Crossbencher Lord Bhatia misappropriated £600k of charity funds

4 December 2013 Last updated at 22:02

Lord Bhatia ‘misappropriated £600,000 of charity funds’

By Mark Daly

A peer has been accused by a charity of misappropriating more than £600,000 of its funds while he was in charge, the BBC’s Newsnight programme has learnt.

Lord Bhatia, a crossbencher, is accused of funding his own lifestyle with Ethnic Minority Foundation (EMF) money.

The peer, 81, was suspended from the Lords in 2010 after wrongly claiming thousands of pounds in allowances.

His lawyers said Lord Bhatia believed the charity had misled the BBC, and EMF in fact owed him more than £250,000.

They added that legal cases were ongoing.

EMF, which Lord Bhatia helped set up, brings in about £1m a year and distributes its money in India and the UK.

Forensic accountant
The peer was its chairman in an unpaid role until 2009 and, the charity says, later offered to take over when the chief executive left to monitor projects in India.

The charity’s board of trustees claims this arrangement was never formalised, and that it was unaware of a purported £100,000 annual contract paid to a consultancy firm owned by Lord Bhatia.

Anil Bhanot, who became EMF’s treasurer in 2012 and is now chairman, said: “He was using the charity to run his own lifestyle really, and that was wrong.”

The charity trustees, who allege Lord Bhatia’s mismanagement of the charity brought it to within weeks of collapse, confronted the peer in December 2012 over their suspicions, and he immediately resigned.

A forensic accountant was brought in to investigate and EMF passed the draft findings to BBC Newsnight.

Lord Bhatia, who was appointed to the Lords in 2001 as one of the first “people’s peers”, faces a series of allegations relating to a total claim of £625,961, including:

That he awarded himself a contract of employment without ratification from EMF’s board. The charity says the contract is invalid and, even if it had not been, the £100,000 salary was excessive and they are entitled to £187,318 back
That his personal chauffeur was paid more than £40,000 a year, which was charged to the charity. In January 2012, Lord Bhatia gave him a £12,000 loan and £12,000 pay rise on the same day, effectively a huge cash gift
That EMF alleges Lord Bhatia owes it £94,094 for failing to make agreed contributions to rental it was paying for a premises owned by the peer
That he put a relative and long-term acquaintance on the charity payroll – to the tune of £75,264 – when they were private personal assistants working mainly for him
That he charged to the charity £22,746 for private medical insurance for three members of his family

That the peer made other inappropriate expenses claims, such as for nearly £800 of duty free and almost £5,000 of House of Lords refreshments. Some expense forms were authorised by Lord Bhatia for himself, contrary to charity policy, the charity says

In addition, documents seen by BBC Newsnight suggest Lord Bhatia could once more stand accused of abusing his parliamentary expenses, an allegation the forensic accountant says could amount to fraud. In October 2010, Lord Bhatia was suspended from the Lords for eight months for wrongly claiming £27,446 of home-related expenses, which he later repaid.

When he returned from suspension in 2011, and throughout 2012, he did not claim any Lords expenses and only started doing so again in January 2013, just weeks after the split from EMF.

However, during 2009 and 2010, Lord Bhatia was claiming his chauffeur-driven mileage expenses from EMF, while at the same time submitting claims to the Lords for journeys to Westminster.

The records show Lord Bhatia appeared to do this 138 times, resulting in payments of more than £1,500 from the taxpayers’ purse.

Lord Bhatia’s alleged double-claiming went on until July 2010, just a few weeks before his Lords suspension, but it did not form part of the case against him. It is understood these allegations are being made for the first time.

Commission referral
Liberal Democrat peer Lord Oakeshott, the party’s former Treasury spokesman in the Lords, said: “We’re sadly used to expenses fiddling on what most people would think was a large scale in the Lords.

“But to be accused by a charity of milking them for £625,000, that is breathtaking.”

Lord Bhatia’s lawyers say that the allegations relating to his Lords expenses are an attempt “to reopen and confuse the historical published position with the present dispute between Lord Bhatia and EMF”.

The case has already been referred by EMF to Action Fraud, the national fraud and internet crime reporting centre, and to the Charity Commission, which regulates charities in England and Wales.

The Charity Commission told BBC Newsnight that it could not comment in detail as the case was on-going, but could confirm that it had been meeting EMF trustees and had “issued corrective advice to ensure they improve the charity’s governance, in particular its financial controls. This will help prevent future abuse”.

BBC Newsnight invited Lord Bhatia to be interviewed about the allegations but he declined because of what his lawyers said were unresolved claims made by the peer against EMF in the High Court and in an employment tribunal.

Lord Bhatia is suing for unfair dismissal, and has launched separate proceedings against EMF to recover more than £250,000 that he says he loaned to the charity.

The trustees say these were not loans, but injections of cash to cover up the scale of his own mismanagement.

Lord Bhatia’s lawyers told BBC Newsnight that he considered it “regrettable that the trustees of EMF have chosen to involve you in these matters, rather than engage in the appropriate court process”.

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