Ian Craig froze out Lothian Buses directors

A family friend was among those appointed to highly paid posts without proper consultation with senior colleagues, the official investigation into their complaints found.

The full details of that investigation, the grievance raised by the disgruntled directors known as the “Annandale Three” and the complaints upheld against Mr Craig can be revealed today following an investigation by the Evening News.

It found the embattled city transport boss hired and fired a series of executives and consultants at a cost to the publicly owned firm estimated at more than £1 million despite the concerns of his most senior colleagues, who claim the dismissals created a “culture of fear” and ultimately resulted in a “skill vacuum” within the company.

He also bypassed them to approve nearly £270,000 of spending on the launch of the Transport for Edinburgh brand, including £18 TfE umbrellas and £25 sets of drinks coasters.

The directors who lodged the grievance against Mr Craig – operations director Bill Campbell, engineering director Bill Devlin and finance director Norman Strachan – were concerned about the amount of money being spent on the branding exercise for the new company overseeing the running of Edinburgh’s trams and Lothian Buses, especially because all the money was coming out of the bus firm’s accounts.

The report – by non-executive director John Martin – upheld a series of complaints made by the trio against Mr Craig, concluding that he:

• Failed to consult properly with executives over a series of senior appointments and dismissals;

• Authorised the TfE brand launch spending without properly consulting them;

• Froze them out of key appointment decisions on the trams;

• Undermined one of the directors through his dealings with a junior female member of staff.

Mr Craig’s judgement was found to be “questionable” over his dealings with the young female member of staff with whom he held a series of meetings without telling colleagues what they were working on.

The report also upheld the allegation that Mr Craig hired several senior members of staff for top paid positions at Lothian Buses without properly consulting fellow executives or going through any formal recruitment process.

One of these was a marketing manager who the investigation report says is a Craig family friend.

During his investigation interview, Mr Craig himself described the appointment of a new communications manager as “more shotgun than open and transparent”.

The investigation report also notes that the marketing manager and the communications manager now perform a role previously done by a single person while each earning a similar salary, “effectively doubling costs”.

The directors who raised the grievance said they were concerned about this growing level of spending, also pointing to the appointment of an HR director which they felt was unnecessary. The trio said that Guy Hughes, who was picked for the role by Mr Craig, now earns £130,000 per year. Mr Hughes’ company had previously been hired as a contractor to do work for Lothian Buses at additional cost.

The report also highlighted concerns about at least three senior members of staff who left under “compromise agreements”, involving pay- offs believed to reach into the hundreds of thousands of pounds.

According to the report, former marking manager Shaun Burnett’s line manager says he simply “disappeared from employment with no discussion with the board”.

In their letter to former Lothian Buses chairwoman Ann Faulds, the Annandale Three allege that the frequent dismissals “resulted in a culture of fear amongst middle and senior management engendering the widespread feeling ‘if you don’t conform you will be removed’.”

In addition to pay-offs and salaries decided largely in isolation by Mr Craig, the Lothian Buses CEO also took personal control of spending around the brand launch for Transport for Edinburgh, according to the report.

In December 2013, an event was held in a corner suite of the Balmoral Hotel to launch the brand for Transport for Edinburgh, the new transport umbrella body for buses and trams.

The guest list included senior figures from Lothian Buses and the council, as well as a number of Edinburgh business leaders.

Attendees were shown a specially made promotional film, and given a “goody-bag” of new Transport for Edinburgh merchandise. The cost of this event and the associated merchandise and promotional material is believed to be £80,000, with another £161,000 spent on new  livery for trams and buses bearing the Transport for Edinburgh logo.

Merchandise believed to have been handed out for free included 300 umbrellas costing £18 apiece, metal coasters embossed with the Transport for Edinburgh logo costing £25 apiece and USB sticks costing up to £7 each, as well as notebooks and pens.

The Evening News understands that the first that senior Lothian Buses executives knew of the glitzy Balmoral launch event which the company had paid for was when they were told to attend in the days before. In total, £269,000 was spent on the brand launch from Lothian Buses funds, including work on a website for the new brand.

In his summary, Mr Martin also writes that Mr Craig “failed to realise that his frequent meetings with one junior female member of staff, innocent as he strenuously states these encounters were, would give rise to unwelcome comments from many other staff and protests from her line managers who were not told what the purpose of those meetings were”.

The report’s author John Martin did not recommend disciplinary action. However, he subsequently backed a call for the Lothian Buses chief executive to be dismissed. Conservative councillor Jason Rust said: “The massive costs which have been run up over recent years, the apparent wasted expenditure and the style of management are disgraceful and causes for significant concern. This is meant to be a public company and not a family firm.

“As a council and the main shareholder we have been kept in the dark for too long and I am writing to the chairman of Lothian Buses directly seeking urgent clarification on all of these points which are in the public domain.”

Lothian Buses chairman Tony Depledge said: “My sole focus is now to work with the four executive directors on our joint work to rebuild the leadership of this strong, successful company.

“I will concentrate my efforts on the future of the company and the issues we have to resolve, not on leaked confidential documents.”

Asked whether the council would be calling as shareholder for further investigation of the upheld complaints against Mr Craig, transport convener Lesley Hinds said Mr Depledge was “restoring stability”.

She said: “I welcome the fact that the Chief Executive and three Executive Directors are back at work, clear evidence of the progress that interim chair, Tony Depledge, is making in restoring stability to the company. So much so, in fact, that I advised the Lothian Buses board on Wednesday that I no longer see the need to attend their meetings as an observer.

“The meeting, attended by all of the executive and non-executive directors, was extremely positive and constructive, which I think bodes extremely well for the ongoing success of both Lothian Buses and Transport for Edinburgh.”

Chief executive branded business ‘out of date’

LOTHIAN Buses chief executive Ian Craig failed to include directors in the recruitment process for Edinburgh Trams because he felt the firm’s culture was “out of date” and something “not wanted for the new tram operation”, the investigation report reveals.

The complaint was upheld by John Martin, a senior independent non-executive director on the board, who wrote the report. Mr Craig’s response to the allegation was deemed to demonstrate “little respect for the business and historical ethos of Lothian Buses”, according to Mr Martin

The chief executive made a written submission. He said: “I’m sure the executive directors’ preference would have been to populate Edinburgh Trams with their own people and impose a set of values that they approved of. I never agreed with this point of view, instead seeing an opporunity to start with a clean sheet as opposed to one that had an operational doctrine that had evolved over 143 years ago as its starting point.”

Mr Martin said the statement “significantly undermines the position of the three executive directors”. He concluded: “Given their significant experience in the transport industry, their detailed knowledge of transport in Edinburgh, the fact that three executive directors are also directors of Edinburgh Trams, and their own particular areas of expertise, I do not believe this position to be reasonable.”

COMPLAINTS

Craig “refused to engage” with executives at the airport, leading to a breakdown in the relationship.

Not upheld

Failed to maintain a good working relationship with the council, particularly in regard to the tram project.

Not upheld

Interacted with fellow management and staff in an inappropriate manner and failed to treat all staff with dignity.

Not upheld

Appointed senior members of staff on big salaries against the wishes of fellow executives, or without their knowledge.

Upheld

Dismissed senior members of staff with pay-offs who “disappeared” without consulting fellow executives.

Upheld

Spent £269,000 on unbudgeted spending for brand launch of Transport for Edinburgh without consultation.

Upheld

Fellow executives were excluded from tram management, showing “little respect” for business ethos of Lothian Buses.

Upheld

Showed “favouritism” to a junior female employee, holding private meetings without telling line manager.

Upheld