Decision

Charity Inquiry: Islamic Research Foundation International

Published 19 May 2022

Applies to England and Wales

The Charity

Islamic Research Foundation International (‘the charity) was registered on 20 December 2007. It is governed by a Memorandum and Articles of Association incorporated on 11 January 2007, as amended on 12 November 2019.

The Charity’s entry can be found on the register of charities (‘the Register’).

The Charity was incorporated as a company limited by guarantee (company number 06065201) on 24 January 2007. The Charity’s entry can be found on the Companies House register.

Issues under Investigation

The Charity’s principal expenditure and focus in furtherance of its objects had been, until 18 November 2019, to support Peace TV channels via grants made to Universal Broadcasting Corporation Limited (‘UBCL’). UBCL owned two subsidiaries Club TV Limited (‘Club TV’) and Lord Production Inc Ltd (‘Lord Production’). Between 1 February 2015 and 31 January 2020, the Charity granted 96% of its total expenditure, which amounted to around £3.6 million, to UBCL. Table 1 (below) provides further details in relation to the Charity’s income, spending and grants made to UBCL during this period.

Peace TV channels were international satellite television channels which broadcast religious programmes from an Islamic perspective until November 2019 in the UK. The Charity’s entry on the Register, until December 2019 used the ‘@peacetv.tv’ domain as its correspondence email address and directed viewers to the Peace TV website to solicit donations for the Charity which continued until at least April 2020 when the Commission opened its inquiry (see below). The Charity never had a website in its own name – the website ‘www.peacetv.tv’ was the only website used to collect funds from the public for the Charity and was provided to the Commission to display on the Charity’s entry on the Register.

The Commission has seen some leaflets in the Charity’s name appealing for donations at Ramadan and for Zakaat which also included the Peace TV logo and/or website and email address.

The Commission previously conducted compliance cases into the Charity in 2016 and 2019 over concerns raised about its governance. This included concerns over the charity’s decision-making in relation to its funding of Peace TV channels. Following engagement with the Commission in 2016, the trustees told the Commission that they would implement governance controls including:

• adding a provision about conflicts of interest in the Charity’s governing document along with an associated policy and a register of interests
• more comprehensive written policies and procedural guidelines for programme clearance on risk management
• a grant agreement between the Charity, UBCL, Lord Production and Club TV (‘the Grant Agreement’)

None of the above controls were in place until October - December 2018.

The Ofcom licence for Peace TV Urdu was held by Club TV and the licence for Peace TV (English) was held by Lord Production. In November 2019, Ofcom moved to suspend Peace TV Urdu’s licence because it had repeatedly rebroadcast material that Ofcom had previously found incited murder. Both Peace TV and Peace TV Urdu’s licence were surrendered by Lord Production and Club TV respectively on 18 November 2019 and consequently they are no longer broadcasting in the UK. Ofcom terminated the licences on 21 November 2019 UBCL was dissolved as a company on 6 July 2021. Lord Production and Club TV were both dissolved on 25 February 2022.

On 17 April 2020 the Commission opened a statutory inquiry into the Charity under section 46 of the Charities Act 2011 (‘the Act’). Prior to opening the inquiry, the Commission was engaging with the Charity’s trustees about various governance matters including their report of a serious incident in relation to Ofcom’s enquiries into Peace TV programmes.

Prior to the opening of the inquiry, the Commission sought to disqualify the Charity’s founder and chair of trustees, Dr Zakir Naik (‘Dr Naik’). As part of previous compliance cases into the Charity, the Commission had questioned the suitability of Dr Naik to continue to act as a trustee of the Charity following the then Home Secretary’s decision to exclude him in 2010 from the UK on the grounds of his unacceptable behaviour in making statements that attempted to justify terrorist activity and foster hatred. Dr Naik sought to challenge his exclusion in judicial review proceedings, but this challenge was rejected by the High Court in 2010 and by the Court of Appeal in 2011. Prior to the introduction of the Charities (Protection and Social Investment) Act 2016, the Commission’s ability to remove an individual from trusteeship was limited and could only be as a result of their misconduct and/or mismanagement in a given charity and being satisfied that it was necessary or desirable to act to protect that charity’s property. The Charities Act 2016 introduced a new discretionary disqualification power under section 181A of the Act which enables the Commission to consider a broader range of conduct by an individual outside of the management and administration of a charity.

