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A charity set up 50 years ago to compensate families living in the shadow of Londons A40 flyover has been branded “institutionally racist” and “unethical”, according to a leaked landmark report.

The Westway Trust, which manages the land under the flyover and works on a range of projects with the local people, appointed the respected Tutu Foundation to investigate persistent allegations of racism against the diverse community of north Kensington. Following the Grenfell fire, the charity provided support for victims, who today commemorate the third anniversary of the disaster in which 72 people died.

The 400-page report recommends that “reparations” and a public apology are made to the local community after finding evidence of “cultural bullying, indifference and arrogance … discriminatory practices … negative stereotypes … and discriminatory decision making” particularly affecting the long-standing Caribbean community behind the world-famous Notting Hill Carnival.

Investigators for the Tutu Foundation, which was set up by the anti-Apartheid clergyman Archbishop Desmond Tutu in 2007, have received evidence from several whistleblowers inside the trust showing how claims of racism, sexual misconduct and bullying were dismissed or secretly settled with payments tied to non-disclosure agreements.

The report has already led to resignations after an interim version was privately circulated to the trust 11 months ago. However, sources in the Tutu Foundation claim publication of the more damming final version is being “suppressed” for political reasons to do with Grenfell.

Local councillor Pat Mason, the leader of the Labour group, told the Observer: “I was a trust employee for over a decade and later a board member, and witnessed a shocking litany of racist and sexist acts and discriminatory behaviour against BAME employees and women by senior staff that I reported to trustees who failed to act except to attack me for challenging them.”

Christian Tilleray a former director of culture enterprise and learning at the Westway Trust, said he was regularly accused of “going native” or “sounding like one of them”. He resigned after complaining about “negativity” towards the black community from the then chief executive Angela McConville.

McConville left the trust in September 2017 and she is currently chief executive of the National Childbirth Trust. Three months later a review was announced into whether the Westway Trust was institutionally racist. The Tutu Foundation was appointed in July 2018. When contacted by the Observer, McConville had no comment.

Niles Hailstones, joint chair of the Community Advisory Group to the Review, said at the time: “I am glad to see the day come when the elephant in the room is now visible and blowing its trumpet … North Kensington has always been on the frontline of the battle against racial prejudice and bigotry since the 1950s. The murder of Kelso Cochrane in 1959 triggered a collective community response to the issue of racism in the UK.”

Cochrane, a 32-year-old carpenter from Antigua who arrived as part of the Windrush generation, was ambushed by a gang of white youths and stabbed. His murder came eight months after the 1958 Notting Hill race riots, some of the most serious racial disturbances in Britain, and against the backdrop of far-right activity in the area by Britains wartime fascist leader Sir Oswald Mosley.

The Westway Trust was set up 1971 after the local community fought a bitter four-year campaign over disruption caused by the construction of the A40(M) flyover.

Michael Heseltine, then a junior transport minister, was greeted by a blockade of angry residents when he opened the motorway extension in July 1970. In response, the government donated 23 acres of land underneath the flyover around Ladbroke Grove tube station, which the trust now manages. The trust works with over 60 member organisations from community groups to schools and sports clubs. It earns a £4m annual rental income from a property portfolio now worth more than £50m.

Crossbencher Lord Simon Woolley, a former chair of the Equality and Human Rights Commission, wrote in a forward that the Tutu Foundations report comes at “a critical juncture” in the UK with rising xenophobia.

The peer called the report “a watershed moment for the Westway Trust and for the community of north Kensington [who] must urgently come together in the spirit of reconciliation and trust [to] embed the reparatory justice model in the recommendations.”

In a statement, community members of the advisory group said: “We are totally committed to the delivery of this review but it must be right. It has to be a tool of liberation that can be used by future generations. We have to be ready and willing to challenge and change the rules of the game. One thing is for sure; the elephant in the room can no longer be ignored.”

Alex Russell, a former director and now joint chief executive of the Trust, confirmed the finding of institutional racism, adding: “No one from Westway has sought to suppress the review. This is a really important piece of work for the trust and the community, we are really keen to see the Tutu report published and we intend to take action on the findings. Westway Trust remains committed to publishing the report when all parties agree.”

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