Co-op suspends two bosses over 'breach of trust'

Alleged link with Andrew Regan leads to investigation

Two of the most powerful men in the Co-operative Wholesale Society were suspended yesterday amid suspicions they were in league with Andrew Regan and his Lanica Trust vehicle, which is interested in acquiring parts of the business.

As details began to emerge of secret meetings, photographic evidence and logged telephone calls, the CWS moved yesterday lunchtime to suspend Allan Green, controller of the CWS retailing division, and David Chambers, chief general manager of the buying, marketing and supply chain. Both left the CWS offices in Manchester immediately.

The Co-op said the suspensions "arose from a suspected recent serious breach of trust". The CWS has also appointed Linklaters & Paines, the City law firm, and KPMG, the chartered accountancy, to conduct an investigation into business dealings between the divisions managed by the two men and "companies controlled by Andrew Regan in the period 1994 to 1997".

This includes the period dating back to the sale of the CWS's food manufacturing business to Mr Regan when he was running Hobson, a food company he later sold.

The implication is that the Co-op believes that the two managers had been helping Mr Regan in his attempts to buy parts of the Co-op.

It is understood that Mr Green and Mr Chambers had been holding secret talks with Mr Regan regarding a possible deal. The CWS is also thought to be looking at the trading relationship between Hobson and the CWS.

The Serious Fraud Office said it was not investigating the affair and would not say whether it had been contacted by the Co-op.

It is not yet clear whether Mr Green and Mr Chambers benefited personally from the sale of the food manufacturing businesses to Mr Regan, or if they stood to gain from any subsequent deal with Lanica Trust.

CWS first became suspicious when confidential information on its affairs, available to only a small group of senior executives, appeared recently in a Sunday newspaper. CWS believes the story was placed by Lanica which had somehow managed to obtain the information.

The CWS confronted Mr Green but he denied the allegations.

The CWS subsequently obtained photographic evidence of secret meetings between Mr Green and Mr Regan.

Details of telephone calls between Mr Green and Mr Regan's home and office were also obtained.

Mr Green was interviewed at length about the matter yesterday morning and confronted with the photographic and telephone evidence. However, he still denied it. He was then suspended immediately together with Mr Chambers with whom he has been working closely.

Further developments are expected though the CWS would not say yesterday whether any other suspensions are likely.

It is possible that Mr Regan had more "friendly" sources within the movement.

As Mr Green was a member of the CWS executive committee his suspension depletes that group yet further. Following the decision of John Owen, the head of the specialist retail business, to step down from the committee earlier this month there are now only three of the original five members left.

The CWS said yesterday that chief executive Graham Melmoth will take over Mr Green's responsibilities as controller of the retail division until further notice.

Mr Green joined the CWS in 1990 from Booker, the cash-and-carry group where he was a buying director. In January he was made head of the buying, marketing and supply chain. He also headed the Co-operative Retail Trading Group, a buying consortium.

Mr Chambers joined the CWS in 1993 from Poundstretcher, the discount retailer.

Their suspensions will come as a devastating blow to the morale of the CWS as it faces the greatest challenge in its long history.

However, it may draw comfort from having taken this action and hope that it spikes Mr Regan's guns.

It may ultimately prove a bigger blow to Mr Regan if his route to the top is blocked. The CWS is unlikely to have dealings with him. Lanica Trust could not be contacted yesterday. Comment, page 23