Details of long-running Arch saga in Northumberland laid bare at tribunal

The leader of Northumberland County Council has said he’s ‘at a loss’ as to why concerns about Arch ‘haven’t been taken more seriously’ by police.

By Ben O'Connell
Saturday, 30 March, 2019, 10:00
Northumberland County Council's leader, Peter Jackson, and chief executive, Daljit Lally.

Coun Peter Jackson’s comments came during an employment tribunal in which the now-replaced, council-owned company’s former finance director is claiming unfair dismissal.

Paul Czerepok says that his sacking for gross misconduct, following suspension and an investigation in the wake of the Conservatives taking over at County Hall in May 2017, was ‘politically motivated’. Coun Jackson and the local authority’s chief executive, Daljit Lally, are named respondents in the case too.

Paul Czerepok, the former director of finance at Arch.

During Coun Jackson’s evidence yesterday (Friday, March 29), Harini Iyengar, representing the claimant, suggested that Mr Czerepok had been caught up in a political campaign and a wider series of allegations of fraud and corruption at Arch, with the outcome being ‘wholly disproportionate’ to his conduct.

“There was not a political campaign to get rid of fraud and corruption, there was a political campaign to change the direction and strategy of the company,” Coun Jackson said.

“There was a feeling that proper governance procedures had not been followed. When they have not been followed in one-off cases, they are worthy of investigation in my view as a director (of Arch).”

These were the purchase by Arch of its then chief executive, Peter Mcintyre’s, house in 2016 and the ‘unduly generous benefits and remuneration package’ for consultant Graham Harper, both of which formed part of the claimant’s disciplinary investigation, although there were no findings of wrongdoing by Mr Czerepok in relation to the latter incident.

“You took the view from June 2017 that the claimant had been involved in criminality?” Ms Iyengar asked, with Coun Jackson replying: “No, I did not.”

She also pointed out that police have now concluded that ‘no criminal offences have been identified’. The force also said last week that ‘the matter has been finalised’.

But Coun Jackson said that members of the council’s audit committee had called for an outside force to take a look, adding: “I’m at a loss to understand why Northumbria Police hasn’t taken these issues more seriously.”

He was also asked if he accepted that the police never interviewed Mr Czerepok and Mr Jackson replied: “As far as I know, the police never interviewed anyone.”

On Tuesday, Mr Czerepok maintained that his dismissal was politically motivated and when it was put to him that this was an easy diversionary tactic, rather than looking at anything he did, he said: “All of the actions over the last 18 months are politically led.”

Under cross-examination from Seamus Sweeney, representing the respondents, Mr Czerepok said he believed that looking at the facts, it wasn’t gross misconduct.

“They could ask me questions about what had happened, there didn’t need to be any dismissal,” he added.

A large part of the questioning on Tuesday related to the circumstances of Arch buying Mr McIntyre’s house.

The tribunal heard that there was no prior discussion within Arch about a portfolio of executive homes for rent before an email exchange between Mr McIntyre and Bradley Hall estate agents in mid-April 2016.

By the end of the month, Bradley Hall had drawn up a pre-acquisition report, which featured The Granary (Mr McIntyre’s property), but it didn’t then appear on a report to the May 26 meeting of Arch’s investment committee.

Mr Sweeney asked if Bradley Hall appeared to be acting for Arch and Mr McIntyre ‘at one and the same time.’ Mr Czerepok replied: “Looking at the time-scale, it appears that way.”

Do you think that looks a little bit odd, he was asked, to which he responded: “I don’t think that’s for me to answer.”

Mr Sweeney said: “Do you feel it’s worthy of investigation, irrespective of your political view?”

“I think it’s worthy of asking the questions,” Mr Czerepok responded.

The tribunal was told that the rental income from the property had initially been listed at £20,000 a year, but later became £21,000, which – when fees are included – meant that the property just met the five per cent yield that had been set as the trigger for investments.

Mr Czerepok was given delegated authority to approve acquisitions where the five per cent target was met at the May 26 investment committee meeting, but he did not find out that it was Mr McIntyre’s house until the middle of June. It was later revealed at the hearing that Mr McIntyre left Arch having not signed a declaration of interests form.

Mr Czerepok admitted this discovery made him ‘uncomfortable’, so he sought assurances, first by speaking to the then director of business strategy at Arch, Jacqui Kell.

He then approached Mr McIntyre, who assured him that it had been signed off by the investment committee, Mr Czerepok said.

Mr Sweeney questioned why he didn’t go to the investment committee or board members directly and asked: “Governance is why you were dismissed. That’s pretty bad governance going to the man at the heart of it?”

Mr Czerepok replied: “If I hadn’t taken additional assurances about it, yes, but I did seek additional assurances.”

The hearing was told that this was in the form of a conversation with Northumberland County Council’s then chief executive, Steve Mason, who was the shareholder representative.

“I believe I went to the highest power at the time,” Mr Czerepok, although it was suggested that this was the council itself, not Mr Mason.

Mr Sweeney said: “Mr Sayers (Arch board member, who carried out the disciplinary process) concluded it wasn’t good enough governance to have a conversation with Steve Mason. Do you still believe Mr Sayers had no reasonable belief that you conducted yourself in an unacceptable way because of governance?”

“He may have believed that, but that’s why he was unfit to carry out my disciplinary as he held a personal view,” Mr Czerepok responded. “He’s on the board so couldn’t look at it totally independently.”

He also complained that ‘the process was taken over by Northumberland County Council, it wasn’t led by Arch’.

Despite the fact that Mr McIntyre’s former property is now on the market for £355,000 – £40,000 less than it was bought for – and that is has been rented out for a total of 15 months at a maximum rent of £15,000 per year since August 2016, Mr Czerepok maintained that Arch had suffered ‘no overall loss’.

