Monday, 11 February 2013

Digging deep into deals done dirt cheap

A brief recap

Back in March 2012, the Regeneration Investment Fund for Wales (RIFW) – an "arms-length" Welsh Government body - sold a bundle of 18 plots of publicly-owned land across Wales to a Guernsey-based company called South Wales Land Developments (SWLD) for £20.6million. RIFW's aim is to raise money through land sales to match fund/loan to companies working on urban regeneration projects in West Wales & The Valleys.

One of those parcels of land, in the Lisvane area of Cardiff, was earmarked
– something of an open secret - by the incoming Labour Cardiff Council administration for housing as part of their changed Local Development Plan.

If you had the money, and were involved in property development, you would've had to have been brain dead not to show interest. It appears as though potential buyers - including SWLD - were "canvassed" directly rather than the sites going out on open sale, which is rather strange. In short, it wasn't a completely open tendering process.

As everyone knows, land values are based on a number of factors including planning consent or strategic land use plans. In this case, the value of the Cardiff land sold to SWLD will have risen from just under £2million to ~£120million because of Cardiff Council's outline proposals for housing.

Former police officer Byron Davies AM (Con, South Wales West) noticed that this was "odd" and referred the matter to the Wales Audit Office for investigation last September. Things began to steamroll, and eventually the WAO expanded the scope of the investigation.

Nearly five months on, Minister for Housing, Regeneration and Heritage, Huw Lewis (Lab, Merthyr Tydfil & Rhymney) ordered a double internal investigation into both the handling of the sales and how RIFW operates. Eight RIFW projects (except one in Neath town centre) have now been suspended.

Who's diddled who?

"Claw back clauses" were inserted into the deal to ensure that if land values rose, some money could be claimed back by the Welsh Government (or "taxpayers" i.e you and me). That's perfectly sensible.

However, as BBC Wales' Nick Servini pointed out, we don't know much about these claw back arrangements, which parcels of land they apply to, or how much the Welsh Government could expect to make back.

There's the possibility that, from the Lisvane land alone, if there wasn't some significant claw back agreement then RIFW (and by extension, the rest of us) could've missed out on up to £100million, possibly on purpose due to the "closed" tender.

An anonymous commentator on my last visit to this linked to a European Investment Bank presentation on RIFW. Some of RIFW's goals (slides 13-14) included :
  • A seemingly immediate need to "meet cash flow requirements for (their) investment profile".
  • Targeting up to "£55million of private sector investment in 2011/12".
  • "Securing planning consents to add value to (RIFW's assets)".

Securing planning consents? How about insecure ones like several thousand houses on the outskirts of Cardiff? That would certainly "add value to assets" - whether houses actually get built or not.

We all know how finicky the EU are about tendering processes. This might come close to falling under the definitions of some sort of fraud – perhaps "failure to disclose information when required to". That's before mentioning all the other unanswered questions about SWLD, RIFW projects themselves (or lack of) and the fund managers' handling of this.

As the anonymous commentator also pointed out, there didn't seem to be any requirement to get the best possible price. That's probably so regeneration projects can get started immediately – even if RIFW weren't doing very much at the time. I'm not business-minded, but although that might make political sense, it doesn't make much business sense.

They also claimed that the land was marketed at a 2009 valuation, not a March 2012 (point of sale) valuation - which is more than a little "odd".

If you have an asset - unless you don't have the option of negotiation (i.e liquidation) or you want a quick sale - you sell it for the best price you can get. And sometimes to get the best price you need as many people bidding as possible. Neither of those things appears to have happened - and this is, essentially, many millions of pounds of public money at stake.

Even if SWLD were in negotiations for up to a year before the sale, it would've been blindingly obvious to anyone with half a brain that ANY open land around Cardiff was going to be worth a fortune because of housing requirements. So why were RIFW so keen to sell it for such a "low" price, bundled in with so many other pieces of land (some of which equally valuable), to a company based in a tax haven, that was set up rather quickly and quietly, with more than a few "local connections"?

Land bank, anyone?

Even if they're not directly responsible for RIFW, the Welsh Government are certainly accountable. These "internal reviews" tend to mean answers are slow to come by. There's plenty of questions to answer for all involved. Especially :
  • Who valued the sites?
  • What were those valuations based on?
  • How was the land marketed?
  • Why the urgency to generate cash flows despite RIFW being practically dormant?
  • The details of alternative tenders.
  • What prior knowledge did anyone involved have about things like Cardiff's LDP?

Both Inside Out and Glyn Beddau have pointed out other possible talking points – too many to go into here. These things usually turn out to be less suspicious than first presumed, but I think this one's smelling rather ripe.

