The Barrow Affair (3): Auditors of leader's personal tax return got ip&e contract says standards report

On Tuesday afternoon, without fanfare or a press release, Shropshire Council published the full report into the alleged breach of conduct by Keith Barrow, leader of Shropshire Council. The report is the result of a thorough and proper investigation by Olwen Dutton of legal firm Bevan Brittan into allegations of a breach of conduct by Barrow. After the investigation, Shropshire Council’s standards board ordered that the council leader apologise for the breach and undertake training in standards. Barrow has also resigned as chairman and director of his flagship council company, ip&e.

The report by Olwen Dutton is revealing. It is not a good report for ip&e, which shows its procedures in its early days to be lax. It also shows that someone with a long experience as a councillor, such as Keith Barrow, can still be unsure when standards procedures apply. (Numbers in brackets below refer to paragraphs in Olwen Dutton’s report.)

The sorry story of Keith Barrow and ip&e’s auditors…

When ip&e was set up in 2012, the board of the company followed the normal practice of seeking an official auditor. The board meeting on 23 August 2012 decided that quotes should be requested from two unnamed companies along with DRE and Co.

DRE and Co is based in Oswestry. The company was the auditor of one of Keith Barrow’s companies until that was sold. It continues to work on his tax returns. One of its directors, Tony Matthews, is also sits on the board of Peakfast Ltd, as does Keith Barrow.

Keith Barrow suggested that DRE and Co should be considered as the auditor for ip&e. After that, he chaired a meeting at which the company was appointed.

The independent investigation found that although the council leader had proposed the company be considered, he had not tried to influence the decision on which auditor to appoint at meetings. The recommendation to appoint ip&e was made by Tom Roehricht, the newly appointed managing director of ip&e (8.4, 8.5).[1] Keith Barrow chaired the board meeting that appointed DRE and Co but, according to a statement he gave to the Shropshire Star last week, he had no influence on the final decision:

“As chairman of any committee or board it is my long standing policy not to vote or influence the outcome unless a casting vote is required from the chairman. In this case no casting vote was needed so colleagues quite properly accepted the objective recommendation of the then chief executive.”

The independent investigation by Olwen Dutton backs this up.

The investigation was triggered after a resident contacted Councillor David Tremellen (Ind. member for Highley). Cllr Tremellen lodged a formal complaint (4.6). He said:

“The public perception of a lack of transparency in the establishment of ip&e and subsequent actions by its directors is what contributes to the lack of public confidence that the affairs of Shropshire taxpayers, and the investment made on their behalf in ip&e are being effectively managed by an executive Council appearing to hide behind ‘commercial confidentiality’” (6.2).

Councillor Tremellen had wanted to ask a question on this matter at the July 2015 full council but the council’s head legal officer told a Code of Conduct complaint was the correct route for concerns about impropriety that might require investigation (6.4).

Keith Barrow accepts he did not made a declaration of his interest concerning DRE and Co at board meetings. He did mention that he knew Tony Matthews and that the company did his tax returns “in passing”. No records were kept of any declarations of interest at board meetings at that point and the item “declaration of interests” did not appear on the agendas. This apparently led to Barrow being “unsure whether to declare interests of not”. It also appears that he was not specifically trained on standards matters, or at least he has no recollection of that happening. The meetings of ip&e were also very informal, so much so that one interviewee said: “I would not describe the meetings as Board meetings given how informal they were.” Board procedures have now been tightened (4.5, 5.2, 5.6, 10.3, 10.7, 11.3).

In her conclusions, Olwen Dutton was dismissive of Keith Barrow’s claim that he did not know whether to declare an interest or not:

“I dismiss this suggestion, as it seems to me that a highly experienced member, with officers to turn to to advise in the event of doubt, should have a sufficient understanding of the way in which all public business – including that of wholly owned local authority companies – is carried out to make sure they do formally declare any interests they may have” (11.13).

Olwen Dutton writes: “Cllr Barrow was adamant that ‘any suggestion that did anything to influence the selection of DRE and Co is completely untrue’… The board were relying solely on the expertise of Tom Roehricht” (5.7). She agrees with this statement, which is backed up by other witnesses (9.2, 10.4, 10.5, 10.7, 11.7).

The verdict

Olwen Dutton concluded that Keith Barrow was “acting in the capacity of a member” of the council on the board of ip&e because he was in that position on the nomination of the council (3.1). The council’s Code of Conduct required that members behave in a way that provides “leadership and example”. She said: “In my view, senior members of the council, especially the Leader, have a particularly onus placed upon them to demonstrate these high standards” (11.2).

“Cllr Barrow told me that he wishes he had declared his interest. I can only agree. Had he declared an interest at the time, it is unlikely that this matter could have been complained about as he would have behaved entirely properly and in accordance with the code” (11.12).

“I also make the following finding that Cllr Barrow offended against the principles of Integrity, Honesty and Leadership set out in the Council’s Code of Conduct at the time by failing to formally declare his relationship with DRE and Co when they were appointed as auditors to ip&e. I find that Cllr Barrow offended the Code of Conduct by failing to formally declare his relationship with DRE and Co” (3.3-3.4).

My view

Olwyn Dutton has produced a thorough and independent report. It shows that the directors often acted in a casual manner in the early days of ip&e. The lack of formality allowed Keith Barrow to attend and speak at board meetings without declaring interests. In my view, that lack of formality lies at Barrow’s door. He was chairman and ip&e and has been until recently his baby. The lack of formality is inappropriate for a publicly owned company. I don’t think Keith Barrow can blame anyone but himself for the position he is now in.

Governance arrangements at ip&e have since been strengthened. Even so, the chair of the company will have a hard task to restore the company’s battered reputation. I have said before, the best future for ip&e is for it to transform itself the innovation arm of Shropshire Council. It should not be obsessed by profit (though of course it should not lose money). It should be reinvented as a social enterprise.

Whether Keith Barrow’s days as council leader are now numbered depends on whether his Conservative colleagues will speak out and acting. So far, they have remained silent and I can only assume they still support him.

Notes

[1]. Tom Roehricht became managing director of ip&e in October 2012 and departed just nine months later. Keith Barrow said he had been on a fixed term contract but said he “couldn’t truthfully say that [Roehricht’s departure] had always been the plan.” He said the council would be looking somewhere down the line for the “right person to take the company forward.” Tim Smith has now been seconded from Shropshire Council to run the company.

Other Barrow Affair Posts

The Barrow Affair (1): Shropshire leader forced to resign from council company after conflict of interest scandal

The Barrow Affair (2): Shropshire Council’s company ip&e needs reinventing as an innovation hub

The Barrow Affair (4): Keith Barrow resigns as council leader and councillor

The Barrow Affair (5): The curious case of a ransom strip in Morda

The Barrow Affair (6): Investigation into Barrow costs more than £12K and Shropshire Council is to pay

2 thoughts on “The Barrow Affair (3): Auditors of leader's personal tax return got ip&e contract says standards report

  1. What a grubby mess.Any self respecting councillor can surely no longer support a leader who has been found to have “offended against the principles of Intregrity,Honesty and Leadership”Just as any self respecting accountancy practice should resign.[Even if putting themselves up for re election]

  2. If DRE&Co should choose not to resign perhaps they should be referred to the Standards Committee of the Institute of Chartered Accountants.Even if Barrow failed to declare a twofold relationship DRE &Co had a duty to declare it.

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