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Wi-fi boss was paid £12k a month... but who agreed to it?
9:00am Tuesday 30th April 2013 in News
BUSINESSMAN Rikki Hunt’s firm was paid more than £100,000 to lead Swindon’s failed wi-fi project as part of £360,000 of taxpayers’ money spent over just 16 months on “administrative expenses”.
Swindon Council agreed in October 2009 to invest up to £450,000 in the firm Digital City (UK) Ltd, to provide broadband access and other wi-fi related services across the Swindon borough, but infrastructure was only installed in Highworth and the firm never generated enough income to pay the loan back.
The council set up the firm under a joint venture partnership with technical partners aQovia UK Ltd and Avidity Consulting Ltd, a firm owned by Mr Hunt, who became the managing director of the new firm, based at the David Murray John Tower, in the town centre. Swindon Council eventually invested £400,000 and was the only cash investor of the parties.
The firm was projected to pay back the loan within two years and produce a net annual profit of about £700,000 after two years, but by the end of 2010 it had made an operating loss of £459,180, leading to questions about what went wrong and where the cash went.
Now an independent auditor’s report to the shareholders, which has been passed to the Adver, reveals that between August 14, 2009 and December 31, 2010, Digital City paid Mr Hunt’s Avidity Consulting £105,067 in “consultancy costs”.
The chief executive post was always meant to be remunerated, but a leaked draft report from a review group of Swindon councillors looking into the wi-fi fiasco, says it is not clear who authorised his salary, which Mr Hunt says he agreed to stop taking in June 2010.
It states: “The shareholder panel... never met yet the CE of Digital City was awarded remuneration of £12,000 per month. No one interviewed could remember being part of the decision to approve that.”
The auditor’s report reveals that Digital City’s payment to Avidity Consulting formed part of the £359,876 it paid in “administrative expenses”, which among other office costs included £25,578 for wages and salaries, £3,106 for travel and subsistence, and £601 for entertainment.
According to the report, Digital City only had a turnover of £5,000 and a handful of customers. But over the same period it spent £31,500 on product management and sales support, £3,600 on business intelligence, £16,000 on customer intelligence and £16,000 on billing, collections and debt management.
The auditor’s report does not state who was paid for these administrative expenses, including for these four services.
During a council meeting in January, wi-fi critic Des Morgan, of Caraway Drive, West Swindon, asked Coun Garry Perkins whether any of the work for these four services was undertaken by Mr Hunt or any member of his family, and whether any of the money was paid to Mr Hunt or to any family member or company/organisation with which Mr Hunt had an association.
He added: “Unless a full answer is given, he [Coun Perkins] and the council must be prepared to accept that it will always look as if you are attempting to avoid disclosure of some unsavoury issue.”
There is no evidence of improper conduct and Coun Perkins, cabinet member for regeneration and culture, who represented Swindon Council on the board of Digital City, said he utterly repudiated his insinuations, adding that he had provided more detail than the director of a private company would.
Mr Morgan reported his concerns to the police who decided there was no basis for further investigation.
Mr Hunt, 59, of Carlisle Avenue, who is a former chairman of Swindon Town FC, became bankrupt in March 2011, which among other restrictions means he cannot be a company director. Bankruptcy normally lasts for 12 months but this was extended in January 2012 until January 2016 because he broke the restrictions.
The Insolvency Service said he failed to disclose to the official receiver that he owned shares in a private limited company, estimated to be worth between £3,250 and £16,500, which should have gone into the pot to be paid to creditors. Mr Hunt subsequently arranged the transfer of the shares to another for no consideration.
According to Companies House, Avidity Consulting was dissolved via voluntary strike-off on December 11, 2012 following an application from Mr Hunt’s wife, Laura, 44, who was appointed the sole director on December 1, 2010 – the day before Mr Hunt resigned.
'There was nothing improper about it'
FORMER wi-fi boss Rikki Hunt said the payout to his firm of more than £100,000 was reasonable – and said ‘nothing improper’ went on with Digital City UK.
Mr Hunt, who left the firm in March 2011, said the level of renumeration to Avidity Consulting Ltd was something agreed initially between the shareholders. He said Swindon Council was represented in the discussions by officers, who he would not name because he did not think it was fair on them.
He said: “Shareholders agreed the consultancy and service payments for both aQovia and myself before the project started, so by definition the council as a partner was party to these discussions. They had to be, they were partners. It was in the business plan. They agreed and that’s the end of it.
“If you look at my background of earnings, it was not excessive. It was quite reasonable, it was quite low to what I had earned previously, and I was stopping everything I was doing to focus on this project.
“I’m 100 per cent there was nothing that was not proper. There shouldn’t be, that’s not what I would do, it’s a nonsense, it’s just people pick on certain pieces and blow them up into conspiracies.”
Mr Hunt said none of the money went to his family or any of his other companies. He said he voluntarily agreed in June 2010 to stop payments to Avidity Consulting.
Mr Hunt, who said Digital City only employed one person for admin and sales and marketing support, said aQovia received the money spent on product management, on sales support, on business intelligence, on customer intelligence and £16,000 on billing, collections and debt management.
He said these were part of the set-up costs and were required no matter how many customers there were.
He said the fact the project became politicised was not helpful in securing customers and suppliers, but would not say any more about the reasons for the failure of Digital City until the council’s review is published in the coming weeks.
Mr Hunt, now a business coach, said he went bankrupt because of personal investments, which had nothing to do with Digital City or Avidity Consulting.
Coun Garry Perkins, who was the council’s director on Digital City, said: “I was not aware that he was being paid anything. I was not aware of the arrangements that had been made. And the first board meeting I had was with aQovia and Rikki in June  and that was when the discussion came up of the renumeration Rikki’s company was getting.
“And because of the non-profit-making at that time of Digital City, it was agreed to stop payment at that meeting. So any money he received was prior to me being aware of him receiving any money.”
Coun Perkins said he was not involved in the initial discussions and could not comment on the level of payment, but assumed it was agreed by all parties.
'It was not put out to tender'
WI-FI campaigner Des Morgan said: “It appears that Mr Hunt paid himself over £12,000 per month from the very outset of the wi-fi scheme – the accounts suggest he considered it appropriate to take over 25 per cent of the sum loaned by the council as a salary.
“At the same time Mr Hunt was also being paid to act as a business mentor to officers and he was paid £12,000 over the same period he was being paid to manage Digital City. In total Mr Hunt received payments from the council totalling £82,000 for what was described as coaching council officers in preparation for their move to an arms-length company.
“What we do know is that the work for which Mr Hunt was paid £82,000 was not put out to tender, it was not discussed by the cabinet and it was not apparently subject to any contract stipulating the type of services to be provided or a timeline in which the mentoring was to be completed.
“In total Mr Hunt was the beneficiary of over £187,000 of taxpayers’ money and there is little if any audit trail showing whether value for money was obtained.”
But why did it fail?
DIFFERENT theories still abound for the failure of the wi-fi project.
The independent auditor’s report states: “The original business case for the company was dependent on revenue from public sector services which the directors do not believe are viable under current conditions. With the business proposition no longer viable, the company has been unable to secure additional funding to continue to support the activities of the business.”
But the cabinet member briefing note which approved the original loan in October 2009, says the viability of the concern was not reliant on exporting the business model to other councils.
It says: “Beyond year two, the projected net profit is circa £700,000 per year. This does not include any projections from exporting the business model to other councils.”
A cabinet report in March 2010 into the failure of the pilot in Highworth, says: “The delay in having a fully operational ‘back-office’ customer care and billing operation has hindered oppor-tunities to sell.”
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