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Last Updated: Friday, 14 March 2008, 16:14 GMT
Regulator shuts business charity
Ethnic Mutual website
The Ethnic Mutual is also being investigated by the Police
A charity which offered loans to business organisations in London's black community has been shut by the Financial Services Authority (FSA).

Ethnic Mutual is one of six bodies funded by the Greater London Authority or London Development Agency (LDA) which the police are investigating.

They have all been accused of misusing public funds.

The FSA said Ethnic Mutual had received 350,000 from the LDA last year but was not being run properly.

After investigations which began last autumn, the FSA came to the conclusion that Ethnic Mutual was "not following its rules, and not operating for the benefit of the community."

Lee Jasper scandal

The FSA first investigated the Ethnic Mutual at the invitation of the LDA.

Their representations were not strong enough
FSA spokesman

Last year the LDA carried out an audit of the charity's activities which "highlighted serious concerns about Ethnic Mutual, and in particular about the use of monies provided by the funders."

The audit discovered that some of the money granted to the Ethnic Mutual had then been lent to an associated company.

Of that, 18,000 was then lent to a company of which the former Mayoral policy director Lee Jasper was company secretary.

"That loan was not repaid and the company subsequently went into liquidation," said the LDA earlier this year.

Mr Jasper was suspended in January due to a barrage of accusations about his alleged role in the apparent misuse of the LDA's money at several organisations.

Earlier this month he resigned after further allegations were made about his private life.

Breaking rules

A spokesman for the FSA explained that members of the loan panel at the charity had connections with some of the companies that had received loans from it.

"We found evidence they had been making loans to people linked to the society itself, which they should not have been doing," he said.

The FSA's investigators looked at the books and records of the charity and decided that it not been operating by its own rules.

For instance it had not held annual general meetings of its members, and had been running with fewer directors than its own rules stipulated.

The charity, which has also received substantial sums from the government, will be closed for the next three months, and may be shut permanently after that.

It had been given three months notice of the FSA's action, and although its officers had responded, "their representations were not strong enough," said the FSA spokesman.

Although operating as a charity, Ethnic Mutual was registered as an industrial and provident society, and so came under the jurisdiction of the FSA.

Mayor hopes to reappoint Jasper
05 Mar 08 |  London

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