An academy trust is suing former bosses for damages over business trips around the world, thousands spent on consultants and holiday cottages – and even wants them to repay their salaries.
“Excessive” expense claims, luxury hotel stays and a £380 bill for a meal in an upmarket steak restaurant are also among 120 “losses” set out by the SchoolsCompany Trust in its claim against former trustees. It is a landmark case, as previously government has just written off such costs.
The trust, which gave up its four schools in 2018 amid allegations of financial mismanagement, is seeking damages of almost £2.8 million – the amount it owes back to the government.
But, three years after the Department for Education gave the legal bid its financial backing, the case is in chaos, with an estimated £900,000 in costs racked up so far and a trial unlikely to happen until next year at the earliest (read the full story here).
For years, details of the case remained under wraps. But public documents were finally made available this month after Schools Week appealed directly to the presiding judge, Master Dagnall.
Four-star hotels and flights to China
SchoolsCompany was set up in 2012 and, in March 2015, became the sponsor of AP schools Central Devon Academy, North Devon Academy and South and West Devon Academy.
It sponsored a secondary, Goodwin Academy in Kent, from July 2016.
Documents prepared by the trust claim the organisation had an operational deficit of £6.4 million by August 2018. This would have been £9.3 million, but the trust received £2.9 million in non-repayable grants from the Education and Skills Funding Agency.
Around £3 million was transferred as liability to the schools’ new sponsors, while around £750,000 was working capital funding, leaving £2.8 million which is still owed to the ESFA.
The trust said the loss had been caused by “numerous breaches” of the defendants’ duties.
These included “their poor governance of the trust, the design and implementation of inadequate financial systems, failure to institute proper internal controls and to ensure that the trust board was properly constituted with appropriate and sufficient oversight of the claimant”.
As a result of the “multiple financial and governance failures”, the defendants “collectively failed to achieve a balanced budget contrary to their duty to do so”.
A spreadsheet filed in court by the trust details the “losses” it has calculated so far. Notable items include £1,766 in flights to China in 2017, as well as a stay at the four-star Jin Lun Hotel Beijing, costing £163.19. It is not clear who the travel was for.
The trust’s case is against former CEO Elias Achilleos (pictured), his company SchoolsCompany Limited and Everton Wilson, the trust’s former finance director.
Claims against one former trustee, Heinrich Zimmermann, have been “stayed”, while Patrick Eames, another ex-director, settled for an undisclosed sum earlier this year.
Achilleos is accused of pursuing “domestic and international business projects” while employed at the trust. These allegedly included “investment opportunities in Ghana” and the “exploration of other projects in South Africa, the UK, Nigeria, Sierra Leone and Zimbabwe”.
But a defence filed on Achilleos’s behalf stated this was based on “speculative” notes.
Middle East business trips
He is also accused of taking trips abroad “in pursuance of his commercial activities which were not for the benefit of the claimant”, including travel to the United Arab Emirates, Saudi Arabia, Singapore and the Netherlands.
His defence admitted that the trips took place, but said that many were for the benefit of the trust, and that those that were not were paid for by his private school improvement company.
Also included in the trust’s claims is a receipt for £383.28 spent at Gaucho Broadgate, a steak restaurant in the City of London, as well as receipts for various hotels including the four-star Rougemont Manor Brentwood.
One receipt for £636 is marked “Dorchester Hotel”. It is unclear if this refers to the five-star London hotel, or a hotel in the town of Dorchester, Dorset.
The trust also alleges losses of tens of thousands of pounds relating to payments to staff working as consultants rather than employees, resulting in “larger expenses being made to consultants than would have been if they had been employed”.
But Achilleos’s defence argued that “had the consultants been employed by the claimant, the claimant would have been liable to pay a higher starting salary plus on costs and relocation costs”.
Other alleged losses include “excessive” mileage claims and gifts, such as hampers and flowers, and money spent on renting several properties for senior staff who did not live near the schools where they worked.
This included bills of thousands to rent properties called “The Annexe” and “Blacksmiths Cottage” as part of a “rent and relocation” package.
They also pointed to more than £10,000 in rent for a property at Lower Tideford Farm, which hosts holiday cottages, and another bill of more than £10,000 for a flat in Bideford, north Devon.
Achilleos has also admitted claiming £511 for new tyres and a service for his Mercedes car, but said he charged it “in the knowledge that [he] was owed substantial monies from unclaimed mileage”.
Finances open to ‘widespread abuse’
The trust alleged that the defendants “exercised decision-making powers without recourse to the trust board, a system facilitated by the inherent lack of separation between delivery and oversight, and did so without minuting and/or documenting the reasons for their decisions.
“The financial system by which [the defendants] were able to spend public funds, resulting in the substantial misapplication and disproportionate use of the same, was further facilitated by the lack of internal controls adopted by those charity trustees.”
But Achilleos’s defence said that “no funds were misapplied and/or disproportionately used. There was no lack of internal controls. The claimant has not set out any such substantial misapplication and/or how funds were disproportionately used.”
The position “was one in which [Achilleos and Wilson], in breach of their duties as directors and charity trustees of the claimant, exercised extensive financial control without any scrutiny and/or oversight resulting in a system that was open to widespread abuse”.
Achilleos’s defence denied this and said that “all such expenditure was open to the appropriate individuals to have sight of”.
The trust is seeking “damages and/or equitable compensation” relating to the losses it has identified, an order that the defendants repay what they were paid when employed by the trust.
A defence filed on Wilson’s behalf said allegations of fraud and dishonesty “should be struck out due to the absence of reasonably credible material which establishes an arguable case of fraud against him”.
The particulars of the trust’s claim had “become imprecise and overloaded with allegations that do not give rise to causes of action”.
The trust announced earlier this year that Eames had settled for an undisclosed amount and had “volunteered to assist SchoolsCompany Trust with its claim against the other defendants”.
A defence on Eames’s behalf, filed before the settlement, said the allegations were “unjustified, improper and not supported by the evidence”.
It added: “This is not to say that [Eames] does not, with the benefit of hindsight, recognise that he made errors in his work for the claimant. Those errors largely arose from the trust [Eames] placed in [Achilleos] and others to whom certain responsibilities had been delegated.”
