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The unread email and the £3million Icelandic investment

Kent County Council invested £3million in an Icelandic bank just one day after its brokers said it should be downgraded, a report has revealed.

The investment with Heritable Bank was made because an email from the company contracted to advise KCC about cash deposits had not been read by council officials.

Details of the decision are set out in a report commissioned by the council to investigate the circumstances surrounding its £50million investments with three Icelandic banks.

It says that had the email been picked up, the deposit may not have been made. At the same time, however, the auditors highlight that at a meeting between council officials and Butlers just two days earlier, the firm made no mention about the state of the Icelandic banks.

An 11-page report by auditors PriceWaterhouseCoopers broadly clears KCC of major mistakes over its decision to invest millions of pounds of taxpayers' money in Iceland. It says that at the time other transactions were made, the decisions were consistent with Butlers' advice.

However, the report suggests that in other cases, the council failed to keep detailed records of transactions and there was no consistent evidence of a regular review of transactions.

It states: "Although this review would not have directly prevented any of the shortcomings noted, it may have resulted in additional discussions around some of the deposits."

Among the report's recommendations is that KCC ensure that information about banks is sent to more than one official. It also recommends the council considers whether adequate safeguards are in place to ensure it is not taking risks with public money in seeking a high rate of return from investments.

Cllr Nick Chard (Con) KCC's cabinet member for finance, said steps had been taken to ensure that information about banks' status was now circulated to more than one person.

"The email went to one individual when it should have gone to more than one. We are making sure that it does not happen again," he said.

He insisted KCC did not take unnecessary risks but hinted that the council would now review its arrangements with Butlers. "Events have shown that we cannot have the same level of faith in ratings agencies and therefore we cannot have the same level of faith in Butlers. The world has changed."

Opposition parties said the report had showed KCC was too casual about its arrangements for investments but stopped short of repeating an earlier call for resignations.

Cllr Roger Truelove (Lab) said: "KCC has been over-confident and has had a warning. There are a series of recommendations they must take note of. My impression is that things have been a little too casual. The public has lost money and there will be an impact on services, " he said.

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