusion and sustainability objectives. Also, the decision was not made as a consequence of a decision by the full council or cabinet to implement town-wide wireless internet access, but as a result of the company approaching the council seeking investment.

5) If this decision were not within the scope of investment decision described in (4), the council’s constitution does permit delegated decision by individual cabinet members in certain circumstances. That delegated authority is specified on page 5 of the constitution:

“To speed-up decision making and to allow the Cabinet to concentrate on major matters, Cabinet Members have the delegated power to make day-to-day decisions in relation to the areas within their portfolio.”

Given that the decision to loan £450,000 and take a 40% share in Digital City UK Ltd for the purpose of it providing boroughwide wireless internet was announced with a press release on 16 November, and the launch of the service in Highworth was by a member of the parliamentary opposition’s shadow cabinet and accompanied by further press coverage, it seems to me that this decision is firmly in the class of ‘major matters’ for which the delegation described on page 5 of Swindon Borough Council’s constitution should not occur.

6) Swindon Borough Council is allowing Digital City (UK) Ltd to send and receive commercial and private internet traffic via its own Local Authority access point(s) to the internet. I am concerned that this may have serious implications under the Government Code of Connections (’CoCo‘), and that Swindon Borough Council may be inappropriately subcontracting or reselling internet service supplied to local authorities.

Whilst none of these issues individually may be cause for great concern, taken together I believe they are sufficient to warrant further investigation. Given the complicated nature of company law I would like the audit commission to examine the commercial relationships mentioned above and clarify whether they are appropriate and represent acceptable and best use of public money.

A shameful failure of scrutiny

A deal has been done between Mr Bluh and Mr Montaut, apparently in an attempt to suppress further scrutiny of Swindon Borough Council’s dealings with Digital City (UK) Ltd.

I have reached an agreement with the Labour Group Leader that as and when the wi-fi project, which is fully supported by both the Conservative and Labour Groups, has been finally cleared by the Scrutiny and Audit Committees then in the interests of allowing the wi-fi project to move forward without further damaging publicity, without incurring additional costs to the taxpayer and to stop the enormous amount of officer time being spent on this issue to date, I will ask the external auditor to confirm the findings of the internal audit report and also to confirm that due process has been followed throughout. It is time to allow this fantastic, innovative opportunity to get properly underway to deliver for Swindon.

There’s nothing fantastic about squandering local taxpayers’ money, Mr Bluh; nor in being so careless in the deal that much of what councillors and council officers have said on the matter has turned out to be untrue; nor in investing in a project so laxly run that even though it was eight months behind schedule and had to ask for its loan conditions to be relaxed, the company board had not met. And just how arrogant it is of Mr Bluh to think the District Auditor needs his permission to investigate. As I noted a couple of days ago, the District Auditor has already been asked to investigate the wifi deal.

What has this acheived for Mr Montaut? Nothing, just an external enquiry that would have happened anyway.

I have been calling for an external enquiry for months now, because this council needs to focus on the things that matter to all Swindoners, like getting value for money for our council tax payers and ensuring that our public services are working to suit the needs of our townspeople. With the external auditors now investigating the Conservative administration’s wi-fi deal, I believe the council can do this.

That sounds to me like Mr Montaut, the chair of the Swindon Borough Council’s Scrutiny Committee, wants to abandon scrutiny of this deal.

The role of the chair of a council’s scrutiny committee is to hold the council administration to account. To shirk that responsibility through worthless back-room deals like this is a shameful failure.

Narrow support

I’m sure that Mr Bluh will claim that the uncritical report by Swindon Borough Council’s internal auditor is an unadulterated vindication of the way the council has spent almost £½M of our money on a loan to Digital City (UK) Ltd for wireless internet. I’m equally sure that Mr Bluh will claim that the absence of any investigation yet by the District Auditor shows that he has no concerns either. However, as Mr Bluh likes to tell us, ‘language is important’, so let’s look at exactly what the council’s internal audit report into wifi says.

The remit of the internal auditor’s report is quite narrow. It addresses six specific issues set by the chair of the council’s audit committee, Mr Dickinson.

• The arrangements regarding the security of the Council’s investment including assessment of credit worthiness of Digital City (UK) Ltd.
• Whether the Council has complied with its own Treasury Management policy and the best practice set out by CIPFA.
• What profit-sharing arrangements are in place.
• Whether EU directives have been breached in particular Article 87.
• Whether value for money can be demonstrated.
• What, if any, lessons can be learned for the future.

That means there are some significant omissions, as noted in the report.

