Retailer potentially faces £5 million damages for alleged cover up of ‘corporate malpractice’

A former procurement director for the Co-operative Group is seeking £5m in damages at an employment tribunal after claiming she was unfairly dismissed for revealing governance issues and breaches of fiduciary duties.

Kath Harmeston, who was hired as group procurement director in April 2014 with the brief to significantly cut costs at the troubled retailer, claimed that she was dismissed after blowing the whistle on incidents of “corporate malpractice”.

At the opening day of the tribunal on Thursday, she said problems that went “right to the top” meant that 70 per cent of the £1.5bn overall spend did not comply with the published procurement policy.

In her statement Harmeston also said the Co-op was “haemorrhaging money” on management consultants and that “due to breach of procurement policy the respondent had paid between £4m and £8m more than they needed in 2013 for consulting services”.

Harmeston was initially suspended on 16 June 2014 and put on garden leave, and eventually dismissed from the Co-op on 12 September 2014.

Allan Leighton, chair of the group, said: “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.”

But the former director said after she made the allegations, which she claims are “protected disclosures” under UK whistleblowing law, the attitudes of senior staff “changed in a negative way”.

The Group “embarked upon a deliberate campaign to comprehensively disparage [her] reputation with staff, suppliers and within the executive search community” although she said she had “at all times acted with the utmost integrity”, she said.

A disciplinary process was initiated against her based on an “anonymous whistleblowing complaint which [she] contend[s] contained a number of false statements”. Harmeston described working in a “highly political and dangerous environment”.

Joanne Woodward, Harmeston’s counsel, said: “Her direct approach, rigour and appetite for change challenged the status quo and the personal agenda of the group’s executive.”

The Co-op headhunted Harmeston from Royal Mail, where she had helped to deliver £650m in savings. She has since joined the Ministry of Defence as independent director for the equipment and support division.

Andrew Burns QC, representing the retailer, told the tribunal in Manchester that Harmeston had hired a contractor – Silver Lining Partners (SLP) – to the Co-op that she knew had been investigated for malpractice at the Royal Mail.

The retailer claimed she did not have the authority to do so and that her allegations against the group were “an attempt to mask her own serious misconduct”.

During the disciplinary procedure Harmeston claimed she was assigned the code name “Wimbledon” by Co-op staff “so as to avoid creating a paper trail of emails relating to [her]”.

The hearing is expected to last two weeks with chief executive Richard Pennycook and chief operating officer Pippa Wicks expected to give evidence.

Additional reporting by Will Green, news editor, Supply Management