A COUNCIL which was forced to take over the running of a multi-million pound theatre after its former managers ran up huge debts, has not yet ruled out a police investigation.

In a letter seen by The Northern Echo, Durham City Council leader Maurice Crathorne said the authority did not have sufficient evidence to seek a prosecution of the Entertainment Team Durham Limited.

But he added that, if the position changed, he would have no hesitation in referring the matter to the police.

The company was responsible for the day-to-day running of the £14m Gala Theatre, in Durham, but crashed last year with debts of £700,000.

Responding to criticism from the Durham City and District Chamber of Trade, Councillor Crathorne said the council was continuing to co-operate fully with inquiries being made by liquidator Alan Marlor into the activities of the Entertainment Team.

Durham City Council has already said that it plans to take legal action against company directors Michael Power and John Nicholas Rule to recover a £75,000 loan.

It had previously accused the Gala's former managers of covering up the parlous financial state the theatre found itself in.

Peter Jackson, chairman of the Durham City and District Chamber of Trade, said traders were continuing to pay the price for the failings of the Gala, which was officially opened by the Queen.

He said: "I personally still feel that this matter should warrant police investigation."

More than 150 creditors were left out of pocket when the Entertainment Team Durham Ltd was placed into liquidation. They were warned that there was very little chance of ever getting their money back.

A spokesman for County Durham police confirmed it had not received a complaint.

But he added: "Any evidence of wrongdoing referred to us would be the subject of close examination before a decision on what action to take."