School for Scandal

St Mathews Academy Saltcoats, one of the four schools built that line the pockets of investors

When I asked a close friend, one of our most distinguished international architects, why his firm had not made a bid to design and supervise the build of new Scottish schools planned under the Labour administration, his answer was viper quick. “Wouldn’t touch the projects; the investors were skimming 40% off the top of the projects before a single school saw a foundation stone laid.”

The former SNP MSP Campbell Martin gives his view of the scam.

Incidentally, there is a way to stop the leaching of millions of public money to the rich profiteering investors at usury rates. Pass a parliamentary law making it mandatory for 60% of local people to be on the governing boards of such PPP enterprises, and as soon as installed pass a resolution with the board of governors of the schools to halve the interest rates (or more) immediately.

THE ONLY GAME IN TOWN

by Campbell Martin

In June, 2005, North Ayrshire Council announced that First Class Consortium (FCS) was the preferred bidder for its Public Private Partnership (PPP) deal to build four new schools. The Council subsequently issued a press release, advising that FCS had been awarded the contract. The press release gave the value of the contract as £80m. However, this figure actually only represented the capital cost, the amount it would take to build the schools. In another press release, the German construction company Hochtief announced it had been awarded the North Ayrshire contract, and gave the total value as £380m.

Hochtief was the main component-part of First Class Consortium, and the figure it gave represented the £80m construction cost plus £300m for a 30-year contract to maintain the school buildings. Before this stage in the North Ayrshire Schools PPP Project was reached, the Council had embarked on a procurement process that has since been recognised as Scotland’s biggest PFI/PPP scandal.

PFI stood for the Private Finance Initiative, a system of procuring and paying for public contracts, initially introduced by the Conservative UK Government led by John Major. The system was rebranded as Public Private Partnerships by the New Labour governments of Tony Blair and Gordon Brown. It was under New Labour that PPP was massively expanded. Councils and health boards seeking to build new schools and hospitals were not only encouraged to use PPP, they were effectively told it was ‘the only game in town’, the only way they would receive central government funding to help pay for construction projects.

The shocking truth of what actually happened during the procurement process for the North Ayrshire Schools PPP Project is told in two documentaries – ‘The Only Game In Town’ and ‘The Only Game In Town 2 – The Cover-Up’. Both films are available on YouTube: links to them can be found at the foot of this page.

Two key outcomes of the process, however, are that the procurement saw First Class Consortium awarded the multi-million-pound contract without ever facing any competition. Also, the figure of £380m, quoted by Hochtief in its press release on FCS being awarded the contract, is an understatement of the total cost to the public purse. The detail of the contract shows payments to the private-sector companies within the consortium increase year-on-year. At the moment, taxpayers are forking-out over £1m every month to service the North Ayrshire PPP debt. In total, by the time the contract ends in 2037, the public will have paid considerably over £400m for schools valued at just £80m when new.

Much of the content in the two documentaries mentioned above relates to the ‘second bid’, which North Ayrshire Council claimed provided genuine competition for its multi-million-pound Schools PPP contract. Watch the films and decide for yourself about that claim. This article, for the first time, focuses on the successful bid, the one from First Class Consortium. More specifically, it focuses on the consortium’s largest component-part, the German construction firm Hochtief, and on the man who provided financial backing for the company.

Hochtief has been a very successful company in the field of construction since the early part of the 20th Century. At the time of its successful bid for the North Ayrshire PPP contract, one of its major shareholders was a German businessman called August von Finck, who inherited much of his wealth from his father, also called August, who died in 1980. The family wealth originated with August senior’s father, Wilhelm von Finck, who, in the 1880s, co-founded the bank Merk Finck and Co, and the Allianz Insurance company.

August von Finck senior was one of Germany’s most successful businessmen during the 1930s, and poured money into backing Adolf Hitler’s rise to power. In 1931, August von Finck and other like-minded businessmen met with Hitler in Berlin’s Hotel Kaiserhof. They promised the Nazi leader 25m-Reichsmark to help his campaign to become Chancellor of Germany. This figure, today, would be the equivalent of around £85m. In February 1933, a month after President von Hindenburg had appointed Hitler as Chancellor, von Finck and the other businessmen provided the Nazi leader with another sum, equivalent today to around £2.5m.

August von Finck was rewarded by Hitler for his financial support, benefiting greatly from what the Nazi’s called ‘Aryanisation’, which was where Jewish property and wealth was seized and handed-over to prominent members of the Nazi Party. One significant ‘gift’ from Hitler to von Finck occurred following the Nazi annexation of Austria, with the businessman handed control of the Jewish bank, Rothschild.

