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4 days ago
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An entrepreneur who represented the UK on an ethics body was asked to resign from a company running government visa services after officials found it made a £13.64m gain on its not-for-profit contract.
After the discovery of years of profit-making, the company, Ecctis, repaid the money to the government and a number of executives, including Cloud Bai-Yun, stood down from the firm, which runs language tests and qualification recognition for people applying for UK visas.
Ecctis was accused of being in breach of its contract for failing to reinvest its large profits into the language test service as it was required to do under a deal first signed with the government in 2014.
The payment of dividends to Ecctis’s parent company out of its reserves was also criticised, as was the allocation to the government contract of management fees of as much as £85,000 a quarter paid to Bai-Yun, who was its chief executive in the relevant period.
Parliament has not been informed about what the Department for Education admitted in a statement were the “serious” failings they discovered last year. The company’s contracts with the DfE and the Home Office have been recently renewed with tightened provisions.
A whistleblower questioned why the monopoly services had been put in the hands of a private company. They told the Guardian: “I believe this is a tale of corporate greed and Whitehall mismanagement.”
Bai-Yun, who was a UK representative on a working group of a Council of Europe committee on Ethics, Transparency and Integrity in Education during Theresa May’s premiership, did not respond to a request for comment. It is understood that she has denied that Ecctis was in breach of contract.
The government’s allegations against Ecctis followed an audit last summer by Kroll, the financial and risk advisory firm, commissioned by the Department for Education.
Kroll claimed that Ecctis had not created a non-profit subsidiary to manage the government contract as it had undertaken to do and that costs were then wrongfully allocated, including the management fees paid to Bai-Yun.
As a result, it was claimed that Ecctis fell significantly below its reinvestment targets and did not meet its obligation to put 100% of its profits in the services it was carrying out for the government.
It was further alleged that there was a failure by Ecctis to provide financial management information to officials in alignment with its contractual obligations.
Bai-Yun was chief executive and sole shareholder of Ecctis’s parent company until 2021, when she sold her shareholding to an employee-owned trust for £17.587m. She subsequently became a ‘chief adviser’ to Ecctis; it was from this position that she was asked to stand down last year.
A source said the Department for Education had made it clear to the new leadership in 2023 that Bai-Yun and other senior executive directors of the parent company should be asked to resign as par of a “remedial self-cleansing plan”.
A DfE spokesperson said: “In accordance with the contractual arrangements with Ecctis Ltd, the DfE requested that Ecctis fundamentally review its management and governance. It was not for the DfE to specify individuals.”
It is understood that an internal review carried out by an external legal firm, Willans, commissioned by Ecctis, subsequently found that there had been a cosy and over-familiar relationship between Bai-Yun and DfE officials.
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It is understood that in interviews with Willans investigators, Bai-Yun denied that the company had breached the terms of its contract and claimed that the Department for Education had been fully informed about all the internal arrangements.
A spokesperson for Ecctis said: “We recognise the seriousness of these historic allegations. After an audit in 2023, we swiftly commissioned our own investigation and internal review, and reached an agreement with the DfE in performance of obligations under our contract with them.
“Ecctis now has a new senior leadership team and board, fully committed to the highest standard of ethics, and continuing to invest in our services, people and technology, for the benefit of our customers.
“We have implemented reforms across the business including overhauling our governance procedures and transforming our financial management and reporting systems.
“We continue to explore all legal remedies that may be open to us with regard to these historic allegations.”
The DfE said that the new contract obliged Ecctis to pay profits directly to the government each contract year and that the company would “no longer receive funds direct from users”.
A DfE spokesperson said: “The Department for Education identified serious historic issues at Ecctis. We took immediate steps to ensure these were addressed and no taxpayer funds have been lost.
“Our new, strengthened contract, alongside a new leadership team at Ecctis, means the department can continue to work with Ecctis to provide a good service to the public on the recognition of qualifications, which is a requirement under international law.
“Any further allegations, or evidence that previous historical concerns are not fully addressed, will be acted on promptly.”
