(Not) model trustee behaviour: Why was Naomi Campbell disqualified as a trustee?

Earlier this year, the Charity Commission disqualified supermodel Naomi Campbell from being a charity trustee for 5 years. Naomi was the founder, and also charity trustee, of Fashion for Relief.

Alison Jones, senior associate, and Victoria Walton, solicitor apprentice, both in our charities team, discuss the lead-up to this decision and reiterate some key responsibilities of charity trustees.

Background

Fashion for Relief (the Charity) was established for the purpose of (broadly speaking) relieving poverty and advancing health and education by making grants to other charities and organisations.

Some items in the Charity’s annual return sparked concern amongst the Charity Commission which ultimately led to a statutory inquiry (Inquiry) being launched into the Charity.

Findings

Some of the key findings from the Inquiry include:

A failure to document decision-making

The Inquiry found that the trustees failed to keep records of their collective decision-making: this included invoices, receipts, partnership agreements, due diligence checks and meeting minutes.

When probed, the trustees were therefore unable to adequately justify decisions made as being in the best interests of the Charity. This highlighted significant poor governance within the Charity.

In light of this, charity trustees are encouraged to read the Charity Commission’s guidance on decision-making (accessed here) and on charity meetings (accessed here).

A failure to manage partnership arrangements

The Charity held fundraising events for two other charities. During the Inquiry, those two charities complained that the requirements of their partnership arrangements had not been met – they were both owed significant sums from the Charity. Those complaints were upheld.

The trustees were criticised for failing to manage the Charity’s relationships with other charities, and for failing to have a formal partnership agreement in place with those other charities.

Please note that the Charity Commission updated its guidance earlier this year on working with other charities. That guidance can be found here.

A failure to adequately manage the charity’s financial position 

Unauthorised payments to trustees

The Charity paid one trustee almost £300,000 for alleged consultancy fees. The Inquiry found that these payments had not been authorised by the Commission, by the Charities Act, by the court or otherwise in accordance with the Charity’s governing document.

In addition, the trustees did not provide evidence to demonstrate that a value-for-money exercise was undertaken at the time the decision was made to remunerate the trustee in question for services provided to the Charity or that the services to be provided were documented.

The Inquiry therefore found that the payments had been made in breach of trust, and the trustee who received them was ordered to repay those.

Low level of charitable expenditure

The Inquiry found that there had been low levels of charitable expenditure, with 72% of the Charity’s expenditure being used for event charges, $14,800 being used for a flight from London to Nice, €9,400 being paid from the Charity’s funds for three nights’ accommodation for a trustee, and only 10% of the Charity’s funds actually being used to award grants/to further the Charity’s purposes. 

When questioned on this, the trustees could not provide any evidence that they had reviewed the Charity’s operating model, that they were satisfied that the costs of the fundraising activities were reasonable, and that the fundraising costs continued to be in the Charity’s best interests relative to the profits generated. 

Trustee expenses

The inquiry found that not all expenses incurred by the trustees were reasonable expenses to be paid from the Charity’s property. Those expenses included €7,939.75 for spa treatments, room service, and the purchase of cigarettes and hotel products. 

The Inquiry found that the trustees breached their legal duties (both to comply with the Charity’s constitution and their duty of prudence) regarding these payments.

A failure to effectively manage the Charity’s finances

Whilst the Charity had its own bank account, that was never used. The funds of the Charity were, in fact, held by third-party advisers on behalf of the Charity.

Therefore, the trustees did not have direct access to the Charity’s funds, which put the Charity’s assets at risk. 

For further guidance on internal financial controls, please click here.

The Inquiry concluded that serious misconduct and/or mismanagement had been committed by the Charity's trustees since its establishment. Therefore, all three trustees were disqualified.

A reminder to the wider sector

This case reminds us that, whilst the role of a charity trustee can be rewarding, it must be taken seriously. Trustees must comply with their legal duties and, if they don’t, the consequences can be serious, not only for the charity but personally for the trustees.

That said, the Charity Commission recognises that most trustees are volunteers who sometimes make honest mistakes. Trustees are not therefore expected to be perfect - they are, however, expected to do their best to comply with their duties. Charity law therefore generally protects trustees who have acted honestly and reasonably.

Keeping up to date with Charity Commission guidance, complying with your charity’s governing document, seeking professional advice where required, and keeping appropriate records of all decisions made, are therefore key to help demonstrate that you are taking your role as charity trustee seriously and acting honestly and reasonably.

If you have any questions regarding the role and responsibilities of a charity trustee, or any of the issues raised in this article, please feel free to contact Alison Jones using [email protected] or 0191 211 7930.