More than £1.3million of taxpayer cash was paid to organisations in Tower Hamlets that may never have existed, and to one whose office was a drug den, a cache of papers reveals.
More than £1.3million of taxpayer cash was paid to organisations in Tower Hamlets that may never have existed, and to one whose office was a drug den, a cache of papers reveals.
In December 2019 a judge ordered that 4,300 pages of evidence in an ongoing tribunal claim against Tower Hamlets Council be published.
The documents, which the Advertiser is still reviewing, lay bare the extent of financial malpractice and criminality that blighted the council's youth service and other divisions from the early 2000s.
The issues were investigated internally from 2014 to 2016 and despite their severity, no-one implicated is thought to have faced criminal charges.
Ex-fraud investigator, Mark Edmunds, who is bringing an unfair dismissal claim against the council, has claimed the probe he led was subject to a politically-motivated "cover-up".
But the council denied this, saying Mr Edmunds' role was no longer needed and claims were dealt with appropriately, adding it had "come a long way" since 2014.
In 2011 a cascade of whistleblower allegations were received by the council. People claimed jobs were being created in the youth service for friends and family members who were not qualified or allowed to work with children.
Three years later, prompted by fresh claims of "mass fraud", the council decided to launch a root and branch investigation, the documents reveal.
Early enquiries unearthed 19 organisations "of concern" that had received £1.36m between them and were all referred to the Metropolitan Police. Police involvement had ended by June 2016.
A presentation to senior members of staff said the revelations "could amount to a conspiracy to defraud the council".
External auditors Mazars were drafted in in 2015. They concluded at least eight so-called providers that received £284,000 in 2013/14 "did not exist".
One firm, paid £52,500, was registered at an address that turned out to be a prefabricated concrete structure at the back of a sari shop.
None of the directors could be contacted and it was dissolved in December 2014.
Other "charities" were based at residential properties, virtual offices or mail forwarding addresses. When contacted, none of the officers were there.
In a withering report, Mazars wrote: "We found no evidence of the organisations or delivery of any project.
"The manner in which the process for awarding funds has been managed has, on the face of it, put the young people at risk."
Youth workers were found directing companies that received payments from Tower Hamlets, including one that received £323,000 from 2009.
At least 28 staff had not produced Disclosure and Barring Service certificates before being allowed to work with children.
But not all of these people were referred to the DBS, even after the council's Local Authority Designated Officer and Schools Safeguarding Lead intervened.
Four youth workers in one unregistered "charity" had previous convictions for common assault, assault occasioning actual bodily harm and possession of an offensive weapon.
In December 2015 police and council officers raided a building in E1, the address of a company run by two youth service staff. Inside they found "a significant quantity of illegal drugs", polyethene bags and weighing scales.
On being interviewed, one of the officers said it had been a "community centre" and he had signed off on bank statements but was not privy to the financial arrangements.
Drugs were also being openly taken at another "community project" run by a Trading Standards officer and a Highways officer.
Elsewhere, the council found, purchase cards were being abused, with 14 people bypassing key controls to spend £149,193.96 between them in 2014/15.
This included £2,958 in restaurants, £1,650 on supermarket gift cards and £65 to pay a parking fine. One person splashed out £91,000 of council money in two years.
Staff on zero-hour or 14-hour per week contracts were found to be earning up to £54,500 a year, while at the same time, another person came forward claiming to have not been paid for two years.
A 2016 council report noted an "embedded culture of fear that can, in all likelihood, be traced back to 2003".
It added: "Joint working with the MPS has established that the scale of fraud was wider than initially anticipated and dates back to as early as 2007."
What happens now?
The evidence bundle dubbed the "Poplar Papers" is part of an ongoing tribunal case brought by ex-council fraud investigator Mark Edmunds against Tower Hamlets.
In December 2019, prompted by applications from the media, Employment Judge Crosfill of East London Tribunal Hearing Centre ordered the parties to redact their 3,000- and 1,300-page bundles and make them available to the press by January 13.
This reversed a previous judgement in August 2019 that had instructed the media to pay the costs of a redaction exercise and set no time limit.
Most of the wrongdoing Mr Edmunds was investigating took place under the previous administration.
But the Poplar Papers raise new questions as to why no staff were prosecuted - and how far people investigated for serious wrongdoing were later able to continue working with children, in east London and elsewhere.
A Tower Hamlets Council spokesman said: "We have come a long way since 2014 when the government removed the previous mayor and issued directions.
"They included investigating historic wrongdoing as well as rebuilding the council's processes including governance, whistleblowing and grant giving.
"Mr Edmunds was employed by the council as part of those investigations. Where there was sufficient evidence, the council took action including dismissing staff and referring matters to the police.
"In the past few years, the government's directions have been lifted, we have delivered six well run elections, our children's services have secured a good Ofsted rating and our services are winning national awards. This progress has been endorsed in a Local Government Association peer review.
"However, we remain vigilant and are using our new processes to ensure fairness, transparency and value for money are at the heart of a well-run, accountable council."
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