August von Finck’s construction company also benefited from its close links with the Nazis. In a recent statement, Hochtief said, “In the 30s and 40s of the last century, Hochtief, as a large German construction company, was involved in construction projects of the Nazi period. Hochtief is aware of its historical and moral responsibility.”

The statement reads as if Hochtief accidentally found itself doing a few building jobs during the “Nazi period” that it now, with hindsight, regrets. This is far from the truth. Hochtief was Hitler’s favourite builder, constructing, among other things, the massive Nazi arena in Nuremberg, at which Hitler addressed thousands of his followers during mass rallies. Hochtief also built Hitler’s personal alpine retreat, the Berghof, and was so favoured and trusted by Hitler that the company was employed to design and build the Fuhrerbunker in Berlin, the underground building to which the Nazi leader retreated as allied forces entered the German capital towards the end of the war.

As the Nazi’s expanded the Third Reich by invading countries across Europe, Hochtief continued to benefit from its close links with Hitler. The construction company was awarded contracts to build infrastructure for the Nazis in occupied countries. Many of the contracts saw Hochtief use slave labour, which consisted of local men rounded-up, transported to Nazi ‘camps’ and forced to work for meagre rations of food. Today, this is how Hochtief describes its close involvement with the Nazis and its use of slave labour: “On some building sites, Hochtief employed forced labourers and thus incurred a burden of guilt for the wrongs committed during the Third Reich.”

At the end of the war, August von Finck temporarily stood down from some of the senior business positions he held, including management of the family bank, which was handed to a trustee. He did, however, retain his great personal wealth, which had massively increased during his time working closely with Adolf Hitler and the Nazis as they committed atrocities across Europe. By 1948, just three-years after the war ended, von Finck had resumed full control of his businesses.

In 1980, August von Finck died: his enormous wealth passed to his son, August junior, who also inherited his father’s stakes in a number of major German companies, including Allianz insurance, the Loewenbraeu AG brewing company and Hochtief construction.

It is now clear that von Finck also inherited his father’s fascist political outlook. The rise of the far-right political party, Alternative for Germany (AfD), is largely credited to the financial support of August von Finck. Much of the money from von Finck was directed through a ‘middleman’ organisation called the Association For The Rule Of Law and Civil Liberties, which funded a poster campaign and free newspapers urging a vote for AfD. It is estimated the posters and newspapers would have cost in the region of €10m. The German newspaper, Der Spiegel, has reported on the close-ties between the Association For The Rule Of Law and Civil Liberties and Ernst Knut Stahl, director of August von Finck’s financial and property holdings.

Alternative for Germany has been characterised as a German nationalist party, which opposes immigration, is anti-Islam, anti-European Union and denies that climate change is caused by humans. In 2021, German media reported that the Federal Office for the Protection of the Constitution (BfV) had placed AfD under surveillance as a suspected extremist organisation.

When Hochtief was bidding for the multi-million-pound North Ayrshire Schools PPP contract – without any opposing bids – August von Finck personally owned a 25% stake in the company. Two years after Hochtief won the contract, von Finck sold his stake to the Spanish construction firm Actividades de Construccion y Servicios. The deal netted him €1.3bn.

August von Finck died in November 2021.

THE ONLY GAME IN TOWN

THE ONLY GAME IN TOWN 2 – THE COVER UP

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11 Responses to School for Scandal

  1. lorncal says:

    Typical Scottish government workings: nothing checked. Don’t listen to anyone. Just full-tilt into catastrophe. You and Campbell Martin are right, though, GB: this could be sorted or, at least, alleviated for the tax payer, with legislation. I won’t be holding my breath, given the speed with which the Labour party and the SNP (duped by the Tories, whose original idea this stuff was – who’d a thought it, eh?) fell for this and their equal culpability in covering it all up. Alec Salmond did try to ameliorate it, but the Tories had already blocked the access to pubic spending necessary to carry out these new builds. Thatcher? Remember her? And her successors, both Tory and New Labour? A number of German companies in existence today are those that supported the Third Reich and its killing machine. It was decided after WW II that it would destroy any hopes of revitalising Germany if these companies were ruined, so the big cheeses at the top were let off and they continued to prosper, as did many of the German scientist/engineering/medical/legal communities who were also complicit. It’s called Real Politik – German words.

