JLC trustees failed to exert 'proper control' over CEO Jeremy Newmark's spending, inquiry finds

Forensic investigators who assisted the inquiry also identified a further £266,189 in consultancy and other fees which could “merit further enquiry”, though in 2013 trustees said they were satisfied about these payments.

The JLC showed “little evidence of acceptable levels of financial control”, allowing Mr Newmark to spend funds “without approval” and to pay money into his personal bank account “without anyone requesting written support documentation”.

Read the report in full

 

 

Examples included cash withdrawals amounting to £4,810 and a total of £1,900 that was paid into his personal account.

When asked by the inquiry to explain such payments, Mr Newmark said they were reimbursements, since at times he had to “fund the JLC out of his private resources due to a shortage of funds” in the organisation’s bank account.

However Sir Mick Davis, the charity’s then chairman, “vigorously denied” the suggestion that Mr Newmark had privately funded the council.

Credit card claims of £17,000 by Mr Newmark warranted further follow-up, while he had leased a car with his personal number plate without trustee approval, claiming it was a “pool car”.

The month after his departure, when Sir Mick asked him about newly discovered expenses on an account belonging to the (anti-boycott) Fair Play Campaign Group, Mr Newmark agreed to reimburse the charity for “the unsubstantiated sum” of £9,672.19.

But when that money was repaid, it was recorded in the JLC’s accounts as an “anonymous donation” and the JLC’s auditors H W Fisher said they had been unaware until recently of the nature of the payment.

The report says that neither the then treasurer Nigel Layton nor the trustees - who included two chartered accountants -had “exercised proper control” of Mr Newmark’s use of the charity’s funds.

Mr Layton, described as an expert in forensic accounting, had authorised payments without proper checks on a JLC credit card and Mr Newmark’s Amex account, and he did not act on concerns over lack of controls highlighted by auditors in letters in 2010 and 2012.

“Had Nigel Layton carried out his duties as treasurer with more diligence than he appears to have done and paid heed to the weaknesses identified by H W Fisher… it seems to the [inquiry] panel he would have recommended a much clearer and more effective oversight of Jeremy Newmark’s activities by the trustee body,” it says.

When Mr Layton was made aware early in September 2013 of allegations by a whistleblower about Mr Newmark’s expenditure, the report says he dismissed the concerns, putting them down to a “naïve employee”. But he changed his mind after reading an internal report into the allegations.

Although Mr Newmark left at the end of the month, he was given a three-month consultancy by the JLC, and a further three months paid for by Sir Mick.

The week before his departure as chief executive, when he had been suspended, he came into the JLC office. According to the whistleblower, he removed files and information - although Mr Newmark has denied this.

The inquiry stated that “records do indeed appear to have gone missing but we have no reliable evidence of how that occurred”.

But the inquiry panel say they found it “difficult to understand why Jeremy Newmark was allowed to return to the JLC offices at all, pending further enquiries. In our view, this was not an appropriate measure to take in the circumstances.”

When the allegations had come to light, trustees had been unaware of a legal duty to file a “serious incident report” (SIR) to the Charity Commission and seemed to have taken no independent legal advice.

It was “hard not to see how the loss of the chief executive in such circumstances could not be thought to merit an SIR,” the inquiry concludes.

The inquiry panellists – Dawn Freedman, a retired judge, Derek Zissman, a former vice chairman of the professional services group KPMG, and Michael Scott, a solicitor at Charles Russell Speechlys LLP – say their work was hampered by lack of documentation including management accounts and detailed records of expenditure, and they were unable to obtain electronic back-up of records.

The report says that the JLC’s trustees had been driven by an “entirely reasonable desire” to make good the losses identified in 2013 and could also be seen to have been “motivated by a desire to protect the reputation of the charity so far as possible”.

“It was thought unlikely to be in the charity’s best interests to launch a full enquiry by looking for further losses,” the inquiry commented.

The various factors “could be seen to indicate that there was an intent to conceal the nature of the allegations against Jeremy Newmark”.

But the “proper course of action” for the trustees at the time of the allegations would have been to launch “a full internal inquiry” into Mr Newmark’s years as chief executive. Had they done so, full records of spending might have been available.

The trustees would have also been able to establish if there was “hard evidence of inflation of project budgets, unauthorised transfers of restricted funds, or any other opportunities for personal enrichment at the expense of the charity and therefore consider - with appropriate advice - whether any activity should be reported to the police.”

Trustees believed there was “no room for large-scale fraud” and Sir Mick Davis said that Mr Newmark could not have committed “a material theft” because he did not have access to significant funds.

After Mr Newmark’s departure as chief executive, the JLC’s full council was told he had left because of ill-health, without reference to the financial issues.

The JLC’s Chairman, Jonathan Goldstein, said: “I would like to start by expressing our sincere gratitude to the whistleblower.

"Their bravery in highlighting serious concerns was a great service to the charity and the wider community.

The 2013 Trustees were let down by Jeremy Newmark. In him, they placed their trust in running the organisation.

Since the independent forensic accountants provided information that was not known to the 2013 Trustees, the JLC has now referred the matters raised in the Crowe Report relating to potentially questionable expenditure, to the police.

"The Trustees have also determined to put the JLC’s audit out to tender and is taking legal advice on other civil remedies that might be available to it."

He continued: "The JLC has worked tirelessly to unite the community, to represent its concerns, and promote collaboration in order to provide solutions to the long term strategic challenges we face.

"Never has there been a greater need for this charity and the work it does. We are resolutely committed to continue serving our community, and to engage with the Charity Commission so we always stand the strongest light of scrutiny.”