The Charity Commission for Northern Ireland has resolved a 10-year inquiry into a charity that made outstanding loans worth millions of pounds to businesses linked to a trustee.
The CCNI called its investigation into Victoria Housing Estates Ltd “one of the most complex and prolonged” cases it had ever conducted.
The inquiry was closed after a housing association took over many of the charity’s former properties as part of a £20m investment.
The CCNI opened a statutory inquiry in 2012, after being made aware that HM Revenue & Customs had concerns about VHE.
VHE managed 420 properties in Northern Ireland and collected ground rents on about 600 more properties and parcels of land.
The organisation appealed against the decision to open an inquiry, arguing that it was not a charity, but the original decision was upheld by the Charity Tribunal for Northern Ireland in 2013.
Further plans to appeal were eventually dropped by former trustee Derek Tughan, the son of the charity’s founder.
Tughan was a trustee at the time the inquiry was opened, along with Ronald Woods and Jill Robinson.
As part of the inquiry, regulators appointed the finance firm PricewaterhouseCoopers as interim managers of the charity.
The CCNI took the same step at the charity Bangor Provident Trust, which had the same management committee as VHE, after finding that the charity had been mismanaging its assets and faced conflicts of interest.
A PwC audit at VHE found the charity had made £12m in outstanding loans to businesses linked to Tughan, as well as paying salaries to two members of his family without any evidence that they carried out any work.
The audit also showed that the charity had paid £750,000 to HMRC to settle Tughan’s personal tax liabilities and provided him with a chauffeur.
The CCNI disqualified Tughan as a trustee as soon as it received the report from PwC, and Woods and Robinson both resigned, according to a statement.
The new trustee board concluded it would cost £21m to bring the charity’s properties “to an acceptable standard”. They also faced a £2.8m tax bill, accrued because the former trustees had not used its assets solely for charitable purposes. VHE later discharged the bill.
The housing association Choice Housing has since invested £28m and taken over properties belonging to VHE, provided tenants agreed.
The investment has brought an end to the case, CCNI said, and means the regulator will no longer pursue “restitution from the defendants in the high court, being satisfied that the repayment sought is beyond the defendants’ current means”.
Rossa Keown, head of compliance and enquiries at CCNI, said: “This has without doubt been one of the most complex and prolonged inquiry cases the CCNI has undertaken.
“However, throughout every step of the process, the best interests of the charity and its beneficiaries remained a priority for the CCNI.
“The resolution which has been found will bring an end to the issues and uncertainty in this charity, paving the way for significant and much-needed investment into the homes of the beneficiaries.
“While cases such as this are rare in Northern Ireland, the publishing of this inquiry report offers an important lesson, highlighting the importance of ensuring charities are well run, with trustee decisions made in the best interests of the charity and in keeping with its charitable objectives at all times.”