This could've been the case of rushed, lazy sale that's potentially lost millions of pounds in match funds for regeneration (gross incompetence). Or, it could've been a knowingly bad sale to benefit "someone" ("market abuse"/insider dealing, possibly fraud). It could even be a combination of the two – which could potentially make it one of the worst scandals of the devolution era.

Beth yw "cute hoor" yn Gymraeg?

Ha! Ha! Ha! Ha! Ha! Oh, please! Make it stop!
(Pic : BBC Wales)

There've been other questionable, but unrelated, planning and development proposals in Wales over the last few years too. More recently - in Gwynedd - the sale of a failed arts centre to private owners. That's also been referred to the auditors.

But in the Powys, Neath Port Talbot and Bridgend area, you can point to developments involving open cast mines. They were actually quite "impressive" proposals. Impressive in a "yeah, right" way.

One involved a "resort" in the Amman Valley. The second involved building some sort of Smurf village/Teletubbyland in a big hole on the outskirts of Kenfig Hill on the Bridgend-NPT border.

Gwenda Thomas AM (Lab, Neath) asked for the Amman scheme to be called in because of the scale/impact. Bethan Jenkins AM (Plaid, South Wales West) has often warned that these schemes are a "front" to smooth through extensions to mining licences - which are due to run out over the next few years. AMs have campaigned for more robust exclusion zones around open cast sites since the Assembly was founded. So the mines have a PR problem then.

Local councillors' responses were mixed. Some (understandably, but somewhat hastily) welcomed the prospect of jobs and investment, while others shared similar concerns to the AMs.

When the Kenfig/Margam scheme was revealed, first of all I had to check the date. Second, when I tried to blog on it I couldn't write as it was so funny. The thought of council cabinet members smiling, wearing Bob the Builder hard hats, as they looked over these plans was too much. It may as well have been a base on the Moon.

I wouldn't object to spending quality time with Christina Hendricks and Salma Hayek on a sweltering tropical paradise island. So sweltering, that it would mean they walk around in tight, but revealing clothing, while I occasionally get diverted with fruit, monkey butlers and grilled seafood.

Someone could offer me that, and bring me some flattering artist's impressions of what such a glorious undertaking would look like. But in order to obtain that dream, I would have to wash jock straps by hand at their Central Asian salt mine for 30 years. Also, they can't guarantee the desired outcome – more a loose promise/I.O.U.

"But look at the artist's impressions!" they'll say. "Look what you could have! Just sign here!" If you were a dopey guy easily mesmerised, you might ignore the fact that by the time you're free, Christina and Salma will have free bus passes.

A similar thing almost happened with these open cast mine projects, which would've prevented them being returned to their natural state. That's not so funny.

It's lucky some people still have their heads screwed on, because several people leading these open cast schemes, also involved in the sale of them – involving offshore-registered companies - were recently put on trial for conspiracy to defraud.

Hmm. Sounds familiar.


  1. Back in the '90s we had the Land Authority for Wales, another supposedly 'arms-length' agency, this one run by Lord Crickhowell's buddy, Sir Geoffrey Inkin, who also ran the Cardiff Bay Development Corporation, pouring public money into Cardiff docks for the benefit of Crickhowell and his friends at Associated British Ports.(

    I've always believed that there are too many politicians, civil servants, quangocrats and businesspeople in Cardiff spending too much time in each other' company in various clubs and other establishments. Making Cardiff rather corrupt.

    The only remedy is to devolve as much as possible out of Cardiff. Just ak yourself - would this scandal have happened if the RIFW had been based in Amlwch? Can't say for sure, but I guarantee it would have much less likely to happen.

    And I'm still waiting for an explanation of the role of Lambert Smith Hampton Did anyone at this company's Cardiff office know people at South Wales Land Developments?

    Wefo is also involved. The agency that has squandered so much EU Struuctural Funding on Labour's cronies in the Poverty Industry.

    The more one thinks about it, the more this takes on the look of a scandal just waiting to happen.

  2. Owen, is there a list of the 18 sites knocking around somewhere?

  3. Thanks for the comments.

    Jac - It could've happened anywhere. I noted the dodgy looking sale an arts centre in Gwynedd. Some people are just shysters wherever you go. I think the Auditors will be trying to determine things like the fund managers relationship with any of the parties involved - ha!

    I suspect this is more incompetence and being a "bad sale" than corruption though. Ultimately, the Welsh Government should've been keeping a close eye on this. You could point fingers at IWJ for setting it up/talked into setting it up this way, perhaps to meet EU guidelines. But Huw Lewis has been (nominally) in charge of it for nigh on 2 years. All this has happened on his watch.

    Cneifiwr - Here's a list (towards the bottom) obtained by Byron Davies.