Covid-19 Grant Fraud at the Grand as Council demands its money back

BREAKING NEWS: Following an FOI request first made on May 3rd 2020 and a full eight months late, the Council has conceded that it received applications for COVID-19 grants ‘which have breached the requirement to confirm that the would-be recipients “were not an undertaking in difficulty.”

The next question asked was:

“Is the Council pursuing recovery action for this money, and if so, how many companies/organisations/individuals are being pursued?”

The answer was:

• “The council is pursuing recovery action for this money. There is one company/organisation/individual being pursued.”

Now read on and watch as Hallam Estates, owners of the Grand and its past and present directors, Michael Stainer (below left) and Robert Moss are put squarely in the firing line.

It looked as if Xmas came early for Stainer, Moss and Hallam Estates as they fought to keep the Grand afloat as COVID-19 hit in February 2020. The government announced there would be support for small businesses, and businesses in the retail, hospitality and leisure sectors.

• “This grant scheme will offer a lifeline to businesses who are struggling to survive due to the corona virus shutdown. Local Authorities should make payments as quickly as possible to support struggling businesses”.

With a rateable value of £51,000, Hallam would initially receive a grant of £25,000 under this scheme. To avoid fraud, the Council would be expected to make use of the government Grants Management Function and Counter Fraud Function’s digital assurance tool, Spotlight, and would receive support in using the tool and interpreting its results.

• “Alongside other checks conducted by local authorities, the tool can help with pre-payment and post-payment assurance. We also want local authorities to work with us and each other in identifying and sharing good practice, including protecting eligible businesses which may be targeted by fraudsters pretending to be central or local government or acting on their behalf.”

This monitoring process would continue after payments were made to identify high risk payments and we reported on November 28th 2020 that the Council wanted its money back, because finally, it realised that Hallam Estates was ‘an undertaking in difficulties’, meaning that “the business was not bankrupt, in liquidation, held by the receiver or in the process of becoming any of these things”.

Fast forward to December 17th in London’s High Court as the Honourable Mr Justice Snowden put Hallam into administration as the culmination of a process that started as far back as October 2019. By the time Hallam/Stainer trousered the first tranche of money, £25,000 in later March/early April, their attempt to set aside the statutory demand for unpaid service. charges had been thrown out, and the attempt to set aside a claim for unpaid court costs dismissed as “totally without merit”.

We know that Council members and officers were fully aware of Hallam’s difficulties, and that therefore, Hallam was beyond all reasonable doubt an “undertaking in distress”, unable to pay its bills as they fell due by the time the first grants were made. Of equal significance is the fact that no later than April 19th 2020 the Council was asked:

• “Is our Council aware, and therefore implementing, measures to ensure that a business which fails the “undertaking in distress test” on 31 December 2019, is ineligible for payments under the COVID-19 Temporary Framework for UK Authorities. One of the criteria, as published in a document entitled Grant Funding Schemes Technical Frequently Asked Questions (FAQ) for Local Authorities, Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund Guidance” by the Department of Business, Energy and Industrial Strategy is as follows:

Para: 76 states:

• “Where the undertaking is subject to collective insolvency proceedings or fulfils the criteria under its domestic law for being placed in collective insolvency proceedings at the request of its creditors.”

By mid-June, the Council conceded that:

• “……the earlier applications didn’t address all of the state aid questions as they weren’t in the original guidance”.

This is most surprising as other local authorities were certainly aware. For example, the original guidance could be found on the South Norfolk Council’s website in April 2020, “Grant Funding Schemes Technical Frequently Asked Questions (FAQ) for Local Authorities, Small Business Grant Fund and Retail, Hospitality and Leisure Grant Fund Guidance”, and it’s still there! This deals specifically and explicitly with guidance on “undertakings in distress”. As we wrote in November 2020, local councillor Tim Prater was one who realised the problem, when on June 23 2020 he posted on his blog:

• All businesses that have had grant aid support via Folkestone and Hythe District Council in the form of the Small Business Grant (£10,000) or Retail, Leisure and Hospitality Grant (£10,000 – £25,000) have now received a form to complete to confirm they were eligible for the grant and that they can keep it.

This form includes the following declaration:

• I confirm my undertaking was not in difficulty (within the meaning of Article 2 (18) of the General Block Exemption Regulation on 31 December 2019.

One local business which received its grant in April received the following on October 9th:

• “Please could you provide a copy of your most recent bank statement for the account into which you received the grant payment by return to this email within 1 week of the date of this request. We need to verify the account name, number and sort code, feel free to redact all other information.”

So, to put it in simple terms, either the Council didn’t know, or didn’t care, what the guidance was, and that the checks it should have made through Spotlight, its digital assurance tool, weren’t made, or if made, were ignored. Was this a case of the ‘chumocracy’ at work?

• Chumocracy: A political system, enabling people in positions of power to gain such positions from their friendships with other people in positions of power (their chums).

Now we can reveal the full cost of the Council’s reckless disregard of its obligations to apply due diligence when handing out public money. We had a clue when Michael Stainer stated in a sworn witness statement before Judge Snowden in December 2020 that:

• “The rateable value support is currently worth £2,835 per week which is due to Hallam as the rate assessments are in its name.”

However, with the administrators in place, the full extent of Hallam’s debts is now clear, and the Council wants all its money back —– all £95,000 of it!! This has been confirmed from within the Council, and it’s to late. Hallam Estates is in administration so the Council will have to join the queue of creditors, if its claim is accepted by the administrators.

Let’s be clear about one thing, and it is bad news for the residents of the Grand: if a payment is made to the Council from the realisation of Hallam’s assets will mean a reduction on what is paid to the other main creditor of Hallam, the service charge account that maintains the Grand. Therefore, there will be an increase on what residents will have to pay moving forwards. It’s all too simple — if the sale of assets generates £100,000 after the costs of the administration, it will be divided up pro rata between creditors. So, if the service charge account is owed £200,000 and the Council £100,000, the former gets £66,000 and the Council £33,000. In other words, the Council’s profligacy has cost the Grand’s residents £33,000!!

It could be even worse. In the unlikely event that the residents collectively acquire the freehold from the administrators, part of the money they pay would go to pay off Hallam’s debt to the Council……….. you couldn’t make it up.

As a final note, the complex of 48 garages at the Grand and the surrounding area, have been taken over by receivers acting for the mortgage lenders, cutting off the last remaining income stream for the Stainers – estimated to be between £30,000 and £40,000 per annum.

The Shepway Vox Team

Dissent is NOT a Crime