Kids Company was disastrously managed and may even have survived if bosses had saved chunks of the reported £42million poured into it by the taxpayer instead of handing some children and families £1,700-a-month, a damning Government report has found.
The charity run by founder Camila Batmanghelidjh and seven former directors including Alan Yentob went into liquidation in 2015, just weeks after it was handed a £3million grant by David Cameron‘s government.
It operated a ‘high risk business model’, according to the Charity Commission report published today, which said there was mismanagement and records were destroyed.
Kids Company, which supported 36,000 vulnerable children, young people and families in London and Bristol until it was wound up in 2015, attracted a number of celebrity backers including Coldplay, artist Damien Hirst and comedian Michael McIntyre.
It was dogged by allegations of financial mismanagement, including claims cash handed to children was spent on designer clothes, alcohol and drugs.
And after it shut down numerous examples of misspending of funds emerged, including the decision to send a drug addict called Dave to Champneys spa to relax with a ‘chocolate massage’ thrown in to boost his self-esteem. The trip allegedly cost the charity £55,000.
Today an official report by the Charity Commission (CC) said that Kids Company operated a ‘high risk business model’, characterised by a heavy dependence on grants and donations coupled with low reserves.
Investigators found that some of the charity’s records were destroyed at the time of its collapse – but those that survived showed that Kids Company was handing 25 people an average of more than £1,700 per month in 2014.
The report said: ‘Due to the limited material available, there was “insufficient evidence” for the inquiry to be satisfied that the charity’s significant expenditure on a relatively small number of beneficiaries was either justified or in the charity’s best interests’.
But Camila Batmanghelidjh and seven former directors including Alan Yentob will still be allowed to run a business after the High Court threw out a bid to get them disqualified for ‘financial mismanagement’ last year.
And today the Charity Commission confirmed it would not be using its own powers to disqualify them.
Camila Batmanghelidjh and Alan Yentob (pictured together) faced being disqualified from running companies after the Kids Company charity scandal that collapsed in scandal but were given a reprieve by the High Court last year. The Charity Commission will not use their powers to disqualify them
A staff member comforts a child as the Kids Company closes doors in Camberwell in 2015
How charity founded by extravagant ‘Angel of Peckham’ Camila Batmanghelidjh ran out of cash after series of scandals including ‘sending an addict to Champneys spa’ and ‘paying for kids’ drugs’
Camila Batmanghelidjh, Kids Company’s colourful founder, was given ‘unique, privileged and significant access’ to the top tiers of Government for years
Kids Company folded five years ago after being consumed by a number of scandals, mainly about how it spent donations and grants.
The charity was dogged by allegations of financial mismanagement, including claims cash handed to children was spent on designer clothes, alcohol and drugs.
Among the revelations, the charity arranged for one of its clients to have private sex-change surgery.
And sending a drug addict called Dave to Champneys spa to relax with a ‘chocolate massage’ thrown in to boost his self-esteem. The trip allegedly cost the charity £55,000.
Whistleblowers, including employees and young people, also claimed that cash was given to youngsters and spent on designer clothes, holidays, drink and drugs.
Founder Camila Batmanghelidjh was born in Iran, the grand-daughter of a self-made millionaire and said that, during her youth, her father was ‘one of the wealthiest’ men in the Middle Eastern country.
Suffering from severe dyslexia, she was sent to school in Switzerland before being moved to board at Sherborne Girls, a public school in Dorset.
Her father was locked up during the 1979 Iranian revolution and, when the his money stopped arriving, she started working in nurseries before claiming political asylum.
Ms Batmanghelidjh has said she’s wanted to open an orphanage since the age of nine and she started Kids Company as a drop-in centre in Camberwell, south London in 1996.
She revealed in an interview that she once used her mortgage repayments to pay for supervisors to carry out therapy sessions.
Kids Company expanded to open centres in Liverpool and Bristol and was this year said to work with 36,000 children.
The closure of the charity was a huge personal blow for Ms Batmanghelidjh, who was awarded a CBE in 2013 and was once named on the Women’s Hour Power List.
The charity was something of a ’cause célèbre’ over the last decade, with figures including actress Gwyneth Paltrow, socialite Jemima Khan and artists Damien Hirst and Grayson Perry being photographed with Ms Batmanghelidjh, along with numerous ministers and royals such as Prince Charles.
It is alleged its directors were repeatedly warned about the financial crisis facing Kids Company – but failed to correct the ‘unsustainable business model’ in which it put ‘spending ahead of its income’.
The organisation, which helped troubled children in South London, was given huge subsidies over almost 20 years – including £7.3 million in the five months before it folded in 2015.
But Ms Batmanghelidjh insists it was a ‘victim of its own success’.
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Philip Kirkpatrick, Deputy Managing Partner, at Bates Wells, who represent the trustees, said: ‘We’re pleased that the inquiry has concluded that no regulatory action should be taken against our client. However, the Charity Commission’s report is unbalanced and ignores many central features of the High Court’s judgment.’
