Human error at Stoke-on-Trent City Council prevented the possible withdrawal of £3million that had been invested in the failed Icelandic bank Landsbanki.
An email, sent by the council’s credit agency, which showed a downward review of Landsbanki’s credit rating, was not acted upon by one of the council’s officers.
The officer left the email unopened and the Icelandic banks including Landsbanki collapsed soon after.
Stoke-on-Trent City Council had a total of £5million invested in Landsbanki but only £3million could have been withdrawn due to the interest deal in place at the time.
The unopened email warned of that Landsbanki’s creditworthiness had been reduced and did not suggest the imminent collapse of the bank or the immediate withdrawal of the sum invested.
A report from the Audit Commission also accepts that the error was genuine and that there was no suggestion or suspicion of fraudulent activity.
123 councils lost money in the Icelandic bank collapse and many are still looking to recapture their losses.
There is an ongoing court case in Iceland which is hoped will lead to Stoke-on-Trent City Council recouping 95% of their losses along with the other authorities affected.
The unopened email will have no bearing on the court case.
The error occurred two years ago and was reported to the relevant director. It was referred to the Council Manager who in turn briefed the elected mayor. This was the correct procedure for the system of governance at the time.
No other EMB member or council politicians were made aware of the error.
The council insist that procedures have been amended and tightened including more staff being given access to credit updates. Treasury officers can no longer sign off investments of this size and more rules have been implemented to protect future investments.
The full Audit Report can be viewed by clicking the link below.
Listen to the Audio Interview below with the Cabinet Member for Resources Kieran Clarke, who explains what went wrong and whether the officer responsible is still employed by the City Council.