Bosses threaten legal action over Iceland cash slur'
PUBLISHED: 17:57 01 April 2009 | UPDATED: 10:35 23 August 2010
A COUNCIL is taking legal advice after a report labelled it negligent in its management of high-risk investments in Icelandic banks. Peter Gilroy, the Chief Executive of Kent County Council (KCC), made a formal complaint last Friday to the Audit Commis
A COUNCIL is taking legal advice after a report labelled it 'negligent' in its management of high-risk investments in Icelandic banks.
Peter Gilroy, the Chief Executive of Kent County Council (KCC), made a formal complaint last Friday to the Audit Commission over the report and a spokesperson said they are taking advice on whether or not they can sue.
The report said most councils that invested in Icelandic banks - that crashed in October last year - acted within guidance but found that seven councils, including KCC, breached guidelines and had been 'negligent'.
In a letter to Michael O'Higgins, the Commission chairman, Mr Gilroy said: "The selection of those seven councils and the decision to brand them as negligent appears arbitrary, unfair and deeply damaging.
"I do not know whether this error is the product of a malicious and cavalier approach to the reputational status of the seven councils or a naive and incompetent style of reporting.
"Whatever the cause, the outcome is entirely unacceptable. We want a retraction of this statement and we require that retraction to have as much public profile as the criticism which has been generated."
KCC invested £50 million in three Icelandic banks - Glitnir, Landsbanki and the Heritable - but Nick Chard, cabinet member for finance, says he is confident they will get the money back.
He added: "KCC has been very open and transparent and has admitted a human error that meant £3.3 million was deposited in Heritable on October 1."
The 'human error' relates to the failure of a member of staff to open an email warning of a ratings change, before making the deposit.
The report adds that the common denominator for 'negligent' authorities was an overreliance on credit ratings agencies and advisers to the exclusion of other information. The Audit Commission itself made deposits totalling £10 million in two Icelandic Banks but said it has identified weaknesses and taken action.
A disclaimer to the report, entitled Risk and Return, reads: "The Commission's own exposure does not compromise our duty to understand what went wrong nor lessen our ability to analyse and comment."
Nick Chard, Cabinet Member for Finance at KCC, said the report is 'a case of the pot calling the kettle black'.
Steve Bundred, Chief Executive of the Audit Commission, said: "There is no doubt that the circumstances leading up to the collapse of Icelandic banks were highly exceptional, but the potential loss of nearly a billion pounds is of great concern.
"We found that most local authorities heeded the warning signs about Icelandic banks. But some did not, and a number were negligent."
But Lesley Berwick, 82, from Swanley, said: "They're trying it on. Of course they're to blame. They risked our money and that's that."
For the full report visit