NI events quango scandal of secret overdrafts, personal loans to pay staff and £250k missing
Scathing report damns demise of government events body as ‘fraud on a grand scale’
The collapse of a quango behind a series of superstar gigs has been branded one of the biggest scandals ever seen in Northern Ireland.
The Northern Ireland Events Company (NIEC) went bust in 2007, leaving the taxpayer to underwrite debts of £1.6m.
An investigation by Stormont's spending watchdog uncovered an "appalling level of mismanagement and impropriety" by senior officials.
In a scathing report, the Public Accounts Committee (PAC) concluded it was likely "fraud on a grand scale" took place.
False accounts were submitted, a signature on an overdraft agreement was allegedly forged and anticipated income of £250,000 vanished.
Committee chair Michaela Boyle said: "This is one of the biggest scandals that has arisen in the history of the committee under devolution.
"The level of scandal involved is completely shocking."
A police investigation into the matter has concluded. The PSNI said last night a report would be prepared for the Public Prosecution Service.
Today's report discloses:
- Chief executive Janice McAleese was appointed despite failing to meet essential criteria for the position;
- She ignored board advice not to promote Motocross and Supermoto events, exposing the NIEC to six-figure losses;
- A £200,000 overdraft was taken out without the necessary government approval;
- Inaccurate accounts were filed in a desperate bid to cover up spiralling losses;
- Cash income from gate receipts may have been understated by at least £250,000;
- Warnings from whistleblowers were ignored as the quango raged out of control.
The NIEC was set up in 1997 to boost our profile on the international stage.
In its early years, it subsidised showpiece gigs at Stormont by artists such as Pavarotti, Rod Stewart and Elton John.
Although it received £18m in public funding between 1997 and 2008, it folded with debts of £1.6m. Last September the NIEC was heavily criticised in a report by the Northern Ireland Audit Office.
In its report, the PAC delivered a damning verdict, describing the quango's demise as a "fiasco" and a "shambles".
It said the 2004 appointment of Ms McAleese was "a pivotal moment" that set in train a series of events culminating in the NIEC's collapse.
Despite not meeting the essential criteria for the post, Ms McAleese passed four different stages of the recruitment process and was recommended by a selection panel.
The PAC said: "The committee are at pains to understand how Janice McAleese made it to the later stages of the process, never mind got appointed."
The Department of Culture, Arts and Leisure (DCAL), the NIEC's sponsoring body, was apparently unaware of the fact - despite a senior official being on the selection panel.
"In the committee's opinion this was the first of many instances at which DCAL appeared to be asleep at the wheel," the scathing report said.
Losses of £1.3m were run up after overspending on events promoted by NIEC between 2005 and 2007, with Ms McAleese apparently ignoring board advice not to promote Motocross and Supermoto.
In September 2005, NIEC promoted a Motocross and a Supermoto event, which together lost more than £400,000, causing a financial crisis.
In a desperate attempt to raise cash, the company undertook two quick fixes - it increased its overdraft and secured personal loans from staff.
Also in November 2005, the NIEC opened a second bank overdraft facility for £200,000, in addition to a £100,000 overdraft already approved by DCAL. The signature of the then chairman, Mervyn Elder, appeared on documents, yet Mr Elder claimed he did not sign them. The NIEC board was "totally unaware" of the existence of a second overdraft, despite four other members' signatures also appearing.
The overdraft should have been disclosed in NIEC's annual accounts. But to conceal its existence, accounts submitted to DCAL were different than those lodged at Companies House.
In December 2005, the NIEC received personal loans of £3,000 and £17,000 from a junior staff member and Ms McAleese respectively.
Further loans of £21,000 and £25,000 were made in early 2007 by Ms McAleese and a second senior official, Jasper Perry.
"The committee was stunned to hear that Mr Elder was aware that personal loans had been used to cover staff salary payments and to keep the company afloat," the report said.
"The use of personal loans is highly irregular, and not informing the board or DCAL of this situation was a derogation of duty."
Inspectors calculated that for the five Motocross and Supermoto events promoted by the NIEC, cash income from gate receipts was probably understated by at least £250,000.
The PAC said these estimates were "conservative".
At one event, Supermoto 2005, no income at all could be lodged to NIEC's bank account - despite an expected income of around £48,000.
The PAC said: "There is a complete and total absence of assurance that some individuals did not personally profit from the large amounts of cash that were collected at events but never lodged to NIEC's bank account.
"The committee suspects that fraud on a grand scale was allowed to go undetected."
The report said the NIEC board did not provide challenge, leadership or direction, and lacked basic common sense.
It also noted how warnings of the looming crisis were ignored.
From as early as 2004, a number of whistleblowers approached DCAL, including promoters, MLAs and even a member of DCAL's own staff seconded to NIEC. Yet their concerns were not taken seriously.
DCAL told the PAC that it believed NIEC's governance system was robust.
But the report stated: "This was clearly not the case. In reality, NIEC was completely out of control."
A DCAL spokesman said: "The department welcomes the recommendations in the report and is pleased that the committee has agreed with the department's analysis and acknowledged the important lessons for all chief executives, boards and departmental accounting officers.
"The department will consider the PAC report in full and provide a formal response in due course."