A healthcare charity transferred a £3m donation to a subsidiary company to help run a hotel business despite little prospect of recouping the money, the Charity Commission has found.
Odyssey (Tendercare) Ltd, which was established as a charity in 2004 to provide therapies and healing treatments to people with cancer and their carers, was liquidated in 2014. Before 2004, it had operated as a trust called the Odyssey Foundation.
A report of a statutory inquiry into the charity, published by the regulator today, says that in 2003 Odyssey provided a £3m loan to its subsidiary company Reeds Hotel Ltd to clear overdrafts.
The commission found that the trustees were unable to demonstrate they had made the decision to lend the money to the subsidiary properly, and says the charity lost money as a "direct result of improper decision-making".
One of the charity’s trustees, Thomas Hazeldine, has been disqualified from being a charity trustee, having already been disqualified from being a company director. Another trustee, Richard Morgan, was removed from this particular position by the Charity Commission.
The regulator found that both people had committed acts of misconduct and breaches of fiduciary duty.
The Charity Commission’s investigation into Odyssey (Tendercare) Ltd, which was based in north Lincolnshire, came after a warning from the charity’s auditors in 2008 about the £3m loan.
The charity’s three founding trustees had bought a six-bedroom guest house and two cottages in the 1990s, the regulator’s report said.
The guest house was converted into a hotel under the name Reeds Hotel and the cottages became a therapy centre.
Another subsidiary company called Odyssey Holdings Ltd owned the land and building, the directors of which were Hazeldine and Morgan – two of the original trustees of the charity. Hazeldine was also a director at Reeds Hotel Ltd.
The commission opened an investigation into the charity in 2008. The Charity Commission’s report says there were "varying levels of cooperation from the trustees" and a lack of information and documentation about the loan and the wider management of the charity. The trustees were therefore issued with formal orders to compel them to answer the commission’s questions. This led to two meetings between the commission and the charity.
In 2005, the charity claimed Gift Aid on some payments, claiming they were charitable donations. HM Revenue & Customs later tried to recover the money, and a final tax demand was issued to the charity in 2013, leading to Odyssey (Tendercare) Ltd being placed in voluntary liquidation on 13 June 2014.
In July 2009, the commission discovered that HM Revenue & Customs had presented a petition for insolvency against Reeds Hotel and it had subsequently gone into administration. This occurred before the second meeting between the trustees and the commission, in which the commission says the company was specifically discussed.
A new social enterprise was created and the activities of Reeds Hotel Ltd was sold to it, the commission says. The trustees said the social enterprise would donate its profits to the charity, although the commission says this was not a formalised arrangement.
In January 2013, £59,000 was transferred from the charity to Odyssey Holdings Ltd. The commission found that this left the charity balance sheet insolvent and with only £413.87 in its bank account. The subsidiary company was also balance-sheet insolvent and was probably unable to repay this money, according to the Charity Commission.
This £59,000 loan also breached an order made by the regulator restricting the transactions into which the trustees could enter.
Two independent trustees were appointed to the charity in October 2011, but the commission found that the independent trustees were not included in all decision-making arrangements. They resigned on 4 February 2013.