Prompted  by the discovery that the NWDA did not obtain guarantees from both the directors of Lucy’s of Ambleside Limited I asked them this question:

Given that any personal guarantee is only as good as the financial standing of the person giving it, would you please tell me what the due diligence process provided in the way of evidence of Mrs Nicholson’s personal worth to assess the value of the guarantee, i.e. what assets did she own and what value was placed on them and by whom?

Their reply is interesting, to say the least!

An assessment of her assets was made as part of the application process, and at the time it was not considered that it would be necessary to seek repayment under the guarantee as the business was judged to be viable and capable of servicing the loan which was advanced from the Fund as well as its other borrowings going forward. The advance of the loan was not conditional on there being sufficient assets to cover the guarantee but the guarantee was taken as an insurance to enable the Fund to potentially recover some or part of the loan in the event of a default. As important is that the guarantee was taken in order encourage a greater personal commitment from (in this case) the controlling Director within the business and to ensure personal responsibility for decisions taken and implemented.

You will appreciate that a purpose of the Transitional Loan Fund (TLF)was to provide finance to viable businesses which were unable to access funding that they needed from commercial sources, as well as to preserve jobs in the North West region. Businesses applying for loans through the TLF were by their nature ones that could not meet the commercial lending criteria of banks or other institutions for various reasons for instance due to lack of an established track record of earnings growth, or lack of security. The business in this case fitted that profile.

I cannot understand how the “the business was judged to be viable and capable of servicing the loan” when I, with only minimum financial information, said at the time the loan was given:

1. The company’s balance sheet at 30 September 2008 showed net assets of £122 (2007 – £18,100) having taken into account an overdrawn directors’ loan account (included in debtors) of £52,777.
2.  There is a note in the accounting policies “As the company has significant current liabilities at the balance sheet date the going concern basis is dependent upon the continued support of the company’s creditors”. This is “accountants’ speak” for the company is unable to pay its debts. It is also extremely rare for accountants to qualify their opinion. In other words they think things are really bad.
3.  As noted above the company has financed its fixed assets with current liabilities, a situation prophesied by the directors themselves in September 2006 in an interview with the local paper, The Westmorland Gazette. The article reveals Lucy Nicholson, one of the directors, has invested nearly half a million pounds in the project but then she adds “Goodness knows where the money is coming from”!
4.  The “half a million” investment isn’t in the accounts. I think she may be confusing spending (other businesses’) money with investment.

I just wish I could say

Well, at least it’s not my money which has been lost

but I can’t because it’s ours as taxpayers.

Earlier today  I asked the NWDA this

Throughout the period the loan application was being processed by the NWDA the company (Lucy’s of Ambleside Limited) had two directors not one.

Will you please let me have the following information:

• How did the NWDA establish the number of directors?
• What information did they have which indicated there was only one director?

They have just replied as follows:

You are correct to state that throughout the application process the Company had two Directors, one of whom was in the process of resigning from his position and severing his links with the Company. This was advised to the NWDA and the Fund Manager by the Applicant and its Advisors during the due diligence process, and the loan application was processed on the basis that the Director concerned would have no further involvement in, or influence over the Company going forward.

Which makes me wonder why, if he was “in the process of resigning from his position and severing his links with the Company” did it take him another 13 months to resign?

The North West Development Agency’s (NWDA) answer to my  Freedom of Information request ,  “When you lent the money to the above company did you ask for personal guarantees from all or any of the directors?” is

The due diligence checks on individual requests for funding from for the Transitional Loan Fund were undertaken by Fund Managers on behalf of NWDA and in this case the Fund Manager did ask for, and obtain, a personal guarantee from the sole director of Lucy’s of Ambleside Ltd prior to the loan being advanced.

Which, in a word, is puzzling because when the money was given to Lucy’s of Ambleside Limited there were two directors, Lucy Nicholson and her husband, Brian Nicholson as shown on  the company’s Annual Return which was filed at Companies House on 8 October 2009 ( the money was given to the company on 27 May 2009 )  and Brian Nicholson didn’t resign until 1 July 2010. Details of his resignation were filed at Companies House on 21 October 2010.

What difference does all this make? Quite a lot really, because when the NWDA found out their loan wasn’t going to be repaid in full they were obliged to fall back on any additional security which they had arranged when the loan was granted. Lucy Nicholson was declared bankrupt earlier this year which meant that the guarantee given to the NWDA was worthless. If, however, they had obtained guarantees from all the directors they would have been able to claim against Lucy Nicholson’s husband, Brian.

I have no idea if this would have made any difference but I cannot understand how the NWDA’s “due diligence checks” failed to reveal that Lucy Nicholson was not “the sole director of Lucy’s of Ambleside Limited” when the information was available to the public.

And without details of Brian Nicholson’s financial position I cannot say if a personal guarantee from him would have allowed the NWDA to recover some of our (the taxpayers’) lost money.

What I would like to know is why so much much money was given to such a financially weak company without minimising the risk of loss?

My next Freedom of Information request?

I am delighted to learn that Cumbria has been handed £4.4 m to help kick-start building projects with the consequent knock on affect for the local economy.

Mr Pickles, the Communities Secretary, announced the money

will unlock much -needed local infrastructure and get the homes we need built

This sounds like great news for Cumbria, much needed housing and a boost to the local economy. But is it? Unfortunately the money is being given to Cumbria Local Enterprise Partnership (LEP)? Mr Pickles goes on to say that he wants the LEP to find

innovative ways to unlock local sites and help get Britain building again.