Since the commencement of the investigation a number of further concerns have been raised in two letters and an e-mail addressed to the Council’s External Auditors…. At the meeting on 15th March 2010, the Council’s Scrutiny Committee raised concerns regarding the possible conflict in interests of the Group Director: Business Transformation who was listed as a Director of Digital (UK) Ltd and the author of the Cabinet report requesting release of the second phase of the loan…. The internal audit investigation has not covered the additional areas of concern mentioned in the correspondence to the External Auditor, or the issues raised at Scrutiny.

The scope also specifically excluded ‘whether due process has been followed as this has already been examined by the Scrutiny Committee who confirmed that it had.’ The report is also unusual in that it includes a disclaimer.

This investigation focussed on the areas agreed in the terms of reference for the investigation only. It did not include a full internal audit of all Council systems mentioned in the areas of concern nor did it include a full review of the adequacy, or robustness, of the documents listed in Appendix 3. Any recommendations relating to Council policy and procedure generally which arise from the findings of this review will be addressed in a separate internal audit report.

Clearly, there’s far more that could have been investigated, but wasn’t. And not only is it not a full audit, but any recommendations that have resulted from it are to be hidden away in a separate later report which Mr Bluh will no doubt hope appears after the present furore has passed.

Let’s also look at what the District Auditor has said.

The External Auditor (Martin Robinson — District Auditor) has confirmed to the Chief Executive that there is nothing contained in the correspondence that requires investigation by him at this stage.

That doesn’t mean he will not investigate. Indeed, correspondence from the District Auditor that komadori has seen indicates that he might.

You will be aware that the council’s Internal Auditors are currently reviewing various aspects of this issue. I am awaiting the outcomes of their review before giving the matter my own consideration as a prelude to deciding whether there are any aspects of it that I would wish to pursue any further…. I therefore hope to be able to respond more fully to the issues raised… by mid-May.

The scrutiny of Swindon Borough Council’s wi-fi deal is not yet over. Far from having a clean bill of health, it remains under close clinical supervision.

Deferred

At a tempestuous meeting this evening of Swindon Borough Council’s Scrutiny Committee — which at one point became a Tomlinson versus Tomlinson debate — it was agreed to defer a decision on the council’s loan to wi-fi company Digital City (UK) Ltd to the next meeting of the committee.

The committee agreed to a proposal by Mr Tomlinson (with amendments from Mr Moffatt) to defer a decision, pending clarification as to just who are the directors of Digital City (UK) Ltd — because Companies House records still show the only director as Rikki Hunt — and an investigation as to the providence of the investments in Digital City (UK) Ltd — because Companies House records show one of the shareholders to be Isle of Man registered aQovia Limited rather than UK registered aQovia UK Ltd. The main (90%) shareholder in aQovia Limited being Sara Kilduff whose main business is, apparently, a ‘virtual PA’.

The meeting also added to the catalogue of what in Mr Bluh’s view are ‘minor errors’; namely that entering an Isle of Man company — with full address — as a shareholder of Digital City (UK) Ltd rather than a UK one was just a matter of missing out the ‘UK’. Quite how this can be viewed as minor when the shareholder agreement underpinning the loan is with aQovia UK Ltd rather than the registered shareholder is something only Mr Bluh seems to ‘understand’. We were also asked to believe that not knowing who the registered directors are does not matter because the company has not made any ‘strategic decisions’. Seemingly, being eight months behind the original project plan and asking for variation of loan conditions are not strategic decisions.

Quite why Mr Bluh still has confidence in this ‘partnership’ is a mystery, especially as every time the company that constitutes the partnership makes a mistake, Mr Bluh refutes all responsibility. Why he expects any member of the public to have confidence in it is an even greater mystery.

Language is important

That was Mr Bluh’s oft repeated refrain to Mr Montaut during the debate at last night’s special meeting of Swindon Borough Council’s cabinet. But rather than using the phrase ‘language is important’ to attack Mr Montaut, Mr Bluh should reflect on how the meaning of language has been distorted in the record of the council’s actions relating to the wifi deal. There were many new meanings that we learnt for simple phrases at the council meeting last night.

• When in a report presented to the meeting it said “The delay in having a fully operational ‘back-office’ customer care and billing operation has hindered opportunities to sell.” it actually meant the back-office software was ready, but the company never intended to start selling before it did.
• Where Mr Patel wrote on his LinkedIn profile “Board Director Digital City (UK) Ltd” he actually meant “SBC observer on Board of Digital City”.
• When Mr Jones, the council’s chief executive, wrote in a letter to Ms Snelgrove on 26 January “we have a director on the board” what he actually meant was “we have a director position on the board but have not filled it yet”.
• By analogy, where in the appendix to the minutes of the 14 December 2009 meeting of the Scrutiny Committee it states “The Council has one Director representing its interests on the Digital City Board.” it also meant “we don’t yet have a director on the board”.
• When Mr Bluh said to the Special Committee at its 25 March meeting “This is a loan repayable with interest at above commercial rate” what he should have said was “This is a loan repayable at a commercial rate”.

