Scottish Book Trust negotiated a significantly worse deal than it claimed to ScotGov and Postcode Culture Trust. As a result, publisher Birlinn – SBT’s CEO’s business partner – pocketed £131k funding, and up to £43k EXCESS profit, for a Muriel Spark Centenary project announced by Nicola Sturgeon, Scotland’s First Minister.

ScotGov and Creative Scotland – Scottish Book Trust’s funders – have allowed conflict of interest to continue, placing £5.5m public funds under the potential influence of Birlinn and ignoring the impact on taxpayers, lottery players and Scotland’s publishing market.

Muriel Spark Centenary

In November 2018, Scotland’s First Minister Nicola Sturgeon announced that Scottish Book Trust (SBT) would donate to Scotland’s libraries 11,000 copies of Birlinn/Polygon’s centenary editions of Muriel Spark’s novels. The £90k project was being funded by Scottish Government (ScotGov) and Postcode Culture Trust (PCT).

SBT had negotiated a deal with Birlinn. However, it seems that its CEO, Marc Lambert, omitted to tell ScotGov or PCT that he was a business partner of Birlinn and thus had a conflict of interest (COI) in the deal. Rather than allow others to judge if/how the COI could be managed, he decided that none existed. When we challenged SBT’s on this, its Chair, Keir Bloomer, also claimed that no COI existed.

The conflict of interest

In 2016, Marc Lambert acquired 15% of publisher Nicolson Digital Limited, of which he is a director. Birlinn owned 42.5% until it transferred ownership to Hugh Andrew, Birlinn’s sole shareholder, in September 2020. Up until then, Marc Lambert and Birlinn controlled 57.5% of Nicolson Digital, which relies on Birlinn for sales, distribution and a material amount of lending.

Hugh Andrew approved Marc Lambert’s appointment as a director of Nicolson Digital, but that approval was hidden from Companies House for 9 months after it was given.

Marc Lambert has a statutory (Companies Act) fiduciary duty to Nicolson Digital as one of its directors; whereas he has a contractual (contract of employment) duty to SBT because he is not a director or trustee of the charitable company. Put crudely, he owes a greater duty to Nicolson Digital than to SBT; and, through Nicolson Digital, is obliged to look after the interests of its shareholders. He and Birlinn are two of its three shareholders.

Marc Lambert should have declared his interest to ScotGov, PCT and the SBT board and allowed them to determine how to proceed.

The Anderson Strathern connection

Birlinn, Scottish Book Trust and Nicolson Digital share the same firm of solicitors: Anderson Strathern. It is also listed as company secretary of Scottish Review of Books Limited (SRofB), to which Creative Scotland gave £0.3m despite another COI meaning that the ‘review’ company’s sole Person With Significant Control is Birlinn’s marketing director. SRofB has made inaccurate and misleading filings at Companies House annually since at least 2016.

SBT did not negotiate what it claimed

A Freedom of Information request has unearthed how, and to what extent, Birlinn benefited from the deal that SBT ‘negotiated’ under the leadership of Birlinn’s business partner, Marc Lambert.

The highlighted section of the document below evidences what ScotGov understood that SBT had negotiated.

Email from Scottish Government, Culture & Historic Environment Division, to Scottish Book Trust, 3 Dec 2018, obtained via FOI request
Maths

£156 versus £200 RRP is 22% discount off RRP. It is not 33%.

SBT made the same claim in its application to Postcode Equality Trust (which PCT funded – see), stating:

‘SBT has negotiated a 33% discount on the Muriel Spark Centenary Editions with the publisher [Birlinn]. Each set will cost £156 (£200 RRP). As mentioned, Alan Taylor’s memoir will be supplied free of charge.’

Here’s an extract from the application (highlighting is ours):

Extract from SBT application to Postcode Equality Trust. (Application was funded by Postcode Culture Trust – same trustees.)
Unwarranted addition of publisher costs

If there is a half-price sale at a bookshop, a customer pays half the price previously charged (usually half of RRP). They do not pay half of RRP then pay the publisher’s licensing (royalty), supply and management costs on top. The RRP includes those costs.

