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Gentoo was ‘close to takeover’ amid payouts crisis, chair reveals
The regulator was close to overseeing a takeover for giant Sunderland housing association Gentoo, as it battled to deal with a governance crisis relating to executive payoffs, the chair of the organisation has revealed.
Keith Loraine told the National Housing Summit the 30,000-home landlord was close to a position where it “had to be taken over or merged into another entity” amid concerns about the “excessive” payoffs.
Gentoo was downgraded to a non-compliant G3 rating in 2017 after reporting the payments to the regulator. It returned to a compliant rating for the first time last month following a two-year turnaround.
Mr Loraine, who had only recently been appointed chair when the problems came to light, said the board had “taken its eye off the ball” when the payouts went through – amid a major programme of redundancies.
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“The board immediately recognised the severity of what they had missed and self-reported to the regulator following an independent investigation,” he said.
“There was no defence – nobody could have missed the signals from the government and the regulator about severance payments.”
After the downgrade, he said the regulator required it not to undertake major development programmes and the organisation underwent a full options appraisal with the help of external consultancy Altair.
“We were close to a position where we might have had to be taken over or merged with another entity,” Mr Loraine said.
“We had to work very hard to convince the regulator that we were fit for purpose and we were able to turn this massive organisation around.”
He also spoke of the work since then to change the culture of the organisation from the diverse business model it had previously followed, which included ventures such as ‘mortgage free’ homeownership and an attempt to establish an energy company.
“The organisation had been big on ideas, but not so good on risk appraisal and risk assessment,” he said.
Also addressing the conference, new chief executive Nigel Wilson said the organisation would now narrow its focus. “We’re going to stick to the knitting – we do housing and we’re sticking to Sunderland. We want to build social and affordable housing,” he said, adding that it would no longer promise to “solve global warming or light up Africa”.
The organisation now has a £417m investment plan – including £300m for improving its existing stock and £117m for new affordable housing in Sunderland.
The payouts were eventually revealed to have been made to Steve Lanaghan, the former assistant chief executive at Gentoo, who was said to have received the early release of pension funds and double the three months’ pay he was contractually obliged, according to disclosures in an employment tribunal.
Gentoo’s accounts show its highest-paid member of staff in 2015/16 received more than £660,000. The highest payment made in 2016/17 was more than £400,000.