With a record like that of saying one thing but meaning another, it’s little wonder that the scrutiny of this deal continues.

More scrutiny to come

Recently, Mr Buckland offered some sound advice to his colleagues on Swindon Borough Council.

The failure by a Council official to declare that he was in fact a Director of the operating company is an example either of incompetence or of something worse.
I blogged recently that I was sure that the lack of openness was not the result of deliberate subterfuge. I still hope that I am right. My advice to those involved is to come clean about everything now. As well as a demonstration of transparency, it may well be the best thing to do in order to secure the future of the project, which I hope will be a success.

It’s advice that Mr Bluh seems very reluctant to accept. In his view, there’s nothing more he needs to tell us about how the council is spending almost £½M of our money on a venture described in parliament as having ‘a detrimental effect on small and medium-sized IT companies in Swindon’.

This deal has been subjected to the most enormous scrutiny in the past months and has passed all those tests.

Err… has Mr Bluh forgotten that his latest attempt to throw our money at the wi-fi project didn’t pass through the last meeting of the council’s Scrutiny Committee? Just what aspect of ‘failed’ is it that Mr Bluh interprets as meaning ‘passed’?

It also seems not to have occurred to Mr Bluh that it has ‘passed’ some of those scrutiny tests only because very limited information was made available. It is for that reason that it has been referred back to the council’s cabinet, where additional information will be presented next Wednesday. It is unfortunately that the claims of Mr Patel that he did not know he was a director of Digital City (UK) Ltd seem inconsistent with the letter sent by the council’s chief executive, Mr Jones, to Ms Snelgrove on 28 January stating

we have a Director on the Board.

It’s difficult to know who, if anyone, involved in this at the council can be believed.

However, from later this week there will be a new Swindon Borough Council representative on the board of Digital City (UK) Ltd. It is proposed that Mr Perkins become a director of the company. Quite what the relevance of his cabinet responsibility for “children’s services” has towards the alleged social inclusion objectives of the wifi project is less clear. Perhaps the more relevant Mr Mattock is out of favour… or has less favours owed to him.

In a recent pep-talk to his party members the blue nest’s Mr Pickles said

We have seen what can be done as a council, and now it is time for our extremely good candidates to get into place and bring some honesty, decency and straightforwardness into government.

We have indeed seen what can be done as a council, and recently it’s not been pretty. If they’re to stand any chance of getting into national government they’ll first need to bring some honesty, decency and straightforwardness to local government.

If Mr Bluh wishes the scrutiny to stop, he first needs to ensure that the very serious concerns about the way he spends our money are answered, and answered honestly.

Anne Snelgrove’s wifi speech

An advanced draft of Ms Snelgrove’s speech on wifi in Swindon is now available. If you didn’t catch the adjournment debate, it’s well worth a read.

Update, 19:40, Tuesday 23 March 2010: You can now watch the recorded debate on the BBC website and read the official record of the debate from Hansard.

Key lines of enquiry

Before he was interrupted by the borough solicitor at the meeting of Swindon Borough Council cabinet just over a week ago, Mr Bluh tried to say — though it’s not made it into the minutes of the meeting — that the only thing that external auditors were looking at in relation to the council’s wi-fi deal was ‘value for money’ and that they were not investigating any issues of process. What it does record of in the minutes of the meeting is Mr Bluh’s view of what is important in this issue.

He did not believe it was necessary to await the outcome of the Audit Committee review that was to look at the best value aspect of the loan agreement for the project.

Let’s look at the Audit Commission’s ‘key lines of enquiry’ when considering value for money.

The use of resources assessment considers how well organisations are managing and using their resources to deliver value for money and better and sustainable outcomes for local people. The assessment comprises three themes that focus on:

• sound and strategic financial management;
• strategic commissioning and good governance; and
• the management of natural resources, assets and people.

Sound financial management and good governance: I’d certainly welcome a thorough examination of those for this wifi deal. Perhaps we could start with an in-depth examination of the governance process and how a director of Swindon Borough Council came to be a director of a company before giving advice to Mr Bluh that the council should invest in that company.

Another noticeable omission from the meeting minutes is Mr Patel’s denial that he was a director of Digital City (UK) Ltd. What it does say is that an appointment to the company’s board will be made, but says nothing about the situation at that time.

The Cabinet were advised that under the loan arrangements, the Group Director, Business Transformation would represent the Council at meetings of the Board of Digital City (UK) Limited and that he received no remuneration from the company. It was confirmed that the Special Committee was likely to be asked to make an appointment to serve on the Board in the near future.

Meeting minutes have rarely been so misleading.