Investigators said the trustees ‘were aware of the risks arising from the charity’s operating model’ – but ‘should have acted sooner during the period of the charity’s growth to improve its financial stability’.
‘Higher level of reserves may have allowed the charity to avoid liquidation, to wind up in a more orderly fashion, or to merge with another charity’, the report said.
The regulator has made a formal finding of ‘mismanagement in the administration of the charity’ over its repeated failure to pay creditors, including its own workers and HMRC, on time.
But the CC will not use its powers to make a referral for investigation to the police, finding that while there were failures there was ‘no dishonesty, bad faith, or inappropriate personal gain in the operation of the charity.
In 15 years, Kids Company took a reported £42million from the taxpayer, including £3million from the Conservative government in 2015 – on the eve of its collapse.
Last year The Insolvency Service (TIS) brought court proceedings against them over the alleged financial mismanagement of the former children’s charity that collapsed after having £42million of taxpayers’ money poured into it over a decade.
TIS has the power to ban any senior officials from organisations that have liquidated from taking similar positions for up to 15 years if their management contributed to insolvency.
In 15 years, Kids Company took a reported £42million from the taxpayer, with the prime minister said to be ‘in the thrall’ of Ms Batmanghelidjh, who squeezed £3million from Mr Cameron just before the firm collapsed.
Its closure came shortly after police launched an investigation, which was eventually dropped seven months later, into allegations of abuse and exploitation at the charity, following the broadcast of a BBC Newsnight report.
Ms Batmanghelidjh, who gave evidence to the court over videolink during a previous remote hearing, said she believed the charity was ‘attacked by envy’.
While in a statement to the court, Mr Yentob blamed the Met saying: ‘Were it not for the timing of the police allegations, Kids Company would be working today’.
But when Kids Company collapsed in August 2015 there were allegations of abuse and financial mismanagement, casting severe doubts on Mr Yentob’s ability as its chairman and the power he wielded at the BBC.
On five occasions Mr Yentob was accused of trying to put pressure on BBC journalists reporting on the scandal, even turning up at the Radio 4 Today programme studio uninvited when Ms Batmanghelidjh was about to be interviewed.
Mr Yentob was later forced to step down as the BBC’s creative director in December 2015 after admitting that his involvement in the Kids Company scandal had become a ‘serious distraction’ to the broadcaster.
Mr Yentob had been accused of compromising the BBC’s impartiality on five separate occasions by meddling with its coverage of the failed charity.
The company also faced a litany of other allegations.
In 2017, Ms Batmanghelidjh was forced to defend spending £55,000 on one troubled young man – including paying his massage bill at a luxury spa – saying material goods were important for ‘self-esteem’.
The colourful character, who had the ear of three prime ministers and courted wealthy donors before the organisation collapsed in 2015, also revealed that at one point, the charity was paying for 48 advisers in a single Lambeth school.
The police also announced an investigation into sex abuse claims made against the charity.
The sex abuse claims proved unfounded, with the judge at the trial saying the company would have succeeded but for unfounded claims of sexual assault.
He also exonerated Ms Batmanghelidjh, of allegations that the charity collapsed because she had failed to operate it on a financially sustainable basis.
In a ruling in February 2021, Mrs Justice Falk concluded that no disqualification order should be made against either Ms Batmanghelidjh or the trustees – including the BBC’s ex-creative director Mr Yentob.
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The charity collapsed in 2015, just weeks after it was handed a £3million grant by David Cameron’s government with ministers said to be ‘in thrall’ of founder Ms Batmanghelidjh who was handed piles of taxpayers’ cash
The judge found that Ms Batmanghelidjh was not a ‘de facto director’ of the charity.
She added: ‘If I am wrong about that then I would still not have made a disqualification order against her, taking all the circumstances into account and on the basis of the allegation or allegations made against her’.
In relation to the trustees, Mrs Justice Falk said: ‘I am wholly satisfied that a disqualification order is not warranted against any of the trustees.
‘As I said above, the public need no protection from them. On the contrary, I have a great deal of respect for the care and commitment they showed in highly challenging circumstances.’
In a statement after the ruling, Camila Batmanghelidjh said: ‘I would like to express my sincere thanks to Mrs Justice Falk for her incredible patience, understanding and wisdom for giving us the opportunity to set the record straight about the work of Kids Company.
‘I hope this judgment will be the first step in refuting the many lies that have been told and banishing the false myths.
‘My regret is that many thousands of children whom we supported were left unassisted and vulnerable once our service was withdrawn and that there were many others who never got a chance to receive help.
‘To them, my heart goes out. I would also like to thank our many donors, staff and volunteers for their remarkable support.
‘I shall not break step in my continuing campaign for the rights of children and to build for them a better future.’
Ms Batmanghelidjh said she recognised the charity was a ‘victim of its own success and that the demand for its services was outstripping its capability to manage’.
In a statement to the court, Mr Yentob said: ‘Were it not for the timing of the police allegations, Kids Company would be working today.
