Salvation Army under fire over tycoon's profits bonanza
Exclusive: Directors of Kettering Textiles Limited have earned almost 10m since 2008 through deal to run recycling banks
The Salvation Army is facing calls to explain how it allowed a private businessman to build a multimillion-pound personal fortune with profits from its charitable clothes recycling scheme intended to be used for good causes.
A Guardian investigation into the lucrative operation has revealed that Nigel Hanger, a 56-year old textiles trader from Kettering, has earned almost 10m for himself and three fellow directors since 2008 though a deal to run the Christian charity's nationwide network of 4,500 textile recycling banks.
Signs on the banks in supermarket car parks claim profits are used "to help the Salvation Army's work with people in need both at home and abroad".
But Hanger, a Northamptonshire textile trader who owns Kettering Textiles Limited (KTL), which is contracted to run the scheme, also earned more than 1.6m from the fundraising operation last year alone and more than 5m over the last five years.
The profits have helped fund his affluent lifestyle, which includes ownership of a 1m mansion and a racehorse. Over the last three years, KTL's directors earned almost 10m from the scheme, while the charity received 16.3m.
The emergence of the arrangement sparked a furious response from donors, who accused the charity of misleading them over how gifts intended for the Salvation Army's good causes are being used. The government and the opposition demanded an explanation and the regulator, the Charity Commission, has launched a review of the case.
A spokesman for the government's charity minister, Nick Hurd, called on the charity "to explain what is going on" while Tessa Jowell, the shadow charities minister, said she was "extremely concerned at the suggestion that a charitable organisation has been misrepresented in this manner".
Clothes recycling is a booming sector for charity fundraisers as a result of g! rowing d emand from consumers in countries including Hungary and Ukraine. The Salvation Army made 5m from donations of used garments last year alone.
Hanger's company works solely with the Salvation Army's trading arm to manage the scheme and collects 2,500 tonnes of clothes each month. It sells these wholesale to customers in eastern Europe.
Tonight the Salvation Army defended the arrangement and what it described as its "administrative costs".
"It needs to be recognised that the operation of SATCoL [the charity's trading arm] and its recycling partner is a huge commercial undertaking providing substantial funds to the Salvation Army which are directly used for our work," said Lieutenant Colonel David Hinton, the charity's secretary for business administration.
"It would be naive to believe or expect that such an operation would not incur administrative costs." It is not appropriate for the charity "to comment on the remuneration paid to personnel in an independent company that is not a subsidiary of the Salvation Army and over which we do not exercise any legal control," he added.
Hanger said he is entitled to earn profits from the business and said that the recent high earnings were partly driven by the rising price of secondhand clothes on the international market.
"I agree that in these austere times it [the profits] might not sit well, but I am in business," he said.
"It is only because over the last 20 years we have been able to build up a financially stable company we can extract that profit coming up to retirement. We use no tax avoidance schemes, I employ 50 people directly and we sub-contract collections to hundreds more."
The Salvation Army is facing particular questions over conflicts of interests concerning Hanger's position. As well as owning KTL, Hanger sits on the main board of the Salvation Army Trading Company Limited (SATCoL) which gives him influence over his client.
The Guardian has learned that SATCoL did not put the contract out to tend! er when it was last renegotiated in 2006. Trevor Caffull, managing director of SATCoL, said no one had anticipated the big rise in profits from the sale of secondhand clothes.
"Kettering Textiles' profits will broadly equal half of the profit of the clothing trading scheme," he said.
"It is an inevitable consequence that the more successful the Salvation Army is in raising funds, the more successful Kettering will be."
Hanger said he is not part of the SATCoL team in contractual negotiations with KTL.
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