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Complaint Number LA/SI/194 concerning an alleged contravention of the Councillors' Code of Conduct by Councillor Leslie Angus And Councillor Alexander Cluness of Shetland Islands Council

1. Complaint number LA/SI/194 alleged contraventions of the Councillors' Code of Conduct ("the Code") by Councillor Leslie Angus ("the first respondent") and Councillor Alexander Cluness ("the second respondent").

2. It was alleged that the respondents had contravened the Code, in particular, the key principles of Openness, Honesty, and Leadership set out in section 2.

3. The person complaining ("the complainant"), alleged that the respondents sought to deceive the press, public and other Council members by denying that the Chief Executive of the Council played a central role in the operations of the Shetland Development Trust.

4. Shetland Development Trust was formed in 1996 with the purpose of assisting in the creation of sustainable employment in Shetland by the provision of financial support and business advisory services. The Trust is funded from the Council's reserve fund and interest from its own loan repayments.

5. There are eight trustees, of whom four are appointed by the Council from its elected members, and four are appointed following public advertisement and interview.

6. In 2002 the Council resolved to separate the functions of the Council from those of the Trust. Accordingly, in July 2002, the Trust appointed a General Manager who took on the functions previously undertaken by the Council Chief Executive. Thereafter the Trust exercised a much greater degree of independence although still retaining the funding link with the Council.

7. One of the companies in which the Trust had invested was SSG Seafoods Ltd, whose principal business was salmon farming. In 2003 the company encountered serious financial difficulties which led the principal investor to withdraw its support, and to the appointment of receivers.

8. The collapse of SSG Seafoods Ltd resulted in a significant financial loss to the Shetland Development Trust and aroused local press and public interest. One factor in the debate was the decision by the Trust to guarantee payments to Skretting, a salmon feed company which supplied SSG Seafoods Ltd.

9. On 19 May 2004 a Council meeting was convened to brief members on the position regarding the receivership of SSG Seafoods Ltd and associated matters affecting the local authority. During the course of that meeting Councillor Angus, the first respondent, was asked whether the Chief Executive of the Council had participated in the decision to provide the guarantee to the feed company Skretting. Councillor Angus informed the meeting that this decision had been taken exclusively by the Shetland Development Trust trustees, and that the Chief Executive had neither participated in, or influenced, that decision.

10. Immediately after the Council briefing, representatives of the press sought to interview Councillor Cluness, the second respondent. During this interview Councillor Cluness was asked what involvement the Chief Executive had with the Development Trust between 2002 and the demise of SSG Seafoods Ltd. Councillor Cluness stated that as far as he was aware, the Chief Executive had no contact whatsoever. His denial was published in The Shetland Times.

11. The complainant read the article and noted this statement by Councillor Cluness. He formed the view that the statement by Councillor Cluness did not present the true position.

12. On 14 December 2004 the complainant wrote to the second respondent, referring to the article in The Shetland Times, and asked him:

a) to confirm that Councillor Angus's statement that the Chief Executive was not involved in Shetland Development Trust's investment deliberations concerning SSG; and

b) to confirm whether the Chief Executive took part in meetings relating to SSG, or in the preparation of reports to Shetland Development Trust prior to the company's collapse, and if so, what was the extent of his involvement.

The first question was in fact based on a misunderstanding in that Councillor Angus's comment had been made in the context solely of the decision by the Trust to provide the guarantee to the feed company Skretting.

13. On 5 January 2005 Councillor Cluness replied to the complainant that the Chief Executive had not been involved in the Shetland Development Trust's consideration of the investments in SSG in 2003.

14. On 23 January 2005 the complainant wrote a second letter to Councillor Cluness, asking him to confirm that the Chief Executive had not been involved in the formulation of investment strategies for SSG, or in meetings of officials and / or the Development Trust relating to investment opportunities in the company in the years prior to 2003.

15. On 9 March 2005 Councillor Cluness responded to the effect that the involvement of Council officers effectively ceased from the appointment of the General Manager in autumn 2002.

16. The complainant contended however that the apparent denial of the Chief Executive's involvement in decisions by the Trust relating to SSG Seafoods Ltd by Councillor Angus at the Council briefing on 19 May 2004, and by Councillor Cluness during his press interview on the same date, and of any involvement in investment strategies relating to SSG Seafoods in letters from Councillor Cluness to the complainant dated 5 January and 9 March 2005 were designed to conceal the extent of the Chief Executive's influence on the decisions of the Trust.

17. In examining this complaint I was mindful of the fact that the complaint stemmed from a press report of an interview with Councillor Cluness. The accuracy of the report was not disputed by the respondents however and I therefore accepted it as the basis for the complaint.

18. The complaint against Councillor Angus relied solely on the press report, and, while not denied by the first respondent, the context in which the denial of the Chief Executive's involvement was made at the Council briefing actually related to the decision to provide a guarantee to support Skretting rather than SSG Seafoods Ltd. The quote in the newspaper article was in fact drawn from a comment by the Chief Executive rather than being sourced from Councillor Angus directly, and it was not readily apparent to the reader that the original statement was restricted to the guarantee.

19. Councillor Angus did not address the specific allegation in his response to the complaint. He was not however present during the press interview and could not have clarified the point at that time. I noted from e-mails passing between the Trust's General Manager and the Chief Executive, prior to the decision on the Skretting guarantee, that the latter's involvement was restricted to consideration as to whether the Council could underwrite the guarantee as the Trust itself had insufficient funds to do so if it was called in.

