A council in Essex appears to have been cheated out of £130m by a rogue businessman who spent the money on a life of luxury that took in a private jet, diamond-encrusted jewellery and a fleet of supercars.

Thurrock council handed over the equivalent of almost its entire annual budget after Liam Kavanagh and his companies exaggerated the value of a group of solar farms it had invested in. It is potentially the largest fraud ever committed against a UK local authority.

Previously unpublished records show the money was then used to buy Kavanagh a wealth of extravagant items including a yacht, a million-dollar watch and a 200-acre country estate.

Emails from January 2020 show that Kavanagh – whose companies had already received £90m in “top-up” payments from Thurrock – ordered one of his directors to provide the council with an inflated price in order to obtain a final £40m. He said it “won’t be a problem” if the council lost money.

Thurrock’s chief financial officer, Sean Clark, failed to check the information was accurate and approved the payment despite having received legal advice warning him off the transaction. That sum, along with the rest of the £130m, has almost certainly been lost from the public purse.

The deals with Kavanagh and his businesses were at the centre of Thurrock’s disastrous investment policy, which was funded by borrowing £1bn from other local authorities. The council loaned £655m to businesses owned by Kavanagh between 2016 and 2020.

Thurrock has since been declared effectively bankrupt after the collapse of these deals and others, with its residents facing years of tax increases and service cuts.

“These new allegations are utterly damning,” said John Kent, leader of the Labour opposition group on Thurrock council. “It looks like the council has been a victim of a colossal fraud and, as always, it’s the innocent residents that will be picking up the tab.”

Andrew Jefferies, leader of Thurrock council, said: “I am deeply sorry for the shocking and unacceptable failings of the past.”

Gavin Cunningham, partner in forensic services at accountancy firm Menzies and a former senior investigator at the Serious Fraud Office, believes the council was misled by the valuations produced on behalf of Kavanagh’s company Rockfire Capital.

“Given the nature of the allegations and the very large sums of money involved, these events require investigation by an appropriate law enforcement body,” he said.

Kavanagh told TBIJ that he strongly denied the allegation of fraud and that there were no restrictions on how the business used Thurrock’s investments. In a statement, he said: “I was approached by Thurrock council in relation to investments in solar farms and those investments produced significant income for Thurrock council over a number of years and the assets continue to make a profit; even more so with recent rises in energy prices.

“I have never misled Thurrock council during the course of those investments. It was always my understanding that Thurrock council conducted its own independent due diligence into investments. I have had a successful career over the course of decades, preceding and outside of renewable energy, and separate to any of the Thurrock council investments.”