New Worker Banner

The Weekly paper of the New Communist Party of Britain

Birmingham Blues

by New Worker correspondent

THE LONG running saga surrounding the costly hotel and conference centre built by Unite in Birmingham has taken important steps forward with the online publication of Project Clean Up, subtitled an Interim Report into Allegations of Historical Corruption, (hereafter the Report), a 63-page document which is heavily redacted due to continuing police involvement which may or may not end with charges.

The union has also published a recent re-audit of the 2021 figures by accountants BDO which is briefly outlined below. A thorough investigation was one of present General Secretary Sharon Graham’s 2021 election campaign promises, matters which played an important role in her victory. An early result of these investigations was the April 2022 South Wales Police raid on Unite’s London HQ. Investigations by the Serious Fraud and HM Customs and Revenue continue.

The background is that the building eventually cost £110 million despite being worth only £35 million. These over all figures are not in doubt, only who is responsible and whether there was criminal action involved. Defenders of the project say that the increase in costs were due to last minute changes in both the design and size of the building. Another reason cited was that Unite properly avoided the normal dodgy cost-cutting practices common in the construction industry such as fake self-employment and insisted on union rates for the job.

In all there have been five union commissioned reports, one was by construction barrister Martin Bowdery KC, an independent legal report into possible criminality, a forensic accounting report by Grant Thornton, and a legal report into problems with Unite’s governance by Bark & Co, the “top expert criminal defence lawyers”.

In large complex projects there can be many reasons for cost overruns which do not necessarily result from criminality. However Martin Bowdery points out that higher wages could not possibly account for more than a small fraction of the final costs. Even Unite’s national construction officer was not convinced workers were on union rates, and reported they were “self-employed” further up the union food chain.

While the bourgeois press made much of claims that former General Secretary Len McCluskey benefited from free flights on private jets to Euro pean football matches provided by the Main Contractor to watch his beloved Liverpool in action, in one case involving a well-publicised stay at a Madrid hotel, there is much more to the case. McCluskey, from the former T&GWU part of Unite, was GS of Unite between 2011 and 2021, while the project was first discussed in 2012 and completed in late 2020. He states that precisely because he was a known friend of directors of the Main Contractor he did not involve himself in the details.

Overall McCluskey’s lawyers have said that the allegations made in the Unite Report about him were “inaccurate, selective and highly misleading”. He has correctly not publicly responded to specifics due to the ongoing investigation but has had his responses to certain matters recorded in the Report. He has firmly denied allegations about the football trips, asserting he always paid his own way.

The Details

Martin Bowdery found that Unite had been overcharged by at least £30 million by the main contractor. According to BDO this resulted in a £66 million impairment in the 2021 accounts. This overcharging included an original estimate of £91,000 for holes in blockwork walls for which the union was billed £1.3 million.

There was no competitive tendering for the Main Contractor. This was the Liverpool-based Flanagan Group. Responsibility for placing the contract is disputed. The Report claims Len McCluskey did so, despite objections from Unite staff and lawyers. In turn Mc Cluskey claims these decisions were made by a now deceased Finance Director without his knowledge.

The Report provides evidence of the Finance Director objecting to Flanagan being appointed and later being told to stop criticising Flanagan when the project was underway.

It has been noted that in 2015 Unite paid £500,000 to Flanagan for payments or loans for an unrelated matter which does not seem to have been repaid. There were many other complaints within Unite against the Flanagan Group due to de lays and cost overruns on previous projects. Some thought it was unnecessary.

In 2016 a wholly owned subsidiary company, Black horse HCC Limited, was set up to manage the project. Curiously three directors claimed they were unaware they were on the board for several years.

There are also disputes about when Unite was aware of the increased costs. McCluskey says he knew costs had reached £90 million in late 2019. Another senior Unite official was told three times in March 2020 it had risen to £98 million. But the EC was only officially told in January 2021 after the Times reported on it. Because it was reported in that paper some tried to dismiss the criticisms as a right-wing attack against the union.

Regarding how the union handled these matters, the Unite Report describes how solicitors Bark & Co identified that potential wrongdoing could emerge due to there being an “ask no questions” culture which saw those that did raise concerns being isolated.

Bark also claims that a culture of favouritism could enable wrongdoing and misuse of Unite members’ funds. This was ensured by jobs and promotions only going to members of the United Left (UL) faction which meant there was little real scrutiny of the escalating costs and other issues”.

This is backed up by the BDO Re-audit of 2021 which concludes that there was a “pervasive fraud environment” under the Len McCluskey leadership, in which “dominant personalities and a weak control environment facilitated”.

BDO also say that in addition to evidence that “certain former members of senior management may have acted dishonestly, not in accordance with Union policies and over-rode controls” there was: “a wide range of significant control deficiencies, further facilitating potential management override of controls”. It recommends that “the EC should put in steps to enhance controls throughout the Union, to reduce the ongoing risk of fraud and error”.

Sharon Graham says that since launching the investigations she has “been subjected to a campaign of unacceptable tactics, including intimidation, and being targeted by online smear campaigns typically using anonymous and fake accounts”. She has also attacked UL members on the EC for being obstructive on this and other issues. This included UL attempts to depose Unite Chair Andy Green who broke ranks with them. She warned that as “money left our union when it should not have, I will do everything in my power to get our money back.”

Looking to the future the Report announces plans to prevent a repetition including a new qualified Finance Director, professional accounting team; a new gifts policy, and the first ever Procurement manager who will develop new rules. A Democracy Commission, from the Shop Steward base, to make recommendations on the union’s governance is promised.

What Next

Whatever the details of the outcome of this matter, it is clear that Unite will not come out smelling of roses. In particular, it does not look good for the old guard left in Unite, who were in charge while this was happening. The normally vocal United Left has largely ignored the issue, except to remind us that Sharon Graham sat on the committees which approved the project.

Gerard Coyne, the right wing former West Midlands secretary and twice unsuccessful GS candidate, told the Observer that “this is one of the biggest financial scandals in union history and I feel over whelming relief that a light has been shone on this terrible episode. It’s gobsmacking that an organisation that had a turnover of more than £170 million a year had no proper checks and balances on financial spend and accountability. There was a shocking and systematic mis use of union members’ money”. In future elections UL will have some difficult questions to answer.

Broader issues affecting the whole trade union movement arise from this matter. At a time when a watered-down Employment Rights Bill is going through its final parliamentary stages such matters do not bode well for those arguing for less state control of unions in such matters as running strike ballots.

Another lesson that needs to be learned is that claims by “left-wingers” that any criticism of their activities in the union movement is the part of a right-wing conspiracy should be subject to a degree of scepticism. It is notable that the “daily paper” of the left has been almost totally silent on the matter. At the time of typing, several days after the release of the documents, the Morning Star has not said a single word about them.

It is perhaps unrelated, but Unite Assistant General Secretary Steve Turner has recently announced that he is retiring during TUC week, after a 42 year career in the union which began with him being elected as a shop steward at a London bus garage. It will be interesting to see if this becomes part of a trend.