On 18 September 2018, the Commission, in accordance with its obligations under the Act, issued notice of its intention to disqualify Dr Naik. In its provisional statement of reasons, the Commission relied upon Condition F of section 181A as it was satisfied that any other past or continuing conduct by Dr Naik, whether or not in relation to a charity, is damaging or likely to be damaging to public trust and confidence in charities generally or in the charities or classes of charity specified or described in the order. Both Dr Naik and the Charity’s trustees made representations in respect of the proposed disqualification; these representations were considered under the Commission’s Decision Review procedures. A final decision was made on 26 April 2019, upholding the Commission’s provisional decision and an Order disqualifying Dr Naik from trusteeship and senior management functions from all charities in England and Wales was made. Dr Naik appealed the Commission’s decision to the (Charity) Tribunal which heard this case on 3 and 4 November 2020. In the Tribunal’s judgement of 4 December 2020, it agreed that the test for Dr Naik’s disqualification was met but part upheld the appeal and reduced the length of Dr Naik’s disqualification to 7 and a half years. The Commission subsequently entered Dr Naik onto the Register of Disqualified Individuals in accordance with its obligations under section 182 of the Act. As a result of the Commission’s Order Dr Naik is prohibited from acting as a trustee or holding senior management functions in any charity in England and Wales.

A range of conduct by the Charity’s trustees referred to further in this report, as examined by the inquiry, relates to the time where Dr Naik acted as a trustee of the Charity. Unless expressly stated, references to ‘the trustees’ further in this report includes Dr Naik.

The inquiry closed with the publication of this report.

The scope of the inquiry was to examine a number of issues including:

• whether the trustees’ decision making about continuing to fund Peace TV channels - despite several breaches of the Ofcom Broadcasting Code (‘the Code’), some repeatedly - indicates misconduct and/or mismanagement in their administration of the Charity
• whether the trustees have learnt from the serious issues arising from the Charity funding Peace TV channels and are willing, and able, to further the charity’s objects in an appropriate manner
• whether the inherent conflicts of interest and/or loyalty - arising from an overlap between some of the charity’s trustees and the Peace TV licensee’s directors - were identified and appropriately managed by the trustees
• whether the Charity has appropriately applied restricted funds and also assess the trustees’ proposals about the funds already raised but not yet passed over to Peace TV channels
• whether all funds that the charity granted to fund Peace TV channels (via UBCL) have been used to carry out activities that exclusively furthered a charitable purpose
• whether the Charity’s resources and/or activities have furthered non-charitable purposes – and also whether any of the trustees have ever received any unauthorised personal benefits

On 29 July 2020, the Commission appointed Virginia Henley of Hewitsons LLP (now HCR Hewitsons) as the Interim Manager to the exclusion of the trustees, under section 76(3)(g) of the Act, to take over the management and administration of the Charity. Further information regarding the work of the Interim Manager can be found under the heading Interim Manager appointment.

Findings

Whether the trustees’ decision making about continuing to fund Peace TV channels - despite several breaches of the Code (some repeatedly) - indicates misconduct and/or mismanagement in their administration of the Charity

Since 2009, Ofcom found that several programmes broadcast by Peace TV channels have breached the Code on various specific grounds. This included one programme broadcast in 2009 (‘offence’ and ‘violence, dangerous or seriously anti-social behaviour’), two programmes in 2012 (‘offence’), two programmes in 2015 (‘adequate protection to public’ and ‘offence’), three programmes in 2017 (‘offence’, ‘hate speech’ and/or ‘abusive treatment’) and one programme in 2018 (offence’, ‘hate speech’ and/or ‘abusive treatment’). The inquiry found that such broadcasts, which were in whole or in part funded by grants made by the Charity to UBCL to fund Peace TV, would not have been capable of furthering the Charity’s purposes for the public benefit owing to their breaches of the code.

The inquiry found that numerous breaches of the Code occurred whilst the founding trustee, Dr Naik was acting simultaneously as both trustee of the Charity and director of UBCL and Lord Production. One of the Charity’s other trustees and several other former trustees were also simultaneously directors of UBCL, Club TV and/or Lord Production, whilst several breaches of the Code occurred. The inquiry found that the absence of the essential governance controls within the Charity over this period meant that inherent conflicts of interest and/or loyalty were not properly identified and managed by the trustees. The trustees had not demonstrated that they had consistently and transparently acted in the best interests of the Charity at all times as they are required to.

The inquiry found that the trustees’ decision to continue funding Peace TV channels despite the above referenced breaches of the Code and failure to manage conflicts of interest was misconduct and/or mismanagement in their administration of the Charity.

