Market News

By Katharine Gemmell

(Bloomberg) -- A bankrupt English council sued a solar-panel entrepreneur it blames for funneling off as much as £150 million ($193 million) to fund his lavish lifestyle.

Thurrock Council, in Essex, southeast England, was declared bust in 2022 after its leveraged bets worth hundreds of millions of pounds on solar energy backfired. The various investments led to a loss of £470 million and spotlighted how some local UK authorities were betting taxpayers’ money on high-risk initiatives. 

Now, the council is suing Liam Kavanagh, the solar farm owner it alleges is largely responsible for the risky bet, according to court documents filed at London’s High Court. Thurrock has accused Kavanagh and his company Rockfire Capital Ltd. of deceit, fraud and breach of contract.

Kavanagh denies the allegations.

Between 2017 and 2020, the council invested around £400 million in bonds issued by Kavanagh’s company to be secured against a group of solar farms, according to the claim form. It says a substantial portion of these funds were not used for the purposes of the bonds and around £150 million was diverted to Kavanagh for his own use.

The council also alleges that its investigation found Kavanagh had used some of the funds to purchase a £9 million Bombardier private jet, an £800,000 sports car, a £3 million property in Mallorca, Spain, and a £13.7 million yacht. Funds were also used to purchase a nearly £21 million English country estate.

Lawyers for Thurrock claim that investments made from 2018-2020 worth £130 million were made based on fraudulent valuations by Kavanagh and his firms. They said he used “unrealistic” electricity pricing assumptions provided by a third-party valuer which led to the assets being overvalued. 

“Kavanagh is personally liable for all of the valuation representations because he manifestly approved and adopted them,” lawyers said in court documents.

Kavanagh’s lawyers said that the claim has not been validly served and the Dubai-based businessman is applying to challenge the court’s jurisdiction, according to a statement provided to Bloomberg News.

“Irrespective of the question of jurisdiction, Mr. Kavanagh strenuously denies the allegations,” they said. “If and when necessary to do so, and should the court permit the claim to proceed, Mr. Kavanagh will be putting forward a full defense.”

The council’s arrangement was not without precedent. UK councils have been known to borrow money to invest in new projects, in an attempt to top up income squeezed in the years following the financial crisis. A string of other local councils have also effectively declared themselves bankrupt, including Birmingham City Council — the largest local authority in Europe. 

“This action demonstrates how determined we are to maximize our recovery on these investments, establish how our investment money was taken, and make sure that those culpable face the consequences of their actions,” John Kent, leader of Thurrock Council, said in a statement.

The UK’s audit and accountancy regulator is currently investigating an unnamed accountant for his conduct in relation to the activities of Thurrock Council. 

The Financial Times reported the details of the suit earlier.

(Updates with a comment from Thurrock Council in the 12th paragraph.)