Tenants who ran their own neighbourhood in a flagship scheme will be pursued through the courts by Birmingham housing officials to recoup taxpayers' cash that was allegedly wasted, the city's housing boss warned yesterday.
Coun John Lines, the city's cabinet member for housing, issued the warning after he finally pulled the plug on the multi-million-pound Druids Heath Tenant Management Cooperative this week.
The 1,700 homes controlled by the TMC since 2000 will now be brought back under the control of the local authority as a council investigation is launched.
The termination of the "power to the people" experiment that put management of Birmingham council homes in to the hands of tenants is set to raise serious questions about the future direction of devolved power in the city.
It follows a report by Government watchdogs last year alleging highly-paid and unnecessary posts were created and filled by friends and family of the management team.
The ombudsman raised further concern over inappropriate awarding of contracts and voting irregularities.
Arrears of rent payment was also found to have shot up by 74 per cent under the coop-erative's management of the houses.
Coun Lines (Con Bartley Green) said the council is currently attempting to recoup £250,000 that is being held in a TMC bank account after the organisation's bank accounts were frozen.
The decision to close the TMC was formally agreed at a meeting of the cabinet on Monday.
"We do not need a Government Ombudsman telling us that the council has failed in its responsibility," he said. "I think localisation can work, but we have to be very careful about the people that manage these organisations.
"The auditors will be going into this organisation. There will be a proper investigation into the finances and, if need be, we will go further.
"If we find any evidence of financial malpractice we will endeavour to recover that money by any means possible, which may need the help of the police."
Housing committee member Coun Vivienne Barton (Con Bartley Green) said: "The council has stepped in because there were tenants on that board who had expressed serious concerns that things went on that shouldn't have with regard to their audited accounts."
The council agreed last month to close the operation which had a £2.5 million annual budget and was once hailed as the future of council house management.
Over the last five years the TMC received a £2 million "bail out" from the authority to cover unexpected additional management support costs.
Three years ago the organisation was the subject of a police investigation after a group of residents raised concerns over management and missing computer equipment.
No action was taken at the time. Coun Barton added: "There has to be lessons learnt from this. That is why the investigation is taking place and decisions will be made as a result of this investigation."
A statement issued from Birmingham City Council yesterday said: "The future of the TMC is that the services and the staff will return to the city council as soon as is practical."