Virt-u dies with nothing to show but cheap porn

February 28, 2003

The failure of an online university for Europe has cost the public £1.4 million and sparked a series of legal rows. Phil Baty reports

Almost £1.5 million of public money has been wasted with the collapse of a pioneering virtual university project, an investigation by The THES has found.

Mismanagement at the heart of the project, insufficient government financial checks and a series of legal disputes have caused the meltdown of the European Commission research consortium that was developing a pan-European virtual university with the backing of two grants from the European Social Fund totalling £2.3 million. The THES has found:

* The British-based European Commission research consortium, the European Network for Integrated Materials Management (Enimm), received £1.4 million of the £2.3 million ESF money. It is now broke and all but defunct, and it has failed to deliver anything

* The Department for Work and Pensions (DWP), which administers ESF money, is seeking legal advice on how to recover the £1.4 million

* A number of British universities that developed course materials for the project have not been paid or have had to take legal action to recover unpaid fees

* The commercial spin-off company Enimm established to develop the virtual university, Virt-uni.com Ltd, has been liquidated, despite the injection of £500,000 funding from a venture capitalist

* The virtual university's internet site, Virt-u.com, is defunct. The address is now being used by a pornography site.

"The concept of the virtual university has been hailed as a great vision with massive potential," said Enimm founder Peter Goodall. He said: "I am personally deeply saddened that despite the millions of ESF money, there is nothing to show for up to 12 years of hard work by many committed partners."

Enimm was set up as a formal European Commission economic interest group in 1994 by Mr Goodall, who as well as boasting a career as a business academic and civil servant is also an accomplished session guitarist who worked with the 1960s groups The Troggs and Thunderclap Newman. He set up Enimm in partnership with management consultant Richard Bennett. Initially run from Mr Goodall's home in the Forest of Dean, Enimm signed up Luton, Sunderland and Sheffield Hallam universities and the Northern Colleges Network as members. The members were not responsible for Enimm's day-to-day management, and they have all since resigned.

Enimm won funding, worth £2.3 million in England, under the ESF Adapt programme for two projects - Time and Tiscam, both to develop online training materials for small businesses.

Both projects were contracted out to a number of academic teams in several British universities, including Sussex, Bournemouth and Brighton. In May 2000, the government agent responsible for monitoring the Adapt programmes, Ecotec, gave Tiscam a clean bill of health, describing it as a "well-conceived project" and "on course to meet all the objectives".

In the same month, with £500,000 of venture capital, Mr Goodall and Mr Bennett set up Virt-uni.com to market the results of the two Adapt programmes as part of a virtual university. A Cambridge company, Fontal, was hired to develop the website. But things quickly turned sour.

Unhappy with its progress, Mr Goodall organised an audit of Fontal's work by John Rosbottom, a virtual- learning specialist at Portsmouth University.

In September 2000, Mr Rosbottom uncovered fundamental problems just a few months after Ecotec had given the company the all-clear.

Although Fontal had done a reasonably "competent job" and had provided "value for money", Mr Rosbottom said that the "development plan was flawed", and Fontal had not been given a "thorough brief".

He said the needs of the commercial Virt-u project had become "muddled" with the needs of the two Adapt projects, which were rapidly approaching the deadline for their completion - just three months away in the case of Tiscam.

While Fontal worked successfully on the technology, it was left to a disparate group of academics, working part time and on a discretionary basis, to provide the learning materials. Mr Rosbottom said it was "just unrealistic" to expect them to deliver on time. "This is a significant failure in management," he said.

He added: "The two Adapt projects are left in serious difficulty in terms of delivering their match funding. They need somebody to take a hard look at what needs to be done in order to define and meet the minimum requirements for a less than totally disastrous result."

In December 2000, the Tiscam project came to an end, with the disastrous result predicted. After receiving about £1.1 million from the ESF for the project, Enimm has nothing to show for the money and has never submitted a final claim to the DWP.

At the same time as the Tiscam disaster, Mr Goodall decided not to renew Fontal's contract and put its work out to tender. He told The THES that he was not in day-to-day control of the Fontal relationship and insisted that it shared responsibility for the mismanagement with Enimm administrators.

The crunch came when he found out that Fontal was paying a licence to a US software company to provide the website platform. He considered this "wholly inappropriate" for a European project.

Fontal made several unsuccessful appeals to the DWP to intervene and salvage the relationship, warning that the whole project was at risk, but they were turned down because the department said it could not deal with sub-contractors. So Fontal sued Enimm, seeking £248,600 for money owed and for damages. It won the full sum by default in October 2001 after Enimm failed to defend itself. Enimm later managed to get the judgment set aside, although the judge ruled that one aspect of Enimm's proposed defence was "unbelievable" and several other elements "could not succeed". It is understood that Fontal eventually won the case, but received only £40,000 in a final settlement.

In January 2001, Mr Goodall appointed a new company, Insitement, to start developing a website from scratch for the virtual university. But it was doomed.

Insitement manager Keir Francis this week confirmed to The THES that after an initial small payment for his work on a demonstration website, Enimm failed to make the second payment, and still owes him about £13,000. Enimm never got its virtual university website.

Mr Francis came on board at the worst possible time. "I had no idea what I was getting involved in," he said. "The management of Enimm had almost completely ground to a halt when I started work. There was complete stalemate."

