Trustees banned and funds recovered at two charities after ‘cash for honours’ claims

Posted: 03/10/2024

The Charity Commission recently concluded its statutory inquiry into The Mahfouz Foundation and Burke’s Peerage Foundation. This has led to three trustees being banned for 12 years from holding senior positions in the sector, after findings of misconduct and mismanagement. 

Whilst the context behind the statutory inquiries is not usual, and fortunately not something the charity sector sees often, it demonstrates wider issues. In particular:

• managing conflicts of interest and loyalty – conflicts of interest are more likely to occur if there are only a small number of trustees on the board, when trustees are closely related, or when the charity has dealings with organisations in which the trustees have interests. It is vital that trustees avoid becoming involved in situations in which their personal interests may be seen to conflict with their duties as trustees;
• managing finances – the Charity Commission expects trustees to discharge these duties by regularly assessing and monitoring the overall financial position of the charity and by taking steps to ensure that its funds can continue to be used for the purposes for which they were given;
• managing financial controls – trustees must ensure that their charity has adequate controls in relation to its bank accounts. Bank accounts of the charity are assets of the charity which are to be used solely for charitable purposes.

The Mahfouz Foundation

The Charity Commission identified that the trustees of The Mahfouz Foundation had allowed it to be used as a conduit for the transfer of funds that were intended for others (including the King’s Foundation). They had not exercised sufficient trustee oversight over the relevant transactions. 

In particular, Mr Michael Wynne-Parker, a former trustee of The Mahfouz Foundation, had acted as a middleman for a wealthy Russian banker, who believed he was making donations to the King’s Foundation. He was, in fact, provided with the bank details of The Mahfouz Foundation. These donations totalled £535,000, of which £193,730 was transferred to a private company bank account. This diversion of charitable funds was improper and occurred at the instigation, and to the personal benefit, of Mr Wynne-Parker.

The misapplication of funds of The Mahfouz Foundation was also found to be a breach of the trustees’ duty to apply the charity’s funds solely in furtherance of its specific charitable objects. The Charity Commission disqualified Mr Wynne-Parker from being a trustee or holding a senior management function at a charity for a period of 12 years as he was found to be unfit to be a trustee.

Burke’s Peerage Foundation

The statutory inquiry into Burke’s Peerage Foundation came out of the investigation of The Mahfouz Foundation. The Charity Commission discovered links between the two charities,  including the fact that £35,000 of the funds donated to The Mahfouz Foundation (intended for The King’s Foundation) were transferred to William Bortrick, a trustee of the Burke’s Peerage Foundation.

The Charity Commission considered the extent to which the trustees were complying with their legal duties in how they administered and managed the charity, including compliance with legal obligations on annual accounts and returns.

It concluded that there was serious misconduct or mismanagement in the administration of the charity due to poor financial management and governance. There had been a lack of separation between the charity and the companies connected to the trustees. The trustees had failed to maintain accurate financial records and had allowed the charity’s bank accounts to be used for non-charitable purposes. More significantly, the trustees had done this whilst misrepresenting the charity’s income in such a way that gave the appearance that it did not need to submit accounts to the Charity Commission. 

The personal benefit from purchases made using funds from the charity bank account included a desk and bookcase totalling £16,000, which were kept at Mr Bortrick’s home address. 

The Charity Commission required the trustees to repay funds that they had misappropriated. It also disqualified both Mr Bortrick and another trustee, Mr Ayre, from trusteeship and senior management functions for 12 years.

‘Cash for honour’ scandal 

Allegations had previously been made by the Sunday Times that donations from Mahfouz to the then-named Prince’s Foundation, were part of an effort to try and gain British citizenship and an honour. Whilst the Prince’s Foundation had accepted a donation through The Mahfouz Foundation, an investigation launched by the Metropolitan Police concluded that there was no wrongdoing by Mr Mahfouz or the King. 

If you have any queries about the issues raised above, please contact a member of our charities group, or your usual Penningtons Manches Cooper contact.

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