  2. ayeinskye says:

    I would love to know if similar happened in the Highlands Gareth, three schools were built by a consortium led by Galliford Try(Morrison Construction) Portree, Dingwall, and Millburn Acadamy, and it was a joke, supposedly design and build, well from my experience it was build then design, I was working for both Morrison Civils (Concreting) and then went on to work with electrical firm Haden Young, and the number of times we had to rip out wiring, etc because the plans had changed multiple times when walls were ripped down, doors moved was a joke, again built on a 30 year lease, Portree school was built at a cost of £28million or there about, but then Highland Council were tied into leases for 30 yearswhere Morrison were supposed to be the caretakers, the school is now looked after by a company called Mears

  3. Morrisons was sold to Mears

  4. ayeinskye says:

    That will explain why Mears took over the HC contracts then, thanks T56

  5. davidbsb says:

    Ah now what you are looking at here is what is called “ rent seeking “ in economics. The British economy is rife with it. The majority of new cars are leased. We all pay phone contracts and netflix subcriptions and houses are being mortgaged for 40 years now. The name of the game is not to own anything but to get in a position where people just send you money every month and you contribute nothing to the greater prosperity of anyone but yourself. Look even at the latest hikes in fuel bills. Curiously all the supposed competing entities applied the same method. They pushed up the standing charges. The bit that has nothing to do with the actual gas you consume. We are all being played for fools. We are turning into a nation of serfs, bound to the financial system and the handful of rich people who sit there coining it, before shuffling off to Hades and passing the ill gotten gains to their avaricious weans.

  6. davidbsb says:

    Hmm. Google search rent seeking and it gets even more interesting. The PPP trick fits the bill. As does the contracts that sprayed all the Covid money to Tory connected “ businesspeople “. We paid surcharges to build and subsidise all those wind turbines now generating profits for power companies charging us for the power as if wind cost the same as gas to buy. And it is indeed rife. Remember when you could draw up at the airport and offload your pals and their luggage? Then those eejits tried to attack Glasgow Airport? And now you have to pay extorted money to do the same thing because the operators cashed in on the safety measures introduced? Its everywhere…

  7. Grouse Beater says:

    Excellent remarks, David. Much obliged.

  8. alfbaird says:

    Economists used to know it as ‘interception of economic rents’, which governments are usually tasked to prevent rather than actively promote as in the UK. UK privatisation of major transport utilities – ports, airports and railways is another case in point where offshore private equity funds continue to make hay. Ferries were not immune either – private equity groups taking control of Wightlink, Red Funnel and even Isle of Man Steam Packet for a while. NorthLink Ferries was ‘created’ with help of KPMG PFI folks with a trio of vastly overpriced and overpowered ferries bought at £30m apiece and leased since 2000/02 to Scottish Gov for around 18-20 yrs @ abt £10m/yr, then bought recently for cash by SG, without any tender(!) when they should really have been replaced. That trio were also the most inefficient ships possible with over twice the ‘normal’ power requirement for small ferries of their size hence higher fuel cost (and CO2 emissions) and which led to increased operating subsidy; NorthLink ‘I’ also went bust around 2004/5 when the annual subsidy had to be raised from around £11m to abt £40m. All-told the public sector has paid more than three times over what a savvy shipowner would have paid for these boats, and double the operating cost. CalMac’s Loch Seaforth was initially a similar PFI deal. Via inept governance state ferries as we know now consume absolute bucketloads of public money including £1 billion operating subsidy every 8yrs for CalMac, plus capital grants for CMAL’s dubious prototype ships, the latest two of which may never operate after costing £250m+, and not dissimilar port expense. All this in return for rather poor service levels. New SNP = New Labour = Tory, little changes, though in Scotland this seems a cultural imposition, what the Europeans involved in transport policy actually term ‘the Anglo-Saxon Model’.

    https://www.bing.com/videos/search?q=loadsamoney+harry+enfield&view=detail&mid=FC79BFBF4192DF25F9E8FC79BFBF4192DF25F9E8&FORM=VIRE0&ru=%2fsearch%3fq%3dloadsamoney%2bharry%2benfield%26form%3dANNTH1%26refig%3d64763af7dea148d1b2ed54cb9c20b7fa%26sp%3d4%26qs%3dAS%26pq%3dloadsa%26sk%3dPRES1AS3%26sc%3d8-6%26cvid%3d64763af7dea148d1b2ed54cb9c20b7fa

  9. Howard Cairns says:

    I am amazed at the ability of the bureaucrats and police and legal service to cover up this mess. What will the new independent Scotland do to correct this? I wonder?

  10. Grouse Beater says:

    A good question, Howard. I know what should be done, but the actual answer will be known after independence.

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