Report released into alleged housing charity impropriety

7 Dec 2018 Ryan Miller    Last updated: 7 Dec 2018

The Charity Commission says Victoria Housing Estates Ltd, under the stewardship of Co Down solicitor Derek Tughan, lost £12m in questionable loans and suffered a £21m underspend on its properties.

One of Northern Ireland’s longest running cases of alleged charity malfeasance appears to have edged nearer to a close.

This week, the Charity Commission published its interim inquiry report into Victoria Housing Estates Limited (VHE), one of two housing organisations the Commission began investigating in 2012 after red flags were raised by HMRC.

VHE manages over 420 properties, worth well into eight figures, which are let to tenants in Greater Belfast and North Down, as well as collecting ground rent from 600 properties and other pieces of land.

The report alleges a series of financial chicanery, as discovered by auditors PwC, who carried out a forensic analysis of VHE, as well as Bangor Provident Trust, on behalf of the Commission.

It also outlines the apparent parlous state of the organisation – owing £2.8m to HMRC, and with its properties left in disrepair by the former trustees and needing over £21m investment to bring them up “to an acceptable standard”.

Over £13m had been removed from the charity as loans to firms in which trustee Derek Tughan, a Co Down solicitor, had interests. Per the Commission, the vast majority of these loans – more than £12m – has never been repaid.

However, Mr Tughan has long claimed that the organisations are not charities at all, and he owns all the assets himself.

Forensic analysis

PwC reported its findings on VHE to the to the Commission in 2015, including that:

  • Over £13,000,000 of the charity’s assets was advanced, as amounts recorded as loans, to various companies of which Mr Derek Tughan had an interest. In excess of £12,000,000 of these loans has not been returned to the charity.
  • Recorded loans in excess of £100,000 were also made to a relative of Mr Tughan and to an employee of an unrelated private business of Mr Tughan’s, for which no repayments have been received by VHE.
  • For a number of years, two of Mr Tughan’s relatives received monthly salary payments from VHE, totalling over £3,000 gross per month, but there was no known service evidenced as provided for these salaries.
  • £750,000 was paid to HMRC, by VHE, which was later confirmed to be in respect of the tax liabilities of Mr Tughan’s family.
  • An employee was paid a monthly salary, by the charity VHE, to chauffeur Mr Tughan and work on another of his businesses.
  • London properties [including in the eye-bleedingly expensive Mayfair] were used exclusively by Mr Tughan and his family, with all costs paid by VHE, yet there was no evidence how these properties furthered the charity’s purposes in any way.

When they received this report, the Charity Commission immediately removed Mr Tughan as a trustee and providing notice of their intention to remove the other two trustees, Ronald Woods and Jill Robinson, who subsequently resigned. Charity expert Roger Courtney was appointed as trustee and given the power to appoint more members to the board.

Meanwhile, the Commission began legal proceedings – still ongoing – to commence the recovery of cash wrongly taken from VHE (and Bangor Provident).

This led to huge resistance from Mr Tughan, whose father founded VHE and Bangor Provident in the 1950s, with the expressed aims to:

  • to carry on for the benefit of the community, the business of providing housing and any associated amenities for persons in necessitous circumstances upon terms appropriate to their means.
  • to provide for aged persons in need thereof housing and any associated amenities specially designed or adapted to meet the disabilities and requirements of such persons.

After being removed as a trustee, Mr Tughan took to the courts – and the media – to cry foul, claiming the organisations were not charities (this was rejected in the High Court), and that “the family silver” had been taken in “state-sponsored theft”.

The situation now

The Charity Commission’s report outlines some of the remaining difficulties in dealing with this case, including with legal efforts to recover assets that are still being fought with former trustees:

“The Commission acknowledges that the charity has suffered significant losses. The charity’s new board, under the chairmanship of Mr Courtney, has identified further significant failings in the previous management of the charity. In particular, the former charity trustees failed to properly maintain the charity’s property.

“As a consequence the charity has identified that over £21,000,000 is required to bring its properties to an acceptable standard. This is an unacceptable situation for both the charity and its beneficiaries.

“The charity has also been presented with a significant HMRC bill (approximately £2,800,000) as a result of the former charity trustees failing to use the charity’s assets solely for charitable purposes. Combined with the amount of money still outstanding to the charity, this has left the charity in a vulnerable financial position.

“VHE’s new board has joined the Commission in the legal pursuit of recovery of misappropriated charity funds from Mr Tughan, Mr Woods and Ms Robinson. While this legal action is ongoing no further detail can be released through this interim report.”

In its concluding remarks, the Charity Commission highlights the somewhat exceptional nature of its investigation: “One of the Commission’s objectives is to increase public trust and confidence in charities. The Commission would stress that conduct as described in this report is not representative of the charity sector in Northern Ireland in general. The public can be reassured that the Commission will take all necessary steps to address identified mismanagement or misconduct in charities…

“All those named in this report have had an opportunity to comment on its factual accuracy. The only comment received disputing the accuracy of the report was from Mr Woods. Mr Woods responded to say that he did not accept the contents of this report and to confirm that the litigation to recover alleged misappropriation is being defended.”

Conclusions and next steps

From this point on, the health of these organisations – left in a state by the previous trustees – and, accordingly, the status of the residents is what needs to be paramount.

A new board is in situ and is working, alongside the Commission, to maintain the health of the organisation as best as possible.

Myles McKeown, the Commission’s Head of Enquiries and Compliance, said: This inquiry has been one of our largest to date. Ongoing court processes, alongside the volume of the misappropriation of charity assets, meant this inquiry has been particularly complex and protracted.

“Despite this, we have remained determined in our approach and the inquiry is a good example of where the Commission has identified a major risk to a charity’s assets and taken the appropriate action to investigate and resolve matters.

“The VHE case is not closed and the Commission acknowledges that the charity has suffered significant losses due to the previous management. However, we can assure the public, and the charity’s beneficiaries that we, and the charity’s current board, are working to recover funds and ensure any remaining assets are used to fulfil the charity’s purposes.”

The Commission says no decision has been made about whether a similar report will be released into Bangor Provident Trust. It is anticipated that more-detailed final report will be compiled once all legal matters relating to these organisations are concluded.

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