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Yard lost £30m after warning to pull out of Icelandic bank
Neil Millard6 Apr 2009
SCOTLAND Yard lost £30million by investing in a flawed Icelandic bank weeks after its financial adviser urged it to pull out.
The Metropolitan Police Authority decided to withdraw its money from Landsbanki in April last year on the advice of its treasurer, Ken Hunt.
But weeks later it reinvested £30million without Mr Hunt's knowledge - he only found out once the bank was nationalised in October last year.
John McFall, chairman of the Commons Treasury Committee, called it a "massive breakdown in corporate governance" as two official reports criticised the lack of oversight the authority displayed in investing taxpayers' money.
Mr McFall criticised Mayor Boris Johnson who, as chairman of the authority was ultimately responsible for the investments.
"Boris Johnson should make amends and hold a meeting with all of those responsible. It is a scandalous waste of public money, and we need to know that he is getting control of the authority's finances," he said.
The reports also indicate that no attempt was made to remove Landsbanki from an approved list of possible investments, leaving the authority's investment manager free to put money into the bank.
The Met invested £10million in July last year and followed that with a further £20million on 23 September, 15 days before Landsbanki was nationalised.
An internal report into the affair was given to the finance committee in November but only released publicly over the weekend.
Green Party finance committee member Jenny Jones criticised the delay. "This was an absolute disaster, a terrible waste of funds, and shows a real problem within the organisation," she said.
"A public body should not invest £30million without telling its treasurer exactly what is going on."
A second report, by auditors KPMG, was commissioned in February and found nine serious failings in the authority and the Met.
The Met said: "It's important to remember that both the Audit Commission and KPMG found the Metropolitan Police Service to be completely compliant with Treasury management policies."
Kit Malthouse, vice-chairman of the MPA, said: "I raised serious concerns about internal controls in place to ensure public funds are secure and safe. MPA members accepted the recommendations of the KPMG review."
Reader views (6)
Trevor - sorry to disappoint you bt the Audit Commission also lost a sizeabl;e sum in the same way .....depressing
- Wallytrader, London, 07/04/2009 09:25
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No problem. Just raise the parking fines, the bin fees, the emergency call fees, the swimming pool fee, the dog walking fee, the tax on bottles, the gasoline tax, the BBC license fee, the .....
- Trunk, US, 06/04/2009 23:10
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Local Government, Public bodies, Universities, Colleges etc should NOT be investing public funds in dodgy foreign banks or other 'Get Rich Quick' scams. It appears these bodies have learned nothing from the past. the past being the BCCi Banking scandal of the 1980s.
It is NOT the job of local government to plays 'Fast and Loose' on the Stock Exchange or elswhere to make a 'Fast Buck'. It appears incompetence and crass criminal stupidity are the norm nowadays in local government finance.
Damn the lot of them!1
- Uncle Vanya, East Anglia Area UK, 06/04/2009 17:13
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Central Government boides are required to hand any year-end surpluses back to the Treasury each year. This rule does not apply to Local Government bodies, who can build up surpluses and invest them as they see fit. The MPA and Audit Commission also have this freedom, though they are neither CG or LG bodies. Perhaps the Government should change the rules so that surplus funds have to be invested with the Treasury giving a commercial, or near commercial, rate of return? Having funds invested with the Treasury would provide the necessary security, and provide UK PLC with essential working capital, keeping the money in this country.
- Trevor, London, UK, 06/04/2009 14:53
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So that's why the Police part of our Council Tax has gone up by double the rate of inflation!
- Chris, Brighton, England., 06/04/2009 13:27
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Lets be clear here, the Metropolitan Police did not invest this money the Metropolitan Police Authority did, they are two distinct organisations.
- Howard, London, UK, 06/04/2009 11:18
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