Whether the trustees have learnt from the serious issues arising from the Charity funding Peace TV channels and are willing, and able, to further the Charity’s objects in an appropriate manner

Despite the Charity funding Peace TV programmes since around 2007, the Grant Agreement, which sets out the general terms under which the Charity granted funds to UBCL (and its subsidiaries) to further the Charity’s charitable objects, was not in place until December 2018. Assurances had been provided to the Commission in 2016 that such measures would be put in place to address concerns regarding the relationship between the Charity and UBCL and connected companies. The inquiry found that the trustees were unable to demonstrate how they were properly assessing and managing the associated risks when awarding the Charity’s funds to UBCL and ensuring that those funds were applied solely in furtherance of its charitable purposes from approximately 2007 until December 2018.

A number of the inappropriate programmes, referred to above, were repeated in November 2019 on Peace TV Urdu which highlights the consistent failure by the trustees to ensure that charitable funds donated to UBCL were used only for the purpose of producing programmes which did not breach the Code.

Further breaches of the Code by Peace TV in 2019 resulted in Ofcom issuing a draft notice of suspension to Club TV on 13 November 2019. After receiving Ofcom’s draft suspension notice, both Club TV and Lord TV surrendered their broadcasting licences on 18 November 2019. Ofcom did not therefore need to proceed with the suspension/revocation process. Ultimately, it was not until Ofcom issued its suspension notice that the trustees decided very soon afterwards on 18 November 2019 to terminate funding with immediate effect to the Peace TV channels.

The inquiry found that the trustees’ repeated failure to consider changes or alternatives for applying charitable funds, following Ofcom’s adverse findings, demonstrates that they did not learn any lessons from the numerous and serious breaches of the Code. The trustees only stopped funding UBCL after Ofcom had issued notice of intention to revoke Peace TV’s associated broadcasting licences due to the seriousness of the breaches.

Whether the Charity has appropriately applied restricted funds and also assess the trustees’ proposals about the funds already raised but not yet passed over to Peace TV channels

The Charity’s accounts referred to its principal activity as “… that of securing donations for the continuation of Peace TV in furthering the objectives of IRFI. Appeals are made through broadcasts on the Peace TV network, these direct donors to the IRFI website which will allow donations…’’ Although funds were not recorded as restricted in the Charity’s accounts, the inquiry found that on balance, donations to IRFI were intended for Peace TV in accordance with donors’ intentions.

In January 2020 the trustees signed grant agreements with two Spanish entities as alternative licence holders to broadcast Peace TV channels, following the loss of the UK broadcasting licences in 2019. The trustees then sent the Spanish entities approximately £51,000 and subsequently provided contradictory explanations to both the Interim Manager and the Commission about whether these funds had been properly applied in furtherance of the Charity’s objects and in line with the grant agreements the trustees entered into in 2020 The trustees told the Commission that they had sent the funds to the Spanish entities between February and April 2020. However, they became aware in April 2020 that one of the Spanish entities had received a two-year suspension of its broadcasting licence before broadcasting could start. The inquiry found that the trustees conducted insufficient due diligence before sending funds to the Spanish entities and that their subsequent failure to demonstrate that charitable funds were applied properly by the Spanish entities has ultimately resulted in a significant loss of £49,797 (of the £51,000) to the Charity.

The inquiry did not need to explore further the trustees’ proposals for how the remaining funds of the Charity were to be used following Peace TV ceasing to broadcast. This is because the Interim Manager was directed by the Commission, on 19 November 2021, to wind up the Charity and distribute the Charity’s remaining funds to appropriate recipient charities who were registered with the Commission and whose objects were similar to those of the Charity.

Whether:

(i) all funds that the Charity granted to fund Peace TV channels (via UBCL) have been used to carry out activities that exclusively furthered a charitable purpose

(ii) the Charity’s resources and/or activities have furthered non-charitable purposes; and

(iii) any of the trustees have ever received any unauthorised personal benefits

The inquiry found that that the vast majority of the Charity’s income was granted to UBCL to support Peace TV channels (as outlined in Table 1 below ^{[footnote 1]}).

FYE	Charity Income (£)	Charity Spending (£)	Grants to UBCL to support Peace TV channels (£) [% of Charity Spending]
31 January 2020	399,907	475,615	431,197 [90.7%]
31 January 2019	518,259	602,183	561,369 [93.2%]
31 January 2018	587,142	789,449	779,775 [98.8%]
31 January 2017	919,684	906,610	888,241 [98.0%]
31 January 2016	951,356	1,032,744	994,848 [96.3%]

The inquiry found that the trustees had not discharged their duties properly in awarding charitable funds to UBCL, as the Charity’s grant agreement with UBCL included payment of core running costs of Peace TV channels. The Charity’s funding of a non- charity’s general running costs (or ‘core’ costs), such as Ofcom licence fees and SKY broadcasting costs, which were not directly connected to the activities that the Charity was funding was inappropriate for the following reasons. Firstly, this funding could be used to support activities and outcomes that were outside the Charity’s objects or that may not be charitable in law. Secondly, this funding could confer a private (i.e., non- charitable) benefit on the non-charity, its staff or board members.

