THE owners of the region's newest theatre last night launched a bitter attack on its former management team, accusing it of a financial cover-up.

Durham City Council said the company appointed to run the £14m Gala Theatre had withheld information on the huge cost of a disastrous opening event featuring pop band Westlife.

The Entertainment Team (Durham) Ltd also went back on financing agreements made before the exchanging of contracts, it claimed. Chief executive Colin Shearsmith confirmed the authority would be taking legal action against directors Michael Power and John Nicholas Rule to recover a £75,000 loan made on their personal guarantees.

The debt is among more than £700,000 owed to 150 creditors by the management company.

Its contract was terminated by Durham City Council last month which temporarily took over the running of the venue.

The authority has faced flak over its handling of the affair and the appointment of The Entertainment Team (Durham) Ltd, but last night attempted to answer its critics.

Mr Shearsmith reassured council tax payers that there would be "no knock-on effect" on next year's bills.

He also claimed there had been interest already from national operators wishing to take over the running of the Gala.

Mr Shearsmith said the city council - which has already pledged an investigation into what went wrong - constantly monitored the financial state of the management team.

But it was not until May 16 - more than five months after the Gala's opening - that it admitted its true financial position.

Mr Shearsmith added: "Durham City Council could not have done more to check and double check the company's financial stability and its ability to perform under the contract.

"Two sets of company searches were carried out through two separate specialist London firms which showed the Entertainment Team was more than capable of managing a multi-function venue the size of the Gala."

Mr Power and Mr Rule have remained unavailable for comment.