However, the deal SBT negotiated meant ScotGov & PCT had to pay Birlinn £10,000 for licensing, supply and management, on top of the price for the books.

SBT had not even negotiated a 22% discount. In reality, the discount was just 19.7%.

Who benefitted from the difference? Birlinn – Marc Lambert’s business partner.

How much has the conflict of interest cost ScotGov (taxpayers) & PCT?

The cost to ScotGov & PCT has come from the differences between:

  • the 33% discount claimed and 19.7% discount actually negotiated; and
  • the 33% discount claimed and a commercial discount on a deal for 11,000 books.

Amazon requires 60% discount for single copies under its Advantage programme. Had SBT negotiated 60% discount, Birlinn would have received £43,295 less from the deal.

SBT ‘negotiated’ 19.7% – less than a third of the normal commercial discount.

£131k to Birlinn

CS had already given Birlinn £45k towards producing its Centenary editions of the Muriel Spark titles. Concluding the SBT deal meant that Birlinn took in £131k even before trade and festival sales, and direct sales at the many Muriel Spark events, including that at Edinburgh’s Usher Hall featuring Nicola Sturgeon, Ian Rankin and Alexander McCall Smith.

Birlinn has received £0.4m from Creative Scotland (CS) and its predecessor SAC. CS has funded it annually, regardless of the company’s £1.4m balance sheet, known conflicts of interest involving other companies that CS has funded, and it paying its owner Hugh Andrew £34k p.a. rent for its offices, which he owns.

Can ScotGov recover what it has lost?

SBT’s main funders are Creative Scotland (CS) and ScotGov. Both are fully aware of the COI but have refused to act to recover money from SBT or Birlinn. Providing a charity with £5m p.a., only to be duped by it, is admittedly awkward to explain, but not as awkward as explaining why no action has been taken.

Has the conflict of interest had a wider effect?

Marc Lambert’s COI has put SBT’s £5m+ annual budget under the potential influence of Birlinn. There is no way of knowing the extent to which that influence may have been exerted.

It is hugely damaging to SBT – a charity – that publishers cannot trust it. Their assumption must be that anything SBT is told Birlinn could be told: from planned new imprints to promotions being considered.

And what of the books and authors SBT promotes? How can publishers and authors be certain that the COI does not influence what is chosen?

SBT CEO role is not compatible with being a publisher’s business partner

The overarching nature of SBT’s CEO role makes it incompatible with being a publisher’s business partner. That the business partnership is via a company that publishes maps misses the point: the partnership is still between the CEO and a company that publishes books of the sort that SBT promotes.

Resolution?

SBT’s trustees had the opportunity to recognise and manage the COI when we informed them of it. Instead, they stuck their heads in the sand and pretended that no COI existed. In doing so, they have failed to act in the best interests of the charity, as required by the Charities Act. They would be advised to consider their positions. We anticipate OSCR considering their positions for them given the detailed evidence before it.

As for the charity’s CEO: ending the business partnership now does not eradicate the past or the fact that he COI was not disclosed.

Questions that need answers
  • Why did Marc Lambert accept shares and a directorship that would so obviously create a COI?
  • Why did Birlinn offer Marc Lambert the shares and directorship knowing that a COI would arise?
  • Did SBT require Marc Lambert to declare his interests? (If so, did he declare his business partnership with Birlinn?)
  • Why did SBT’s trustees allow Marc Lambert to oversee a negotiation with his business partner? And why did it ignore the COI when told of it?
  • Why did ScotGov state that it was ‘content’ with the discount ‘negotiated’ by SBT with Birlinn when the discount ‘negotiated’ was substantially lower than the one it was told it was getting?
  • Why did Creative Scotland and ScotGov ignore the COI when informed of it in 2019? Why did they carry on funding SBT regardless?
  • Did Creative Scotland take account of Birlinn’s £86k income from the SBT deal when assessing how much of the £45k it had provided it should recoup from Birlinn? Did it ignore that income and enable Birlinn to keep the entire £45k?
  • What action has SBT taken to recover from its CEO the loss to it resulting from overpaying for Birlinn’s books as a result of a) the discount ‘negotiated’ not being the 33% claimed and b) both the claimed and actual discounts being substantially below normal commercial rates?