He explained that the portfolio was designed to be an investment over a 15-year basis and he had no knowledge of the circumstances of the property’s rental or being put up for sale since leaving Arch. Mr Czerepok now works for Bradley Hall, the tribunal heard.

Also on Tuesday, the board meeting at which a ‘red risk’ in relation to Coun Jackson being in breach of his duties as a director of Arch, by pledging to scrap the company in the Conservative manifesto ahead of the 2017 election, was discussed.

Coun Jackson was not at the meeting and this item wasn’t in the board papers sent out to directors as it was a late addition.

Mr Sweeney asked why no action plan was drawn up for this risk, suggesting that the decision simply to write to Coun Jackson about this matter was purely political.

“That was my recollection of the discussion, yes,” said Mr Czerepok, explaining that the other members were wary of ‘walking into a potential political trap’ if Coun Jackson was removed from the board.

“Is it fair to say the decision-makers were more concerned about politics than the company?” Mr Sweeney asked, with Mr Czerepok replying that there had been a long discussion, but they ‘wanted to find out more about what scrap Arch meant rather than jump to any conclusions’.

In his evidence, Coun Jackson described this letter, sent by the then Arch chairman, Coun Dave Ledger, as a ‘political stunt’, because the contents of the letter appeared in the press in the following days.

Asked if he thought that Mr Czerepok had helped his political opponents, Mr Jackson said he only received the letter from Coun Ledger and didn’t know which officer at Arch had been behind obtaining the legal advice. “I would have assumed it was Peter McIntyre,” he added.

In another incident, in late May 2017, when Coun Jackson and Coun Richard Wearmouth spoke to staff at Arch, Mr Czerepok claims he challenged the new council leader for saying that a £25million figure for money to be provided to the council by Arch was ‘pie in the sky’.

Coun Jackson said he didn’t know if he used that phrase, but ‘maintains that Arch never paid a dividend to the council’, adding that he doesn’t remember Mr Czerepok correcting him or saying anything at that meeting.

Ms Iyengar said: “He did challenge you and you gave him a dirty look?” Coun Jackson replied: “He didn’t challenge me.”

Ms Kell, who became interim chief executive of Arch around the time of the 2017 county council elections, gave her evidence on Thursday.

She told the tribunal that she ‘felt under a huge amount of pressure’ to suspend Mr Czerepok, despite not thinking he had done anything wrong.

“I felt I had no other option but to do what Kelly Angus (the council’s deputy chief executive and head of HR) and Daljit Lally said,” she said. “I felt Daljit Lally had ultimate responsibility as shareholder representative.”

Ms Kell said Ms Lally asked her about a rumour she had heard about Mr McIntyre’s house on June 5, 2017, which she confirmed, and then told Mr Czerepok that the council knew about the purchase.

Asked why she had told Mr Czerepok if it was no big deal, she replied: “It was unusual in the way that Daljit told me.

“It was among a whole lot of information I had to tell Paul because he was responsible for the executive housing portfolio.”

The judge, Mr Harnon, asked: “You said that a lot of people in Arch knew that Peter McIntyre’s house had been bought by Arch, but that you didn’t shout it from the rooftops, why?” Ms Kell replied: “It wasn’t the way we did business.”

The judge referred to a briefing note Ms Kell was asked to prepare for the new council administration in which Mr McIntyre’s house was listed in ‘miniscule font’ in a spreadsheet as an appendix, asking, ‘why didn’t you shout it from the rooftops in the briefing note?’

“It was 12 months on, it was just part of the portfolio that was being managed,” Ms Kell said.

But before this, Mr Harnon continued, Ms Lally had come to you about the rumour, so ‘why not broadcast it?’

“I wouldn’t have countersigned the decision if I didn’t believe it was in the governance,” Ms Kell replied.

Coun Jackson was asked if Ms Lally passed on the information about Mr McIntyre’s house (The Granary) to him on or around June 5, but he said: “Not to my knowledge.”

Ms Iyengar then asked if he had suspicions, given that he had heard rumours about Arch during the election campaign. “Not about The Granary, that came as a shock to me,” he said. “There had been no mention in any of the board meetings I had been to.

“I was seriously shocked to hear directors had not been informed about it.”

The judge, Mr Harnon, pointed out that Couns Grant Davey and Dave Ledger were on the investment committee, which had free rein to make purchases, asking if they should have reported it to the board.

“I think that would have been a natural thing to do,” Mr Jackson said. However, the tribunal had already heard that Mr McIntyre’s house was not in the papers for the May 26, 2016, investment committee, so it is unclear if they knew about it.

Coun Jackson was also asked about the appointment of Ms Lally as interim chief executive and subsequently the full role in the months after he became leader of the county council in 2017.

He said that it was natural she became the interim boss as she had been deputy chief executive for some time and had plenty of experience at senior level at both the council and NHS trust.

He was asked if she only came to mind after the election. Yes, he replied.

It was put to him that Steve Mason, the previous chief executive, said that Coun Jackson becoming leader was a major factor in him leaving his post.

Coun Jackson said he had made it clear that he thought Mr Mason holding the joint role of chief executive and chief finance officer to be unacceptable from a governance point of view.

Ms Iyengar asked if he and Ms Lally started ‘making plans’ in relation to Arch not long after the election, prior to being elected leader of the council and before the new board of the company was in place.

“That’s not the way I would term it,” Coun Jackson said, also telling the tribunal that it ‘was by no means clear’ that the existing board members would resign at that point.

“You had a negative impression of what was going on?”

Coun Jackson replied: “I had a negative impression of the previous Labour leadership.”

“You were concerned about fraud and corruption?”

“I had heard rumours, so I suspected it.”

The tribunal continues.

Ben O'Connell, Local Democracy Reporting Service