‘For the reasons set out above and in the affidavits of the jointly represented trustees, I do not accept that the charity had a business model that was unsustainable or that the trustees are unfit to be concerned in the management of a company,
‘These disqualification proceedings are a profound and unjust humiliation for the trustees who gave years of dedication and commitment to supporting the most vulnerable in our society.’
The Official Receiver (OR), which brought the case against Ms Batmanghelidjh and the former trustees, argued they are ‘unfit’ to hold company directorships as a result of their handling of the charity.
Batmanghelidjh was reportedly paying herself a £90,000 salary at the time that Kids Company went under.
An investigation was also carried out over claims that thousands of pounds of the charity’s money was spent on paying the boarding school costs of her chauffeur’s daughter.
Mr Yentob was accused of trying to repeatedly influence the BBC’s coverage of Kids Company, including accompanying the charity’s founder, Camila Batmanghelidjh, to a Radio 4 interview
Soon after, Yentob resigned as the BBC’s creative director in the wake of controversy over his role as chairman of the scandal-hit group.
Mr Yentob allegedly piled pressure on journalists and presenters as they were preparing to go to air with their reports on Kids Company, of which he was chairman.
He personally telephoned Newsnight executives twice ahead of investigations into the failed charity, and sat silently in the Radio 4 Today programme studio during an interview with its founder, Ms Batmanghelidjh.
His resignation was met with gleeful cries in the BBC newsroom, which has been at the sharp end of Mr Yentob’s interference.
Kids Company’s founder Ms Batmanghelidjh had ministers ‘in her thrall’ and her ‘powerful personality’ allowed her to become an expert at controlling people, a senior Tory MP said at the time.
Bernard Jenkin, then chairman of the influential Public Administration and Constitutional Affairs Committee (PACAC), said the controversial charity boss deliberately prevented information reaching trustees – including ministers.
A report published by the committee in 2016 urged the BBC to reopen its investigation into Alan Yentob, the former chairman of Kids Company, after he was accused of ‘deliberately intimidating’ corporation staff during the collapse of the scandal-hit charity.
The MPs said his meddling in the BBC’s coverage of Kids Company had been ‘unwise at best, and deliberately intimidating at worst’. And they said BBC bosses were too slow to take action against Mr Yentob.
In a damning assessment of Batmanghelidjh, Mr Jenkin said: ‘The founder of this charity was a very, very powerful personality, who had a very, very big vision and she became expert at controlling the people around her and even the trustees were in her thrall to an extent’.
Accusing the charity’s trustees of negligence, he added: ‘People sometimes chose trustees to be very nice and well-motivated people, but who don’t necessarily have expertise in the sector they’re dealing with.’
Mr Jenkin suggested that allegations of sexual abuse in the charity – which ultimately did not lead to any prosecutions – were ‘the straw that broke the camel’s back’ and led to the charity losing its reputation.
The charity, which aimed to support deprived and vulnerable inner-city children, received £46million of government funding over 13 years including £3million days before it collapsed.
The Commons committee admitted in its report: ‘Ms Batmanghelidjh and Kids Company appeared to captivate some of the most senior political figures in the land.’
Mr Yentob, pictured with Rod Stewart, continued to present his £150,000-a-year job presenting Imagine but then quit the BBC after admitting the scandal became a distraction
How Alan Yentob tried to pressure BBC staff during the Kids Company funding scandal that saw him forced from the corporation
Alan Yentob (right in the Calais jungle in 2016) was forced to apologise after repeated clashes with BBC colleagues over Kids Company.
His first intervention came when he called Newsnight on July 2 2015 as it was preparing to reveal that the Government was withholding £3million of funding from Kids Company, which folded months later.
The following day he turned up uninvited at Radio 4’s Today studio as charity founder Camila Batmanghelidjh was interviewed.
On the Thursday he tore into BBC News special correspondent Lucy Manning ahead of an investigation into allegations of abuse at the charity, but he later apologised.
Then, more than a month later – and after the initial controversy – Mr Yentob telephoned Radio 4 presenter Ed Stourton, 45 minutes before he was due to go on World At One with an item about Kids Company.
Mr Yentob insisted there is no conflict of interest because he does not have control over BBC News. ‘I’m not remotely considering my position at the BBC. I don’t think I’ve in any way abused my position at the BBC,’ he said in October 2015.
Mr Yentob admitted the interventions and said he ‘regrets’ any intimidation to BBC journalists, but insisted that he did not compromise the BBC’s editorial independence.
The BBC faced mounting pressure to axe Mr Yentob, amid concerns that he has abused his position at the corporation to promote Kids Company, and that his failures as chairman have now made him ‘toxic by association’.
Among the most embarrassing episodes, was the ‘hysterical’ letter signed by Mr Yentob and sent to ministers as the charity was negotiating for more Government funding.
It warned that without Kids Company there could be ‘arson attacks’ on Government buildings, rioting in the streets and ‘savagery’ in parts of Britain.
However, Mr Yentob compounded the embarrassment when he told MPs on the Public Administration and Constitutional Affairs Select Committee that a boy had been murdered because of the charity’s collapse.
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