THE chief executive of the country's biggest credit union is resigning in the wake of a Yorkshire Post investigation into allegations of wrongdoing and severe criticism from the Financial Services Authority for giving "inaccurate and misleading" statements to this newspaper.

Leeds City Credit Union (LCCU) said Sue Davenport, one of the leading figures in the credit union movement nationally, would be leaving her post when asked for a response to the contents of a leaked report which alleged she had attempted to impede an internal inquiry.

The credit union, which has over 20,000 members, did not comment on the report but instead issued a statement saying Mrs Davenport would step down from her role next month.

The leaked report was drawn up by former Leeds MEP Mike McGowan, who was one of three directors on a panel LCCU set up to investigate its management and the conduct of Mrs Davenport following publication of a series of allegations in November.

It was revealed then that Mrs Davenport's son was able to obtain a £16,000 loan when credit union rules only entitled him to £1,200 and that the chief executive has been investigated by HM Revenue and Customs over allegations she avoided paying tax over consultancy fees she paid into her credit union accounts.

In addition, a series of loans to staff members were made on favourable terms – breaking credit union rules.

But Mr McGowan's report to the board, written on January 15 this year, revealed the inquiry was "handicapped" because "some members of the board and the chief executive were opposed to the investigation from the beginning". He added the panel had to move its meetings away from the credit union's HQ in New York Street, Leeds "when it was felt the atmosphere was not conducive to its work as a result of the attitude of the chief executive".

Potentially even more damaging criticism came from extracts from a letter from the FSA, which regulates financial institutions, written to the president of the credit union, Jackie Young, when the Yorkshire Post was investigating its activities last year. It referred to Mrs Davenport's response to the allegations, which included a suggestion it had been endorsed by the FSA.

The extract from the letter, dated August 31 and written by
one of its officers – Roger Marshall, said: "The fact that Sue (Davenport) gave inaccurate and misleading responses to the journalist about the FSA's views cannot be ignored. Nor can the apparent support given to those inaccuracies by the board of LCCU…"

The letter then goes further and specifically highlights Mrs Davenport's denial to the Yorkshire Post that she had been subject to an investigation by the tax authorities over thousands of pounds of consultancy fees she received which were made payable to LCCU but paid into the chief executive's personal credit union accounts.

Mr Marshall wrote: "Furthermore, it seems that the board has endorsed Sue's refutation that she has been the subject of an Inland Revenue investigation into unpaid tax. I cannot see how the board can express an opinion on such an allegation as they are presumably in no position to know, one way or the other."

Mr McGowan's report also includes extracts from Mrs Davenport's letter to the FSA, dated September 6, in which she offers an explanation for providing misleading information.

It said: "I accept the substantive reply can be seen as misleading, although this was not intentional. By way of explanation, though not offered as an excuse, the reply was drafted by the company solicitor and issued on his advice. I have been too stressed and ill to be able to respond rationally myself and have relied too much on the solicitor's help."

The revelations contained in Mr McGowan's report represent the first information to emerge since the investigation was set up in November but it is not the first report he has drawn up into the affair.

The Yorkshire Post has learnt the three-man panel were split on their findings, with two of them, Simon Baker and David Usher, producing a 'majority' report and Mr McGowan a separate minority report.

LCCU did not respond to a request for copies of those last month and Leeds City Council, which has provided hundreds of thousands of pounds of public money to support the credit union, refused to provide copies after a request was made under the Freedom of Information Act.

The local authority, which has received copies, claimed the information was confidential and it was not in the public interest for council taxpayers to know the findings. It has set up its own separate inquiry – but also refuses to say what that involves.

Mrs Davenport, who has previously denied any wrongdoing, declined to comment on the contents of the leaked report and instead said the matter was being dealt with by the LCCU board.

Instead, in a statement issued by LCCU, she said: "I am very pleased to have been part of the team who made Leeds City Credit Union one of the top credit unions in the country. But after almost 18 years (as an employee), I think I can say I now deserve a slightly quieter life."