DAMNING evidence has emerged that shows that Sean Clark, the architect of Thurrock Council's disastrous 'borrow to invest' policy that has brought the authority to its knees, was warned not to pursue it.

A report from the Bureau of Investigative Journalism reveals that Mr Clark ignored multiple warnings about the "unprecedented" risks he was taking with public money. 

As reported on Thurrock Nub News yesterday the council is facing an operational loss in the current financial year of approaching £470 million.

Around £16 million of the budget deficit can be attributed to the impact of covid and the cost of living crisis.

The rest is a direct result of flawed investments it has made by Mr Clark despite him being cautioned about the haste, risk and scale of his investments, and about specific deals he was making.

In March 2018, the financial consultancy Arlingclose wrote to Clark personally to express urgent concern about the council's "extreme" appetite for risk that the company felt was "well beyond" all of its other clients, even those who had adopted aggressive approaches.

The strategy of investing huge sums of money borrowed from other local authorities had, wrote Arlingclose, moved the council "well beyond the tolerances of what we consider to be prudential risk-management boundaries".

The letter listed a series of risk areas including the £370m invested in unrated bonds, high levels of debt and "huge exposure" to local authority funding. It also noted that the company's "advice has either been ignored or we simply have not been consulted".

The letter continued: "Arlingclose currently works with several local authorities that have pushed the investment boundaries … but the extent of the risk taken by Thurrock council without consultation with us in key decisions is unprecedented.

"This activity presents reputational issues, both for Thurrock council and Arlingclose."

Mr Clark, who had been repeatedly praised by leading Tory figures in authority, was so confident in his own financial acumen and belief in his vision that he continued to arrange deals for more than a year after Thurrock decided to pause its investment policy.

His fans among top Tories in the council were legion.

Cllr Jack Duffin.

Cllr Jack Duffin, later to become portfolio holder for finance, said: "Massive thanks to Sean and his team, they have done a brilliant job and keep it up"

Another advocate of his 'skills' is current deputy mayor Cllr Sue Little who, in 2020, said: "Our only fear is that someone is going to come along and poach our brilliant section 151 officer. He does so much."

An internal council report into Mr Clark's conduct, leaked to the Bureau, alleges that he failed to act on this advice or pass the concerns on to other senior figures at the council. 

This "contributed to the council's financial failures and the resulting government intervention", said the report.

Mr Clark terminated the council's relationship with Arlingclose in March 2019 and continued to approve increased borrowing from other local authorities, which at one stage were owed £1bn by Thurrock, in order to finance investments.

Those deals include much of the £655m provided to companies owned by the businessman Liam Kavanagh, via bonds that financed the purchase of 53 solar farms. Earlier this month Mr Kavanagh's company, Toucan Energy Holdings 1, was put into administration and this week the council admitted it has lost £188m as a result.

In a statement, Mr Kavanagh said: "I installed a new management team in June 2022 and, as far as I am aware, the underlying business has traded strongly and all interest has been paid in full and on time in accordance with the terms agreed between Thurrock council and the company."

He said that, if approached, he would "assist the administrator to achieve the best outcome for the company's stakeholders."

Arlingclose was not the only outside organisation to have raised serious concerns with Mr Clark about the deals he was making.

In late 2018 the council started to significantly increase its investment in a portfolio of 32 solar farms. These top-ups were agreed after undisclosed meetings between Mr Kavanagh and Mr Clark, with the basis for the investment being a report commissioned by Kavanagh's company that claimed the sites had gone up significantly in value since they were bought with the help of the council less than a year earlier.

There is no evidence of any due diligence being undertaken by the council to independently verify the increased valuation. 

Last week one of the council's internal auditors to councillors he and his team had not checked the veracity of the deals on the instruction of Mr Clark.

These payments would eventually total nearly £140m and the council has little idea where the money ended up.

The report into Mr Clark's conduct reveals the top-ups were made in three stages and alleges that, before the third payment was made in early 2020, the legal firm Bevan Brittan "flagged serious risks with the investment to [Clark]" only for the deal to be "authorised before these matters were resolved".

A spokesman for Bevan Brittan said it would not be appropriate for the firm to comment.

It is also alleged Me Clark continued to invest tens of millions of pounds after councillors agreed no further deals should be made, including to a company that has since gone bust.

In September 2020 the council decided to pause its investment policy. 

Yet Mr Clark continued to arrange investments for more than a year. The report lists nine transactions totalling nearly £55m between October 2020 and December 2021, which it describes as "a serious breach of delegated authority".

Those investments include some of the £94m Thurrock has tied up in Just Loans Group PLC, a lender which provides funding to businesses unable to raise money through traditional means. The company went bust in June and the council estimates it will lose £65m.

Other failed investments include £19m lost in a deal with a company that supplies eco-friendly generators to leisure centres and £14m written off after the collapse of a wood-chipping business Chip Chip Ltd.

The leaked report says there was "no evidence to show appropriate due diligence was undertaken" by Mr Clark before the investments took place, adding that "the quality of governance in place for a £1bn investment programme was inadequate and the scale of delegated authority was too great".

A separate report, published by the council yesterday revealed Thurrock has never set aside any of its budget to repay the loans that financed its investments. The report said this was in breach of the rules around local government borrowing and represented a "material failure that has led to the significant overspend".

Sean Clark.

The council is obliged to rectify this and apply the appropriate charges. The cost of doing so will be £129m this financial year and £75m the next. It was Clark's responsibility as chief finance officer to make sure these regulations were followed.

It was also Clark's role to decide whether to release details about the investments in response to FOI requests. After a three-year battle, in October this year a tribunal ordered the council to disclose this data to the Bureau. Its ruling criticised Clark for his "worryingly casual attitude" towards keeping councillors informed of what he was doing.

A spokesperson for Thurrock council said it does not comment publicly on internal employment matters. Its statutory financial powers have been handed to commissioners from Essex county council, which is also undertaking an inspection which will report to the government in January.

Mr Clark has not respond to requests for comment. He has been suspended on full pay since the urgent government intervention in September following "grave concerns about the exceptional level of financial risk and debt incurred by the council". The council's debt currently stands at £1.4bn – almost twice the level that alarmed Arlingclose.

In October 2019, Clark did admit to wondering whether the council's borrowing and investments had gone too far. "I have an internal conversation on this," he said. "Sometimes I look at it and go, 'We've done an awful lot here. Should I have done that amount? Should we be doing this?'

"But then I come back and go, 'Actually, local authorities have always done this.' All we've done is upped the amounts we're talking about."