Up to now, true to form, there is no mention of this on the Cumbria LEP website. I found the details because of a Google Alert which highlighted the story in the North West Evening Mail. Interestingly the paper describes Cumbria LEP as

the much-criticised body set up to replace the doomed regional development agency

When is Cumbria LEP going to get off its backside and do something to make things happen? Do the board members understand the meaning of “proactive”? Have they looked at other LEPs to see what they are doing?

I, for one, will not be holding my breath waiting for the answers to these questions!

And, just for once, I’m not referring to the many acts which Mintfest have “sponsored” over the years in the name of Art. Although to fully understand the point I’m making you shouldn’t forget such classics as:

The Concert of Silence;

The Spurting Man; and

The Tom Jones Experience

However, that’s enough “fun” for the time being.

Like so many other businesses, and it’s important to realise that the festival is run by a private company (Kendal Arts International),  Mintfest is running out of money. So much so that Julie Tait, one of the directors, has told the Westmorland Gazette

(the) street festival could be under threat if thousands of pounds is not raised to plug a funding hole

but no need to worry. The ever resourceful “organisers” have come up with a plan to ask the public to donate money to Kendal Arts International (a private company) to keep the “street event intact”.

Leaving aside, for the time being,

• The accuracy of the figures used to justify the success of Mintfest as highlighted recently by Private Eye ;
• The £24,000 which South Lakeland District Council have already given towards Mintfest 2012 ; and
• The £128,000 sitting in the company’s bank account at 31 March 2011 (the date of the latest accounts filed at Companies House)

I have just one thing to say to the directors of Kendal Arts International

If you want to be treated like a charity act like one and at the very least publish full details of your income and assets but, also, don’t forget that December is an important time for giving and traditional charities will be suffering in the recession as well. Every £1 given to Mintfest is a £1 less for far more deserving causes.

I am delighted that, at last, Cumbria Local Enterprise Partnership has started to create jobs in Cumbria.

Admittedly, the job is only:

• temporary (until March 2012)
• in the public sector, and
• is in Cumbria LEP itself!

but it’s a start (after all Cumbria LEP only really “got going” last February, and that’s only eight months ago!).

Finally, why doesn’t the newest business development quango in Cumbria have an up to date list of Cumbrian businesses because that’s what the job is all about – phoning local businesses and updating their details.

It’s more than ten years since Foot & Mouth hit Cumbria and, since then, countless £millions of public money have been pumped into the county to develop its economy, and to what end?

Because our Local Enterprise Partnership doesn’t even have an accurate database of Cumbrian businesses.

Earlier this month I wrote to the NWDA asking if they had taken personal guarantees from the directors of Lucy’s of Ambleside Limited when they lent them £250,000, which bearing in mind the lack of suitable security would have been nothing more than good ‘banking’ practice. Yesterday I received this reply.

Leaving aside the question of why the NWDA couldn’t have forwarded my e-mail to Capital for Enterprise Ltd, I e-mailed my request to David Campbell and immediately received this ‘reply’

The following message to <david.campbell@capitalforenterprise.co.uk> was undeliverable. The reason for the problem:  5.1.0 – Unknown address error 550-’5.7.1 Unable to relay’

At the same time as I asked the NWDA about personal guarantees, I sent another e-mail to them:

Guess what? No reply! After all though, it’s only public, taxpayers’ our money, so why should the NWDA care?

Quite frankly I just don’t understand!

Lucycooks seems to be a profitable company judging from the latest set of accounts which I have downloaded from Duedil

The profit for the year ended 30 September 2010 must have been nearly £136,000 to reduce the profit and loss account reserve from £243,600 to £107,609.

Which makes me wonder why the £200,000 which Lucy’s Of Ambleside Limited loaned to Lucycooks Limited before going into liquidation in February of this year has been treated as valueless by the liquidators (see below for the relevant extract from the liquidator’s report)

Private Eye raised the question of who was going to repay the £250,000 which was “given” by the NWDA to Lucy’s of Ambleside Limited to

enable it to secure its growth

I think I may have found the answer to £200,000 of it!

Readers of the 3CA Blog will know that I have always had my doubts about the figures supporting the success of Mintfest and Lakes Alive but it wasn’t until last week that I realised I had been barking up the wrong tree.

My worries about the connection between Mike Savage, a Research Fellow at Cresc, who was Director of the ESRC Centre for Research on Socio-Cultural Change (CRESC) from 2004 to 2010 and  Kendal Arts International are actually nothing compared to what  Private Eye said about a report prepared by CRESC eulogising Lakes Alive’s “remarkable rate of return on public investment”:

the glowing CRESC report was written by senior research fellow Andrew Miles who at the time was on the Companies House register as a director of Kendal Arts International ….. [ I think he was actually Company Secretary ] *

But then Private Eye adds

Oh, and he also happens to live with Lakes Alive boss Julie Tait, who is his partner and mother of his child.

Well, well.

* The comment about being Company Secretary is my own comment and is not in Private Eye

For a long time I have been questioning the accuracy of the figures trumpeted by Mintfest showing what a vital part of the local economy it has become!

One of my main concerns is that Mintfest relies almost totally on public money yet we (the public) have no idea how the money is spent. Mintfest is run by Kendal Arts International Limited which is a private company and although abbreviated accounts are available from Companies House they don’t really tell us anything.

South Lakeland District Council don’t share my worries though because they have just given Mintfest £24,000 towards Mintfest 2012.

Neither does our local ‘paper’, the Westmorland Gazette, it seems. Private Eye ran a story on “the figures” last August and I contacted the Gazette this week giving them details of the story. Up to yesterday they hadn’t had time to look at cutting !

P.S. Perhaps the £24,000 could have been better spent on keeping Kendal’s public conveniences open.