Post
by Mick Norris » Mon Sep 27, 2021 10:08 am
Mike's now emailed Council members
Putting the Record Straight: Answering Malcolm Pein
Since my earlier email to you of 19 September my opponent in the forthcoming contested election for the post of Chief Executive at this year’s AGM Malcolm Pein has made a number of inaccurate and misleading comments that need to be addressed.
In summary:
1. If the main plank of Malcolm’s strategy as set out in his election address – the transfer of around £200k’s worth of assets directly to the ECF – is supported by any kind of robust analysis of the potentially serious taxation, financial, trust/charity law and oversight implications of such a transfer that analysis has not, as far as I am aware, been made public.
2. The potentially serious governance and conflict of interest implications of having three CSC salaried employees on or close to the ECF Board, two of whom would report to the CEO of CSC, should not be dismissed as lightly as Malcolm attempts to do.
3. Less than two months ago Malcolm claimed, in an open email to the Board, that if he won the election he would stand down as Chief Executive as soon as he found a suitable replacement. We need an explanation as to why he appears to have changed his mind so suddenly.
4. Malcolm claims to have ‘made strenuous efforts’ to reach an accommodation with me before deciding to stand. That is not the case.
5. Malcolm has made various inaccurate and misleading statements about how the 4NCL operates. I rebut those comments below.
I give more detail below. If you haven’t done so already, you may want to read the Word document ‘Message to Council Members’ that I attached to my earlier email of 19 September in conjunction with this email.
Regardless of who your organisation decides to vote for (although of course I hope that it will be for me), if you’re not intending to attend the AGM in person and if you haven’t already decided to give your proxy votes to another Council member, my earlier email sets out how you can go about appointing a proxy for your vote(s). And, as I said earlier, do please feel free to contact me if there’s anything you would like to discuss.
Thank you again for all you do for English chess.
Malcolm: Obviously I have considered this. I will shortly publish a road map of how these assets can be deployed to the benefit of the ECF while minimising any tax liability. We are fortunate to have an ECF NED who is a tax lawyer and I have been consulting him on this matter.
Mike: Stephen Woodhouse is a share schemes specialist, not a trust or charity law expert. Malcolm has consulted Stephen to understand how the Permanent Invested Fund (PIF) works – maybe something he should have done before launching his campaign. Stephen has provided no advice to Malcolm as to how any tax liability may be minimised other than in terms of transferring PIF assets to the Chess Trust. As things stand Malcolm’s proposals will result in the certainty of a substantial capital gains tax charge on the PIF on the transfer to the ECF, and in all likelihood a substantial corporation tax charge on the ECF on the transfer from the PIF. The corporation tax issue is a slightly grey area and there are possible arguments to be made about the tax treatment of the transfer, but the risk of future non-trivial arguments with HMRC is obvious. One of the purposes of the transfer from the PIF to the Chess Trust (unlike the PIF, a charity), as agreed by the BCF Council in 2018 was to avoid both tax issues. I’ve seen nothing from Malcolm so far to suggest that he has satisfactorily addressed either the capital gains tax issue or the corporation tax issue should the PIF assets be transferred directly to the ECF.
Malcolm: Mike Truran claims that funds transferred to charitable funds outside ECF control are subject to more oversight.
Mike: I do not claim this. I claim that funds transferred to the Chess Trust are subject to more oversight than if they are transferred directly from the PIF to the ECF, and so effectively directly to the Board, which will (whatever Malcolm may claim) be in a position to spend the funds as the Board sees fit without oversight from third parties such as the PIF trustees or Chess Trust trustees. Under Malcolm’s proposals the PIF trustees cannot have any part to play in any oversight process once the PIF assets have been transferred to the ECF – see below.
Malcolm: ECF nominees to the Chess Trust & the John Robinson Youth Chess Trust are not accountable for how they spend funds to the ECF Board & Council.
Mike: There are no ECF nominees to the JRYCT.
Malcolm: All of my proposals to develop & grow English chess will be carefully costed out & put to the Board & PIF Trustees .
Mike: Well, they haven’t been carefully costed out so far. That’s no basis for an election manifesto. Moreover, as Malcolm proposes to transfer the funds out of the PIF directly to the ECF, the PIF will have no longer have any purpose. Self-evidently the PIF trustees cannot have oversight over assets which are no longer in the PIF.
Malcolm: If it is a governance problem having ECF directors from the same organisation, why was this not raised at any time in the three years prior to October 2020, when three 4NCL Directors (Mike Truran, Alex Holowczak and David Thomas) sat simultaneously on the ECF Board?
Mike: 4NCL directors are not and never have been salaried employees of the 4NCL. Having three CSC salaried employees on or close to the Board, two of whom would report to Malcolm as Chief Executive of CSC, clearly brings with it potential governance and conflict of interest issues of an entirely different magnitude. Malcolm earns over £60k from CSC, and both Chris Fegan (prospective Chair of Governance) and Aga Milewska (prospective Director of Women’s Chess) also earn salaries from CSC.
Malcolm: Of course, if elected I intend to serve the full term. This may refer to an email exchange from July 28…. when I thought it was still possible to reach a compromise on the way forward without a contested election.
Mike: What Malcolm wrote on 28 July, in an open email to the Board, was: ‘I feel sufficiently strongly about this to consider standing against you myself on a time-limited basis with a specific manifesto while a new CEO can be recruited.’ If he has since changed his mind, that is a rather abrupt about-turn in so short a time. Moreover, the reason Malcolm gives above is not an answer to the question as to why he has apparently changed his mind.
Malcolm: 4NCL is a for-profit private limited company.
Mike: No it is not. 4NCL is a not for profit company limited by guarantee. 4NCL’s total reserves as at the end of June 2021 amounted to the grand total of £93 after 25+ years of operation, with no salaries, bonuses, distributions or dividends having been paid since it started.
Malcolm: (4NCL’s) leagues and congresses compete to an extent with ECF events.
Mike: No, 4NCL leagues and congresses do not compete with ECF events. Moreover, the 4NCL has always sought to work collegiately with the ECF, for example just a few years ago contributing £5k+ to the stock of equipment (clocks, live boards, sets etc) jointly owned by the ECF and the 4NCL.
Malcolm: I made strenuous efforts to reach agreement with Mike, but his rejection of every offer to meet him halfway has left me no option but to stand for CEO.
Mike: No he didn’t. After his 28 July email Malcolm waited until the start of September, so only shortly before the deadline for nominations, before getting in touch. He has never made any concrete proposals as to what ‘meeting me halfway’ meant. He then published his election manifesto and his intention to stand before the nomination deadline, effectively rendering any meeting pointless.
Any postings on here represent my personal views