Midlothian Council is investigating allegations of fraud surrounding the awarding of road servicing contracts to private firms, The Ferret can reveal.

The austerity-hit local authority declined to give details of the investigation but sources say that a council officer is alleged to have committed fraud by awarding council contracts to at least one private company.

More than 50 people are understood to have been interviewed by investigators so far, with sources claiming that the council’s Fushiebridge Depot, near Gorebridge, is a focus of the allegations.

Sources named the council officer and private companies allegedly involved but details cannot be revealed for legal reasons.

In its most recent budget Midlothian Council made £10 million of cuts to services, including the imposition of charges for school music tuition, a 10 pence increase in the price of school meals and the closure of five football pitches.

The council confirmed an investigation was taking place. “Following serious allegations being raised by members of staff regarding suspected procurement irregularities, a full investigation is being conducted,” said a council spokesperson.

“The council takes such allegations very seriously and is prioritising the conduct of the investigation to ensure that public monies are protected.”

The spokesperson added: “The investigation report and subsequent actions will look to identify and resolve any procedural failings and take all appropriate further actions. We are keeping our external auditors and Police Scotland fully informed on the progress of the investigation.

“The council is not in a position to comment further until this work has been completed.”

The council didn’t disclose its external auditor, but The Ferret has learned it is the multinational firm, Ernst & Young.

We needed every penny that we could lay our hands on, and somehow significant money appears to have been trousered by others. Could this possibly be by council staff? It’s just too horrendous to contemplate Peter De Vink, former independent councillor

Peter de Vink, a former independent councillor who still currently sits on the council’s audit committee, criticised the council for lacking transparency. He first learned of the allegations when approached by The Ferret, he said.

“I was mortified to learn from the media that this was going on, and I take great exception to the fact that it is the media that has to tell me that there is something seriously wrong, and that I was not told this by officials.”

He added: “We needed every penny that we could lay our hands on, and somehow significant money appears to have been trousered by others. Could this possibly be by council staff? It’s just too horrendous to contemplate.

“I’m glad there’s an investigation, but I hope that there are going to be people that will acknowledge that they bear the responsibility.”

“Now the cat is out of the bag and Midlothian is left with a great deal of egg on its face, why could they not have owned up at a far earlier stage?” de Vink said.

Police Scotland confirmed an investigation was on-going. “Police Scotland is aware of an internal investigation being conducted by Midlothian Council and officers await the conclusion of their inquiries,” said a spokesperson.

One source said the allegations are common knowledge among many council workers and contractors. “The allegations of corruption at the top level are, in fact, a recent development, and I only heard about them a couple of months ago,” the source added.

“I’m not surprised that it’s not been reported before, because the scale of the investigation is big, going back many years and will probably cost many thousands of pounds. Every paper trail and business transaction will need to be investigated, and this will take time.”

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Audit Scotland said it was aware of allegations about “suspected procurement irregularities” and was being kept informed by the council’s external auditors, Ernst & Young. “Once the investigation being carried out by the council is complete we will decide whether further action is needed,” said a spokesperson.

Other councillors, including current and former members of the audit committee, declined to comment, saying they would await the conclusion of the council’s internal investigation. The Labour leader of Midlothian Council, Derek Milligan, did not respond to repeated requests to comment.

The allegations resemble those which prompted a police fraud investigation into the awarding of South Lanarkshire Council road contracts.

Several other local authorities have been embroiled in corruption allegations involving the awarding of contracts over recent years, including North Lanarkshire and Edinburgh City Council, where four men were jailed in 2015.

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