Published: 18:56, 06 August 2019
| Updated: 19:24, 06 August 2019
A council's trading company embarked on "highly speculative ventures" without permission which have led to a police fraud investigation.
This is according to Medway Council leader Cllr Alan Jarrett who was speaking at the local authority's cabinet meeting this afternoon.
The Tory said some projects taken on by Medway Commercial Group (MCG) were a "departure from its expertise" and were a key weakness in a probe into its management and financial services.
He revealed he had mounting concerns about MCG as long as 18 months ago and eventually called in external forensic accountants.
In December, he told the Messenger how the company was good for the Towns.
However, at today's meeting, he said he was very alarmed at the first feedback from the financial experts.
Deputy council leader Cllr Howard Doe took over the MCG chairmanship earlier this year and is overseeing an ongoing review - now in its seventh month - of its management and working practices.
He told the meeting: "We are now in tight control of this company.
"It is clear certain individuals did not act in a way they should have done. But we should not jump to conclusions."
In February, the Messenger reported how an MCG employee had been suspended and an interim chief executive appointed.
Cllr Jarrett added: "We are all bitterly disappointed by the way this has worked out.
"None of this makes happy reading. But I am confident Cllr Doe is the right person to turn this around."
He added a project to deliver a £25 million independent special needs school in Gillingham was taken out of MCG hands because it did not have the senior management capacity.
Some Labour councillors had claimed the company did not have the experience required.
Cabinet members were told more robust records of accountancy and working practices were now in place.
A report produced ahead of cabinet revealed MCG made a loss of £667,000 in 2018/19 and is set for a projected loss of £400,000 in 2019.
It also found a number of additional projects "had been progressed which were outside the core business and had not provided an adequate return on investment".
The council will not be drawn on the exact nature of the fraud concerns but the Messenger understands they may be linked to the awarding of contracts.
Meanwhile, MCG's former chairman has spoken out about the ongoing situation.
Speaking on Friday, the former Tory councillor said: "I was surprised to read your article.
"It wouldn’t be appropriate for me to make any detailed comments about the company as I am no longer involved, and on any other matters while any investigation is taking place but will of course be happy to assist if requested.
"I must, however, put on record that during my period as chairman it exceeded profit targets in year one and year two in its audited accounts and was certainly on target to do so for 2018/19.
"While I am not aware of how these suggested losses have been calculated in a private limited company, one has to ask why a management charge of £810,000 has been made to MCG from the council as stated in the cabinet papers.
"Clearly this charge, while propping up the council's figures and finances to balance their budget, it simply damages what would have been a profitable MCG. I have no other comments."
Police have declined to comment on the investigation.