Trustee ban for trio over carpet pension scheme (From The Northern Echo)

Trustee ban for trio over carpet pension scheme

8:00am Thursday 9th February 2012 in News By Joe Willis, Regional chief reporter

THREE men have been banned from acting as trustees after they broke investment regulations while running the pension scheme for a royal carpet maker.

The Pensions Regulator found that Robert Angus Hill, 61, Nicholas John Halton, 51, and 46-year-old Simon Christopher Ragg had overseen “some of the most worrying examples of mismanagement of a final salary pension scheme” it had known.

The three men were trustees of the Hugh Mackay pension scheme until they resigned in October last year.

In breach of investment regulations, the vast majority of the scheme’s assets – more than £35m – were invested directly in property.

The scheme’s accounts showed it was committed to repay bank loans of more than £21m secured on property bought using the finance.

Investigators found that the scheme paid Chartpoint Limited – a company registered to Mr Hill’s home in Holywood, Wolsingham, County Durham – more than £1.1m between 2006 and 2009.

All three trustees received salaries and bonuses from the company.

The regulator’s determinations panel found that the trustees’ relationship with Chartpoint gave rise to serious conflicts of interest.

In two speculative deals, the scheme bought land for £1.55m in 2006 and a commercial building for £8.6m in 2007.

On both occasions, one of the trustees had a substantial interest in the vendor companies and was also a trustee of the scheme purchasing the properties.

The three men conceded that they had breached investment regulations requiring them to demonstrate sufficient trustee knowledge and understanding.

The panel concluded that the breaches were so “serious and persistent” that the men were not “fit and proper” people to act as trustees.

The regulator’s chief executive, Bill Galvin, said: “Our investigation in this case unearthed some of the most worrying examples of mismanagement of a final salary pension scheme that we’ve seen.

“The risk to members’ benefits posed by the investment strategy and borrowings secured against scheme assets was stark; and it is difficult to imagine a more clear-cut conflict of interest than a trustee effectively negotiating with himself as the vendor in a property deal.”

The pension scheme is due to be transferred to the Pension Protection Fund in the near future, securing compensation for its 400 members.

An investigation of the management of the pension scheme by Durham Police is continuing.

The carpet maker, which was based in Durham City and had held a Royal Warrant since 1972, shut in 2005.