Co-operative Group faces malpractice allegations

Co-operative retail store signage Image copyright Reuters

The Co-operative Group is facing allegations of corporate malpractice in an employment tribunal brought by its former procurement director.

Kath Harmeston claims she was unfairly sacked in 2014 after reporting what she believed was criminal conduct and is seeking more than £5m in damages.

The Co-op says Ms Harmeston was sacked because her behaviour was not in keeping with her role.

The group announced a return to profit last April after a turbulent period.

Ms Harmeston, who now holds a senior position at the Ministry of Defence, claims she was unfairly sacked for blowing the whistle on what she believed to be the unlawful, corrupt or irregular use of members' money, and the commission of criminal offences.

The details of her allegations will become known over the course of the tribunal, which starts in Manchester on Thursday and is expected to last two weeks.

Senior Co-op bosses, including group chief executive Richard Pennycook and chief operating officer Pippa Wicks, are expected to give evidence.

Cost-cutting skills

Ms Harmeston was headhunted by the Co-op Group from the Royal Mail where she had managed a budget of £2bn between 2009 and 2014 and helped make savings of £650m.

This was partly achieved by procuring delivery bikes for postmen from China at £45 each, rather than paying £360 per bike in the UK.

Her cost-cutting skills were much needed at the Co-op after the problems with its banking division had resulted in a £2.5bn loss in 2013.

Co-op Group chairman Allan Leighton said: "We intend to fully and robustly defend our decision to dismiss Kath Harmeston at the upcoming tribunal.

"We dismissed her because she acted in a manner which was not in keeping with the importance and seniority of her role, nor the values and principles of the Co-op."

Rebuilding reputation

The tribunal comes after a turbulent period for the Co-op.

In May, 2014 the former boss of the Co-op Bank Paul Flowers pleaded guilty to possessing cocaine, crystal meth and ketamine, after he had been filmed handing over £300 for drugs in a car in Leeds.

He had stepped down from the Co-op six months earlier over concerns about expenses. He was also suspended from the Labour Party and his position as a Methodist minister.

In 2014, a review of the Co-op Group by former board member Lord Myners said the organisation should adopt a much smaller board and focus on being profitable in order to survive.

Lord Myners said the group's current board was "manifestly dysfunctional" and needed more members with business experience.

However, last April the Co-op Group which includes food, insurance and funeral care businesses, announced a return to profit and posted profits before tax of £124m in the year to January 2015, helped by a recovery in its grocery business and the sale of pharmacies and farmland.

The outcome of Ms Harmeston's case is likely to have a bearing on the rebuilding of the group's reputation.

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