A London-based charity has been repaid more than £2m it was owed by a connected company following a statutory inquiry by the Charity Commission.
The Commission first opened an operational compliance case into the charity, the Reb Moishe Foundation, in December 2014 when HM Revenue and Customs raised concerns about a £2m loan made in 2006 by the charity to a company, property developers Gladstar Ltd, of which the charity’s sole trustee, Jacob Plitnick, is a director.
The original loan agreement suggested the £2m would be paid back at a 24 per cent interest rate, but a decision was then made in 2011 to reduce this to 10 per cent.
In May 2015, the Commission opened a full statutory inquiry by which point the total due to the charity had risen to £2,236,401 as a result of interest accrued.
Today, the Commission’s inquiry closed and it published a report saying it reached an agreement with Plitnick that the money would be returned to the charity, from which he would resign.
It says Plitnick agreed to transfer the proceeds of the sale of six properties owned by Gladstar Ltd to the charity, which resulted in £2,137,368 being vested in the bank account of the Official Custodian for Charities (the OCC).
The report says Plitnick resigned from the charity in August 2017 and, as part of the agreement, two new trustees were appointed to the charity by the settlor.
The Commission considered the action it took against Plitnick was “proportionate” due to his age, 94 according to Companies House records.
In October, the new trustees opened a new bank account for the charity, after its previous one was closed in 2015 due to inactivity, to which funds totalling £2,137,736 were transferred from the OCC later that month.
The Commission said the trustee board of Plitnick and one other trustee, now deceased, failed to manage conflicts of interest; failed to protect the charity’s best interests; and failed to fulfil legal duties in respect of seeking proper professional advice regarding the £2m loan.
It said the loan was always at risk due to its being guaranteed by Gladstar Ltd's parent company, Bridgemere Holdings, which was registered in Gibraltar.
It said it would continue to monitor the new trustees, who have adopted policies of grant making, investment and conflicts of interest for the charity.
Harvey Grenville, head of investigations and enforcement at the Charity Commission, said: “Failings of governance and financial management unfortunately put this charity’s assets on the line.
“The good news is that, following our intervention, over £2m can now be put towards important charitable causes.
“This inquiry demonstrates that if not properly managed, conflicts of interest can seriously hamper trustees from acting in the best interests of their charity.”