The Charity Commission opened a statutory inquiry into the Cup Trust in a bid to save face after criticism from the Public Accounts Committee, the lawyer representing the charity's corporate trustee has claimed.
Mountstar PTC, the corporate trustee of the Cup Trust, has appealed to the charity tribunal against the commission’s decision to open a statutory inquiry into the charity, which received £176m in private donations but had charitable expenditure of just £55,000 over two years. Accounts show that over the two years it spent £176.37m on buying government bonds but later sold most or all of these bonds for only £17,000.
At the first day of the hearing at the Royal Courts of Justice in London yesterday, Matthew Smith, a barrister from Maitland Chambers, said the commission had used a fine issued to the charity by HM Revenue & Customs for failure to comply with its regulations as a "pretext" for opening its inquiry into the charity in April this year.
The regulator opened a non-statutory inquiry into the charity in March 2010 but closed it in March 2012 after receiving legal advice that the Cup Trust was "legally structured as a charity".
After the Cup Trust’s practices were exposed by The Times newspaper, senior commission figures were asked to appear before the Public Accounts Committee on 7 March, when the regulator was strongly criticised for its lack of action in the case.
The commission announced on 1 May that it had opened a statutory inquiry into the Cup Trust on 12 April.
Speaking at the hearing yesterday, Smith said he agreed with the commission’s decision to close the earlier non-statutory inquiry in March 2012.
He argued that the regulator had taken the decision to open its statutory inquiry earlier this year because of criticism it received from the Public Accounts Committee on 7 March and reports in national newspapers of alleged wrongdoing by the charity.
"A difference of approach can be discerned after 7 March," said Smith.
Speaking on behalf of the commission, Ben Jaffey, a barrister from Blackstone Chambers, said the regulator had launched an inquiry into the Cup Trust because it was concerned by conflicts of interest that were created by the tax-avoidance scheme in which it was involved.
"The commission does not believe this was a scheme negotiated at arm's length, in the interests of the charity," Jaffey said.
He said that the interim manager of the charity had found five blank cheques signed by members of the corporate trustee Mountstar, which caused "real concern" for the commission.
The tribunal hearing is scheduled to end today.