Social housing landlords cheated by repair firm Mears Group, tribunal hears

Mears Group denies whistleblower’s claims of fraud and corruption involving taxpayers’ money

Rewired: firm is accused of overclaiming for maintenance on social housing

One of Britain’s leading housing repair companies, which is funded by taxpayers’ money, is at the centre of extraordinary fraud, bribery and corruption allegations involving contracts with a string of public authorities.

(See update at bottom of article.)

Senior directors at Mears Group, which maintains around 10 per cent of the country’s social housing stock, received cash “backhanders” in return for contracts, according to allegations made at an employment tribunal.

Alan Strong, a former regional manager, claims executives were secretly overpaid by corrupt individuals working for their clients, which include a number of councils and housing associations across southern England.

The whistleblower claims he was victimised after raising concerns over the alleged corruption with his superiors at Mears Group. He is suing the company for constructive dismissal.

Mr Strong claims the alleged malpractice surfaced at Morrison Facilities Services (MFS), which was bought by Mears Group in 2012. However, he claims both companies covered-up the alleged fraud and says he has since been placed on a construction “blacklist” for blowing the whistle.

At a hearing at Central London Employment Tribunal last week, Mr Strong also said his house was burgled earlier this month – on the day his witness statement was sent to the company, whose order book stands at £3.8bn.

The former manager told the tribunal that police who attended the crime scene believed it was a “professional job”; the burglars had only removed his computers and external hard drives, while leaving jewellery, televisions and other expensive items.

There is absolutely no suggestion that Mears Group was behind the burglary.

Mr Strong said he was first alerted to the alleged malpractice when he discovered MFS “overclaiming and overcharging” on its contract with Southwark Borough Council in south London.

“MFS regularly made commercial claim for payment for work they had either not carried out … or not completed the work … or not actually done any work at all,” he said in a witness statement lodged at the tribunal.

“The overclaiming came in many guises .... These same actions of overclaiming were occurring on many other contracts and clients. I would estimate that the overclaiming covered at least 100,000 to 160,000 properties.”

MFS clients mentioned in Mr Strong’s witness statement include the London councils of Southwark, Kensington and Chelsea, Lambeth, Havering and Hackney, and major housing associations including Gateway, One Housing Group and Paragon Community Housing Group.

Mr Strong’s most serious allegations at the tribunal centre on bribes said to have been paid by clients to two MFS directors who deny the allegations.

In his witness statement, the former MFS commercial manager claims he was told that One Housing Group – which manages 15,000 homes for 26 councils – had “requested the removal “ of one of MFS the directors from its contracts as the organisation “had a problem with … his integrity”.

Mr Strong said in his witness statement: “Cyclical work, which predominately involved the redecorating on a cyclical basis of housing association properties was being allocated by One Housing Group to MFS at illegally enhanced rates.

“The agreed percentage for overheads and profit on the cyclical contract was 18 per cent, but One Housing Group was paying MFS 30 per cent. In addition, there were allegations of money exchanging hands for the allocation of works … enhanced payments being made to the subcontractor were being paid out to the employees involved at One Housing Group and MFS.

“These payments, I understand, were being made in cash. Over the period I was able to investigate, I would estimate that this was in the region of £200,000 on the cyclical works of One Housing Group during 2011 and 2012. I do not believe these actions were isolated to either just One Housing Group or this one element of OHG works.”

Mr Strong told the tribunal that he confronted the other director after a man called Paul McKinley had come to him to warn that people were “paying money to individuals as a backhander”.

The first director “was implicated in all of this because he is said to be one of those receiving money,” Mr Strong. He said that he told the second director: “This is current. This is happening right now …” He [the second director] told me to get rid of Paul McKinley and get on with it.”

Mr Strong said he also confronted the first director later that day. “Both denied any involvement in alleged fraud, bribery or corruption,” said Mr Strong in his witness statement. However, he told the tribunal: “If I could read body language, I would say both men were panicked.”

In his witness statement, Mr Strong said he was motivated by a “wish to do things that are right by our clients and their tenants”, but once he raised his concerns he said “all authority and responsibility that had previously been mine had been removed from me”, he said.

“I was made to feel that everything I undertook was not considered good enough ... never supported in any way, just nasty comments and further reduction of my role or demeaning tasks and comments.”

Mr Strong added that he was “criticised and ridiculed for being on the clients’ side” and was placed “physically out of the way” in Thurrock, Kent, which he described as the “place they felt I could do least damage to the company in respect of the corruption and fraud that was going on”.

Eventually, Mr Strong quit Mears Group, which had bought MFS in the midst of his dispute with the company and had also allegedly failed to take action over the corruption claims.

Last week, Mr Strong, who is represented by the employment law firm Compromise Agreements, told the tribunal that an employee at the Michael Page recruitment agency has since told him: “You have no chance of getting any further work because you are on a blacklist.” Mr Strong said he asked them to put that in writing, but claimed the person at the other end of the line laughed, saying: “Do you think I am stupid?”

Alan Long, executive director of Mears Group, said: “Any organisation that has had to deal with a disgruntled former employee can have their reputation put at the mercy of ‘no win, no fee’-type arrangements, where mud flinging is designed to pressurise businesses into settling spurious claims.

“While it may be easier to settle, we have taken the decision to challenge unsubstantiated claims head on. Unfortunately, while the employment tribunal continues we are unable to respond to the specifics of this case. We do, however, strongly refute all of the allegations raised by Mr Strong and remain committed to defending this case.”

* In a judgement of 27 October 2014, Employment Judge Taylor and the other members of the tribunal ruled that Mr Strong's claims failed and they were therefore dismissed. A counter-action by Mears Group and Morrison Facilities Services Ltd was successful; Morrison also won an order of costs against Mr Strong, who was told to pay Morrison just over £10,000.

In relation to the disclosures of information Mr Strong had made and which he had argued showed that criminality had taken place, the tribunal ruled: "...we do not accept that the Claimant had a reasonable belief that the information tended to show such a breach [of the law] as there was no supporting evidence. Furthermore, we do not accept that the disclosure was made in good faith."

The tribunal ruling went on, "We do not accept the Claimant has established treatment to entitle him to resign and claim constructive dismissal. Accordingly we find that he was not dismissed by the Respondent but resigned." The tribunal also ruled: "We do not consider the Claimant has established either that he was involved in fraudulent activity or that he was exposed to fraudulent activity that breached his contract with the Respondent."

[This note added: 4/12/14]