The inquiry found that the trustees, in allowing the Charity’s funds to support the core costs of Peace TV channels, failed to ensure that they were used solely on activities which were capable of furthering the Charity’s purposes. As Peace TV is not a charitable organisation, some of its activities may not have furthered the purposes of the charity and importantly been for private not public benefit. Any running costs associated with broadcasts produced for non-charitable purposes ought to have been a matter for UBCL to cover from other sources and not from the Charity’s funds. The inquiry did not see any evidence as to how the trustees satisfied themselves that all of Peace TV’s activities were capable of furthering its charitable purposes for the public benefit. In the event that the trustees did satisfy themselves that this was the case, they failed to fully consider the implications of the Ofcom judgements and the undue detriment or harm that the programmes may have caused contrary to the public benefit requirement for which the Charity’s funds must be applied.

Awarding the Charity’s funds to UBCL in this way, which resulted in the Charity’s funds covering core costs of Peace TV was found by the inquiry to be misconduct and/or mismanagement in the administration of the Charity.

The inquiry found that UBCL had debts written off by its subsidiaries Club TV and Lord Production. However, it was not clear whether these debts were owed to Club TV and Lord Production or to third parties associated with these companies. The inquiry also did not see any evidence to suggest that UBCL, Club TV and Lord Production received financial and/or any other support from any other charities in addition to the Charity. The inquiry did not explore these points in detail due to the limited financial information available and that the fact that these companies were in the process of being liquidated.

The inquiry noted that the Interim Manager was unable to obtain a clear answer from the trustees about the reason for the complicated group structure, which saw the Charity granting funds to UBCL who in turn was the owner of the Peace TV licence holders. There was also an overlap between a number of trustees and company directors at the Charity, UBCL and/or its subsidiaries. Amongst other concerns, the Interim Manager highlighted two points. First, it was possible that these companies had been structured to divest the Charity from any risks and sanctions associated with breaches of the Code. Second, the Charity made large grants to UBCL without due consideration and that these monies were also used to subsidise the costs of Club TV and Lord Production. The inquiry therefore found on balance that the trustees were unable to demonstrate full accountability and transparency about their method of funding and supporting the Peace TV channels.

As part of their appointment, the Interim Manager questioned whether the trustees acted diligently and exclusively in the Charity’s best interests when they had agreed to use charitable funds to cover legal advice which related to non-charities such as Peace TV’s licence holders. The Interim Manager had concerns about the way in which the legal advice was provided and the basis upon which it was charged to the Charity. Permitting the Charity’s funds to be used for anything other than activities which furthered its purposes is a breach of trust and further evidence of misconduct and/or mismanagement in the Charity’s administration by its trustees.

The inquiry did not see evidence of unauthorised payments from the Charity’s funds to those who acted as trustees. The inquiry found that Dr Naik was the most prominent trustee, and he was also acknowledged by the other trustees as the driving force of the Charity’s activities which included attracting donors and beneficiaries. The inquiry noted that Dr Naik frequently appeared on Peace TV channels. As a result of the Charity’s funding Peace TV channels since 2007, Dr Naik may have seen his personal profile elevated which facilitated other opportunities for him personally in respect of speaking engagements and writing opportunities.

Conclusions

The Commission concluded that the trustees were responsible for repeated incidents of misconduct and/or mismanagement in the administration of the Charity over a number of years.

There were fundamental failures in governance by the trustees which included not being able to identify and manage conflicts of interest appropriately. This contributed to the trustees failing to learn appropriate lessons from their decision to continue to fund Peace TV despite the numerous Ofcom breaches which had occurred over a lengthy period which caused the Charity material and reputational damage.

The Charity was ultimately found not to be viable and was therefore wound up and dissolved as a result of an Order of the Commission.

Regulatory Action Taken

On 17 April 2020, the Commission opened the inquiry. On 15 July 2020, the trustees requested a decision review in respect of the Commission’s decision to open the inquiry. On 21 December 2020 the reviewer concluded that the Commission’s decision to open the inquiry was reasonable, proportionate and lawful.