20. In his letter of response to the complaint, Councillor Cluness referred to the wording used within his letter to the complainant of 9 March 2005, and in particular the statement that:

"At none of the meetings which had any bearing on SSG do I detect the involvement of the Chief Executive in the reports or in the discussion."

Councillor Cluness also stated in his response that in establishing this view he had accessed the minutes and reports considered by the Development Trust during his term of office as a trustee.

21. This statement appeared carefully composed in its reference only to reports submitted to the Trust and the participation of the Chief Executive in debate at Trust meetings. It did not however address the wider questions posed by the complainant in his letters of 14 December 2004 and 23 January 2005. I considered that these questions were clearly expressed by the complainant and, in seeking to confine his reply to reports and debate, Councillor Cluness's reply had been limited in content.

22. The note of the meeting on 6 February 2002 relating to SSG Seafoods / Dury Salmon, and a subsequent e-mail exchange, clearly established that both respondents were present during the discussion and kept informed of subsequent progress in developing a proposal for consideration by the Trust. While the passage of two years might have reduced their recall of this particular matter, it was an established fact that the Chief Executive was the principal advisor to the Trust until late 2002. Councillor Cluness's denial of the question posed by the complainant as to whether the Chief Executive was "involved in any capacity in the formulation of investment strategies for SSG, or in meetings of officials and/or the Development Trust relating to investment opportunities in the company in the years prior to 2003" did not sit easily in the face of the reality of the Chief Executive's advisory role.

23. I noted however that in seeking information from Councillor Cluness the complainant failed to disclose his possession of Council e-mails referring to the meeting in February 2002, when the proposal by SSG Seafoods Ltd to purchase the assets of Dury Salmon Ltd was raised. Had the complainant been open in this regard, the reply from Councillor Cluness might have been more illuminating and obviated the complainant's subsequent action in lodging this complaint.

24. I also noted the conflict that may arise when a councillor as a trustee, as in the case of the first respondent, also takes on the role of nominee director of a company in which the Trust has a financial interest. There is potential for a very real conflict of interest between their duties to the Council, the Trust, and the company. In the case in question Councillor Angus was in a particularly difficult situation when the trading position of SSG Seafoods deteriorated and the Trust was asked to make a significant financial commitment in the form of a guarantee to the feed suppliers. That position was further complicated by the fact that the Trust itself had insufficient financial resources to meet the guarantee and would be reliant on the Council to underwrite the agreement. The report placed before the Trust on 17 April 2003 highlighted the ‘current perilous trading position' of SSG Seafoods Ltd and the decision inevitably gave rise to a judgement between the requirement to show appropriate stewardship of public funds, the aims of the Trust, and the practical and urgent issue of continuing to feed live salmon to maintain their market value.

25. In considering this complaint I was required to examine the application of the Code. The complainant made reference to the key principles contained in section 2, and asserted that elements of all the principles listed applied to his complaint. I considered however that those relating to Openness, Honesty and Leadership were relevant to his complaint. These requirements are expressed as key principles and are not in themselves substantive rules of the Code, such as those set out in section 3 dealing with General Conduct.

26. The essence of this complaint was that the respondents sought to deny the extent to which the Chief Executive of the Council was involved in developing investment or loan proposals by Shetland Development Trust. The complainant also raised concerns relating to the involvement of the Chief Executive on the funding application by SSG Seafoods Ltd, a company of which his brother was a director, to facilitate the acquisition of Dury Salmon Ltd. It is important to stress that this predated the commencement of the Councillors' Code of Conduct and was therefore outwith the scope of my jurisdiction. I noted however that the Trust's Administrative Regulations adopted on 15 November 2002 now include provisions on Conflict of Interest which take account of the family relationships and pecuniary interests of trustees, and the pecuniary interests of employees or officials acting in an advisory role.

27. In regard to the statement by the first respondent, Councillor Leslie Angus, at the Council briefing on the morning of 19 May 2004, I was satisfied that the context in which he referred to the Chief Executive's involvement in decision-making by Shetland Development Trust related to the provision of the guarantee to the feed supplier. While the Chief Executive necessarily had some input in considering the financial consequences for the Council in underwriting the guarantee, the report on which the Trust based its decision, and the decision itself, were Trust responsibilities to which the Chief Executive had no direct input and the statement by Councillor Angus was accurate. Accordingly he was not in breach of the Code and I found accordingly.

28. The statement attributed to the second respondent, Councillor Cluness, in The Shetland Times article had a wider context in that it was a denial of any contact between the Chief Executive and the Trust between 2002 and the demise of SSG Seafoods Ltd. The subsequent letters sent by Councillor Cluness to the complainant did not address the breadth of the complainant's request for information as to the extent of the Chief Executive's involvement in an advisory role although, on a narrow basis, what was said was not inaccurate. I did not, therefore, consider that this approach constituted a substantive breach of the Code and I found accordingly.

29. Having considered the information that arose from my investigation, I concluded that Councillors Leslie Angus and Alexander Cluness had not contravened the Councillors' Code of Conduct.

D Stuart Allan,
Chief Investigating Officer.
Forsyth House
Innova Campus
Rosyth Europarc
Rosyth
Fife
KY11 2UU
23 December 2005