Litany of failings and mistakes highlighted as another piece of significant Thurrock Council financial mismanagement is highlighted. It's not looking so 'fantastic' now

EXCLUSIVE

THIS evening Thurrock councillors will be briefed about a shocking lack of diligence, high risk and mistakes surrounding a housing policy once described as a 'fantastic bit of business'.

The head of internal audit, counter fraud, risk management and insurance will deliver a report to Thurrock Council's audit committee on the authority's relationship Phi Capital – a company that went bust owning millions despite being picked by the council as a trustworthy partner.

A deal to buy property and renovate them, using the services of Phi Capital, was promoted by the last Conservative administration, and repeatedly praised by then lead councillor for housing, Cllr Luke Spillman who said he believed it was a great and innovative scheme worked out by the council's financial advisors and he championed it.

He described it as a 'fantastic bit of business'. However, other council members had previously expressed concerns about whether due diligence and scrutiny was taking place.

Phi was founded in 2014 by brothers Omar and Ryan Al-Hasso who have a checkered and controversial history in the housing investment market. It went into administration this year, owning millions. But it managed to transfer some of its deals to a new 'phoenix' company – despite that practice being highly frowned up as it effectively took any assets away the old company, that might have been assets for the administrators, Arafino Advisory Limited.

Arafino have been contacted by Thurrock Nub News about the management of Phi Capital's affairs but have, to date, declined to respond.

The council itself has always been shy of talking about the deal with Phi – which was only brought to the local public's attention by an exclusive Nub News story in August 2021.

And since that story, the council has been reticent to promote any aspects of what Mr Spillman clearly believed was a showcase policy. There is virtually no coherent trail of what properties have been involved in the Phi deal, with many payments ranging from a few thousand to multiple millions of pounds scattered across the council's purchase ledgers just under the heading of 'Acquisition of Land and Buildings'.

Concerns about that were regularly expressed by Nub News and the report before councillors today completely vindicates that concern and damns the council.

The report presented today was prepared after Phi Capital went into administration after a winding up order was filed by HM Revenue and Customs, who wanted around £4m in unpaid tax. The petition was presented on 15 November 2024. Despite that petition being filed, Thurrock Council made a payment of £33,992.39 to Phi Capital on 20 November. Earlier in November it made two payments to Phi, which was on the cusp of failing and had warned staff of pending problems, totalling £115,753.76.

In December the council paid Phi Capital £11,979.92.

The committee will receive an appendix report prepared by the council's Chief Executive and Managing Director Commissioner, Dr Dave Smith, but Nub News can say with surety, the initial document he put to councillors contains inaccuracies which might suggest he has tried to hide the council's ignorance of the state of Phi Capital's financial position.

Phi lie: Phi Capital Investment didn;t just hide its financial position to partners, it even tried to con its own staff, as this festive social media message shows.

He said the council were informed by Phi of its financial problems in December 2024 and acted appropriately at the time. That is simply not true, and that has been confirmed by the council's head of financial assurance, internal audit, risk and insurance Satinder Jas – though in his own report to committee he also refers to the council being told by Phi of its situation in December 2024.

The council was unaware of the Inland Revenue's bid to wind up Phi Capital until told by Thurrock Nub News editor Neil Speight on Friday, 17 January – a fact Thurrock Council has admitted and issued a public statement about. The timeline was confirmed on Thursday, 30 January by then housing portfolio holder Cllr Mark Hooper, said: "This week Phi Capital went into administration. The first we heard of this was when news emerged of an HMRC petition against the company for unpaid taxes.

"We were disappointed that as a client of Phi, we weren't alerted to this in advance, and we have spent the last few weeks reviewing our arrangements with them to limit any impact of their situation on Thurrock.

In his report today Dr Smith does concede: "Overall, our review has identified that there were fundamental weaknesses in relation to both governance standards and financial controls."

As part of the agreement with Phi Capital, the council also signed up to a finance agreement with loan provider Topland Group. Like Phi, the Topland Group also has a past that has courted controversy. It was founded by billionaire Israeli-born brothers Sol and Eddie Zakay who built a property business empire in the eighties.

In 2010 Topland was accused by then Labour-led government of deceit and bribery over an alleged property scam that cost the public purse more than £20m.

Thurrock Nub News highlighted concerns about both companies in an article in January 2022 but our concerns were brushed aside by both senior officers and leading officers who discarded a litany of historic problems.

The report today focuses on those failings by officers and councillors, though concerns about Topland are largely by-passed. Thurrock Council has paid many millions to Topland since the deal was brokered, but it committed to spending many more over decades before financial deals expire.

In the report the following concerns are highlighted and the council is historically damned for taking 'high risk' decisions:

· Contractual agreement was not signed by all parties.

· Lack of transparency in the process and criteria for selecting Topland.

· Management was not able to provide the letter of engagement with Phi.

· Management was unable to provide support in relation to the capital expenditure limit. · Management was unable to provide support or the basis of costs in relation to the schedule of rates.

· There was no documented evidence to confirm that appropriate checks were completed before they properties are handed over to the Council.

· Payment processes occurred via BACS and using emails as authorisations which bypassed the existing financial controls.

· Inadequate approvals before payment for the purchase of properties are made.

· Due diligence completed by the Council identified that Phi were a significant financial risk before they entered into the agreement.

· Due diligence completed by the Council identified potential losses in the case of insolvency of a supplier.

· There was inadequate senior management oversight and project management arrangements in place throughout this project.

The report goes on this detail those 11 major failings and suggest ways they might be mitigated, though Nub News believes it is very much a case of 'shutting the stable door after the host has bolted'.

In January this year Thurrock Nub News ran an exclusive story highlighting major failures in the council's relationship with Phi Capital. Nub News editor Neil Speight had broken the news to Thurrock Council earlier the same day – and the council acknowledged it was unaware of the perilous situation of its business partner.

An investigation into the issues raised by Nub News – with evidenced examples – continues but is not mentioned in the report to tonight's committee.

In December members of the council's Place committee rejected evidence put before them of a major failing.

Despite being a staunch advocate of the council's housing strategy which bore his signature and for which he claimed great pride and satisfaction, complementing senior officers, Mr Spillman eventually stood down from his role as portfolio holder for housing and followed up with an astonishing attack on senior officers.

He was quitting the front bench of the ruling group because officers were deliberately 'misleading cabinet, council and the residents we represent."

He said he had reached the conclusion there was "breath-taking incompetence that has plagued the senior leadership of this council for so long. This incompetence has undermined the democratic process."

However, he has repeatedly stood by his assertion that dealing with Phi was 'fantastic business'.

Ahead of this evening's meeting Nub News editor Neil Speight says: "This report is a damning indictment of the appalling way Thurrock Council has conducted its financial affairs over many years. Conceit and ego have dominated thinking and the authority's financial philosophy was jump in head first, waive common sense and sod the consequences.

"That attitude brought down the council over its investment in solar energy – for which residents will be paying the bill for years. God alone knows what secrets might eventually be unearthed relating to Topland and the millions we are indebted to them, and I wonder how many more cock-ups remain undiscovered – or perhaps covered-up.

"I welcome this report today as one small step in a move towards more honesty, but I find it extremely concerning that, in his address to members, the council's CEO blatantly hides a truth. Even now, after all that has happened, honesty, openness and transparency seem far from his agenda – yet he and his fellow commissioners have just been reappointed by the government.

"It appears yet another failure has been rewarded. Something residents in Thurrock are sick and tired of seeing."