Justice minister failed to declare interest in industry he regulates

Jonathan Djanogly did not record that his children had shares in his brother-in-law's two accident-compensation-claim companies

guardian.co.uk, Randeep Ramesh, social affairs editor, Sunday 2 October 2011 

Justice minister Jonathan Djanogly sold the shares in his brother-in-law's
company after it emerged they were owned by his children.
Photograph: Rex Features

The justice minister Jonathan Djanogly failed to declare that his children were minority shareholders in his brother-in-law's businesses – two firms which advertise accident compensation claims and are part of an industry that Djanogly regulates in government, the Guardian can reveal.

Djanogly only records in the ministerial register of interests that his "brother-in-law Ben Silk owns Going Legal Ltd and Legal Link Introductory Services Ltd". According to company accounts, the two firms made £130,000 last year in profits.

Both are claims management companies, which advertise "no win, no fee" compensation claims for accidents and charge a referral fee for passing potential cases on to lawyers and insurance firms.

Djanogly is the minister in charge of supervising claims management companies and is weighing up changes to the industry. He did not disclose his children's stake in the firms last month when he announced the shakeup of referral fees.

The companies are controlled by Silk, who has sole voting rights in both firms. According to returns made in June, ownership of the companies was split between family members including Djanogly's young children. The class of shares, representing less than 1% of each firm, yield no income, but they would have appreciated in value as profits increased.

Despite Cabinet Office guidelines stating that "particular care also needs to be taken over cases in which a minister may have a personal interest or connection, for example because they concern family", Djanogly did not register the interest until a legal aid forum last week questioned the shareholders' identities.

A source close to the minister accepted that he had not declared the shareholding, but said the matter had been cleared up. Djanogly had informed the permanent secretary in the Ministry of Justice of his oversight and sold the shares at non-market rates. "It's a mountain out of a molehill,"

Djanogly's office said. "These non-voting, non-interest bearing shares are of minute value. At the earliest opportunity after Mr Djanogly was notified of their existence, he informed the permanent secretary.

"They have subsequently been sold at their issue price, eight pounds."

This admission comes at a crucial time for the 46-year-old former City solicitor. The cabinet secretary, Gus O'Donnell, is considering a complaint from Labour's justice spokesman, Andy Slaughter, that Djanogly faces a slew of conflict-of-interest claims over plans to cut legal aid budgets and curb payments.

Labour's call for an inquiry was sparked by revelations in the Guardian that Djanogly was piloting the changes, which could benefit the insurance industry by £1bn a year, but had investments worth at least £250,000 in firms with insurance arms.

An investigation by the paper also revealed that the minister could personallyprofit from the changes. In the past three years, Djanogly has been entitled to an average annual payout of £41,000 from being a minority partner in his family's firm of insurance underwriters, the Djanogly Family LLP.

Djanogly is pushing through a bill that will attempt to slash the legal aid budget by £350m as well as shift part of the costs of "no win, no fee" cases from losing defendants to winning claimants. This reduces the liabilities of firms and their insurers if they unsuccessfully defend a claim as it will force claimants to pay their lawyers' success fees out of any awarded damages.

Until this point, the minister's defence has been "that his financial interests are a matter of public record, in declarations made both as a minister and as an MP".