The inquiry exercised the Commission’s information gathering powers under sections 47 of the Act on several occasions to obtain information and documents, including from the trustees, the Charity’s bank and third parties.

The inquiry exchanged information with partner agencies under sections 54 to 56 of the Act.

On 29 July 2020, the inquiry exercised the Commission’s regulatory power under section 76(3)(g) of the Act to appoint an Interim Manager to take over the management and administration of the charity and its property to the exclusion of the trustees, to take any steps necessary to secure the property of the charity and also to consider its viability.

On 6 September 2021,the inquiry issued the Commission’s notice of its intention to make an Order under section 84B of the Act, to direct the Interim Manager to take the necessary actions to wind up and dissolve the Charity and to transfer any remaining assets to a charity or charities with similar objects. The inquiry also gave public notice of the Commission’s intention on 9 September 2021. In the absence of any representations, on 19 November 2021, the inquiry exercised the Commission’s power and made an order under section 84B of the Act as outlined above.

The Charity was removed from the Register on 11 May 2022 under s34(1) of the Act on the basis that it ceased to exist.

Interim Manager Appointment

As mentioned above, an Interim Manager was appointed by order under section 76(3)(g) of the Act on 29 July 2020.

The scope of the Interim Manager’s appointment included:

• taking any steps necessary to secure and take control of the Charity including but not limited to:
  • its bank account(s) and any other deposit account(s) or investments as appropriate; and
  • its staff, volunteers, assets, interests and any relations with third parties, both domestically and internationally
• consider the viability of the Charity and the ability of the current trustees to run the Charity in compliance with their legal duties
• if it was determined that the Charity was viable, make recommendations to the Charity trustees on necessary actions required to secure compliance with legal requirements and standards
• if it was determined that the Charity could not continue in its current form, settle the outstanding debts and liabilities of the Charity, apply its remaining property/assets in line with its charitable objects and wind up the Charity in accordance with the Charity’s Governing Document

On 23 April 2021, the Interim Manager concluded that the Charity was no longer viable. The Interim Manager identified three charities with similar objects, and with the Commission’s agreement, transferred the Charity’s remaining funds to them in equal proportion from a total sum of £57,950.27 on 26 January 2022.

The cost of the Interim Manager’s appointment (July 2020 - May 2022) were met out of the Charity’s funds and totalled £ 47,779.24 (inclusive of VAT and disbursements). The Interim Manager was discharged on 13 May 2022.

Issues for the wider sector

The purpose of this section is to highlight the broader issues arising from the Commission’s assessment of the issues raised publicly that may have relevance for other charities. It is not intended as further comment on the Charity in addition to the findings and conclusions set out in the earlier sections of this report but is included because of their wider applicability and interest to the charity sector.

Trustees are jointly and equally responsible for the management of their charity. To be effective and to meet their statutory duties as charity trustees they must contribute to the management of the charity and ensure that it is managed in accordance with its governing document and general law. All charities should have and apply appropriately tailored internal policy documents which address the specific risks associated with the kind of activities that are undertaken.

Trustees must ensure that their charity has adequate controls and decision-making principles in place, it is important that the governance decisions of charities are properly recorded and are transparent. Charities are accountable to their donors, beneficiaries, and the public. Donors to charity are entitled to have confidence that their money is going to legitimate causes and reaches the places that it is intended to, this is key to ensuring public trust and confidence in charities.

All trustees have a legal duty to act only in the best interests of their charity. Trustees’ personal and professional connections can bring benefits to the work of a charity, and they often form part of the reason why an individual has been asked to join the trustee body. However, they can give rise to conflicts of interest, to which the trustees must respond effectively. Otherwise, conflicts of interest can lead to decisions that are not in the best interests of the charity and which are invalid or open to challenge. Conflicts of interest can also damage a charity’s reputation or public trust and confidence in charities generally. These harmful effects can be prevented where individual trustees can identify conflicts of interest, and the trustee body can act to prevent them from affecting their decision making.

Charities can set up or keep a close connection with a non-charitable organisation, if this helps in making a positive difference for beneficiaries. This can include a charity making grants to connected non-charity where it’s in the charity’s interests to work in this way. However, trustees must ensure that they only give funding for activities, services or outcomes that will further their charity’s purposes for the public benefit, and for no other purpose. They must also ensure that the grant does not result in more than incidental benefit and they must carry out appropriate checks on the non-charity. The trustees must also be satisfied that their charity’s funds were actually used for the purposes given.

1. The source of this information is the Charity’s financial statements for the financial years ending between 31 January 2016 and 31 January 2020. ↩