The stalemate at Enimm was caused by an extraordinary power struggle between Mr Goodall and his partner, Mr Bennett, both legally responsible for management under European Commission rules. It appears that they disagreed fundamentally about the potential of the university and the problems besetting the Adapt project. Each now claims that the other was seeking self-aggrandisement and personal gain, and each says that the other made it "impossible" to manage. Each denies the allegations made by the other.

Relations were so bad that in June 2001 the DWP's European Social Fund division wrote to the pair to postpone a meeting. "The reason... is the lack of consensus within Enimm about who is in charge of the ESF projects," it said, and demanded to know who would be responsible for making the final claims for the Time and Tiscam projects.

But, as with Tiscam, the final claim for Time was never made, and nothing was delivered for the £328,000 Enimm is understood to have received from Adapt for the project.

Shortly after the DWP letter, at the end of June 2001, Mr Goodall resigned as director of Enimm. An unsigned letter, purporting to be Mr Goodall's resignation letter, was sent to Enimm members. It said: "I acknowledge that I am in need of psychiatric and psychological assistance."

Mr Bennett claimed that Mr Goodall had property belonging to Enimm and had wrongly spent £13,000 before his departure, and sued him. Mr Goodall counterclaimed, saying that he was owed hundreds of thousands of pounds in unpaid management fees from Enimm related to his work in setting up the company. He also claimed he had been forced to resign by Mr Bennett and his supporters in Enimm, and claimed damages for wrongful dismissal.

As The THES reported last month, Mr Goodall won the case by default at the end of 2002 and was awarded £250,000 in damages. Mr Bennett, still technically legal manager, said that Enimm had failed to mount a defence because the group no longer had any members and was defunct. He vehemently denied that Mr Goodall was either forced out or was owed money by Enimm.

Despite his victory, Mr Goodall could have a long wait for his money.

Although bank statements from May 2001 seen by The THES reveal that Enimm closed a money market investment and received £455,000 in its current account, the group said it was broke a few months later.

In February 2002, Enimm finance director Teresa Davidson wrote to one colleague: "We have been forced after a court case to give almost our entire funds to Fontal Ltd. We did not receive funds (from the DWP) after it became apparent that we would not meet the private match-funding targets... We have been obliged to cease operations."

In the same month, Virt-uni.com Ltd was formally liquidated, its Virt-u web address long since taken over by a US pornography business, no doubt keen to capitalise on the "virtue" pun.

Certainly a number of Enimm's partners have been unable to recover the money owed them. As well as Mr Francis from Insitement, Bournemouth University is also owed money. A spokesman said: "We understand that Enimm is still in existence, but we are still experiencing problems making contact with them."

Sussex University is understood to be owed in the region of £30,000, and Brighton University had to take legal action to recover a proportion of the sum owed to it.

Speaking to The THES this week, Mr Bennett insisted that the Fontal affair - which he said was Mr Goodall's responsibility - used up all the money.

"It was an error to switch from Fontal at such a late stage," he said. "We contested (Fontal's claim), but we failed to defend the case. Fontal received virtually everything that remained."

Mr Bennett also denied responsibility for the failure of the entire project: "I was not managing the project at any stage... Indeed I ceased to have any contact for a lengthy period because of an impossible relationship with Peter Goodall. I received no support from the (DWP) on renewing my involvement... I also believe that if there had been an extension with me running the projects, then there would have been a better outcome. You should not assume that all European Union projects result in successful dissemination after their completion. The number is probably quite small."

Mr Goodall said this week that he was right to end the Fontal contract and claimed that he could have successfully rebuffed its action if he had still been in charge at the time. He said his claims that he was forced out by Mr Bennett were vindicated by his court victory against Enimm, and that the project would still be active had he remained manager. He said the project was salvageable: "I now want to resurrect it as it has still got huge potential and it will not take much to get it back on track."

A spokesman for the DWP said: "A total of £2.3 million was allocated to the two Adapt programmes, and £1.4 million of advances was paid out. We are seeking legal advice to see if we can recover the money that was paid."

'We must learn from this failure'
Enimm commissioned Brighton University business academic David Francis to report on the collapse of the project, hoping to extract some positive lessons.

Dr Francis noted the irony that he was never paid and never delivered his analysis. This week he outlined why the project failed. "This was an innovative idea right for its time. But it was too grand and overblown in its aspirations. There are aspects of heroic failure about it."

Dr Francis said that there were five key "learning points":

* The online learning modules - designed to last 100 hours each - had not been properly market tested with their target audience of small business managers

* The organisational model had many disparate and relatively autonomous components - academics in different universities and different departments - which made it hard to manage

* There was disagreement about the purpose of the project, which "has a corrosive and on-going damaging effect once people are not working to a coherent vision"

* The row between Mr Goodall and Mr Bennett was crippling. "Conflict between members of top teams absorbs energy and stunts progress and divests the attention of people in the organisation"

* "Project failure has an emotional cost as well as practical consequences.

People have invested of part of their working lives in something that has failed and feel a sense of loss and betrayal."

Dr Francis said the failure to deliver the objectives was not total. "But if we fail to learn the lessons of what went wrong, we will have lost an important opportunity."

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