The City of London Corporation has invested at least £100m of public money in land purchases that opponents claim will enhance the value of neighbouring developments by the property company that employs the lord mayor.
Documents seen by the Guardian show how the Corporation has dipped into its funds to buy a series of east London sites on the periphery of the square mile.
Hammerson, the property firm that employs Michael Bear, the lord mayor of the City of London, is simultaneously developing a range of neighbouring sites as part of what critics characterise as large-scale expansion of the City into new areas.
Bear has taken a year-long sabbatical from his role at the firm while he serves as mayor but the Corporation's website still lists a Hammerson email address for him.
Community campaigners opposing plans for the construction of high-rise tower blocks regard the developments as a blurring of the lines between the interests of the Corporation and those of powerful business interests.
Bill Parry-Davies of the action group OPEN, who is also a solicitor in Hackney, said: "The City has been discreetly investing in speculative land acquisitions, in combination with acquisitions of neighbouring land by Hammerson, to assemble large sites in Hackney's City fringe for comprehensive high-rise office redevelopment. The City has been working closely with Hammerson.
"The City has also been investigating, with Hammerson, ways to defeat challenges by local residents and businesses who regard the City's expansion as predatory."
While the Corporation denies that developments and investments on its periphery are part of an expansion, its officials have described land it has bought as part of a "path of progress" from the City's existing boundaries.
Documents seen by the Guardian reveal that the Corporation has spent at least £60m acquiring lands in the Tabernacle street area of east London, and at least £40m acquiring several nearby properties on a site known as Nicholls & Clarke after a builders' merchant which partly occupies it. The acquisition of the sites was described as being for redevelopment to provide large-scale offices "for City type occupiers".
The money for the Nicholls & Clarke acquisition came from the Corporation's "City cash" fund, which is known to have holdings of at least £1bn but whose assets remain closed to public scrutiny because the Corporation describes it as a commercially sensitive "private fund".
An internal Corporation document says that redevelopment of the Nicholls & Clarke site is likely to be in conjunction with "other major land owners on the site", naming Hammerson.
It adds that the site is located on "the path of progress" from the Spitalfields market area through to the Bishopsgate goods yard. Hammerson is developing the goods yard, a large brown-belt property with vast development potential that could provide the basis for what opponents claim is further expansion by the City's financial services industry.
In response to the suggestion that there could be a conflict of interest involving the mayor, a spokesman for the City of London Corporation said that all sites had to be openly marketed in a clear process.
"Members' interests are registered," the spokesman said. "They declare them at meetings and, where appropriate, withdraw." He pointed out that Bear did not serve on the property investment board, which determines property management and investment issues.
The spokesperson insisted the City had "absolutely no plans to expand its local government boundaries", but added: "It does, however, have a responsibility to assist the competitiveness of London by ensuring there is high-quality office capacity available. "
The City of London has been targeted by Occupy the London Stock Exchange protesters over what they claim is lack of transparency and accountability. The Corporation last week backed down from its attempt to evict the protesters camped outside St Paul's Cathedral.
Hammerson told the Guardian that it was originally involved in a management role with the Corporation on the Nicholls & Clarke site and that it had put in a planning application for the Corporation. The company says it owns land to the north of the site and has the chance to work with the City on that. The two have held discussions. The Corporation's purchases of the Nicholls & Clarke, and Tabernacle Street sites were made before Bear began his term as lord mayor.
Previously, Bear's dual identity – as an elected local authority representative and as an executive working for Hammerson – was illustrated by his role in the contentious development of Spitalfields market. Bear had been chief executive of the Spitalfields Development Group (SDG), a property consortium which had been developing the area since the 1990s. He remained in that role when Hammerson bought a majority stake in SDG, entering into a joint venture with Corporation.
The City's involvement in the project was key in allowing the development to prevail in the face of local opposition.
Bear went on to become Hammerson's regeneration director in 2003, the same year he was elected as a "common councilman" at the City of London Corporation. He rose in the Corporation's political seniority, becoming an alderman, then sheriff of the City of London and, last year, lord mayor. By 2007, when Spitalfields was complete, he was writing to other councillors "on behalf of Hammerson and the City of London Corporation joint venture".
Elsewhere, residents who had fought against another City of London-Hammerson joint venture, near the Barbican, told of their frustration at having to go through a local authority that was also effectively developer of the project they opposed.
Despite objections, the Corporation's planning and transportation committee in June approved the high-rise office scheme on the site of the 1950s St Alphage House, at London Wall.
"We feel that the Corporation is pretty conflicted over this," said Tim Macer, deputy chair of the Barbican Association, the residents' group which was involved in opposing the big development of the London Wall/St Alphage site.
Macer added: "The commercial viability of the scheme was based on how much Hammerson had to put into it and how much the Corporation had to put into it. Because of the way planning works, there was all this pre-planning consultation. But it was basically the City having conversations with the City. It was bizarre and of course it meant that they had the inside track.
"We went in with loads of objections but the problem was that anything that we could object to, they had within the letter of the planning law come up with answers. We knew it would be very difficult. [Hammerson is] trusted by the City of London and there are multiple connections, not least that the lord mayor worked for Hammerson."
Campaigners plan to mount a symbolic challenge this week to the role of the lord mayor by attempting to upstage this Saturday's Lord Mayor's Show marking the transfer of the office to Bear's successor.
Anti-cuts activists from the Reclaim the City campaign, which is involved in the St Paul's protest, will arrive at the show and present three demands for democratic reform of the Corporation, before acclaiming their own "alternative lord mayor".
Philip Goff, of the Reclaim the City campaign, said: "In the absence of democratic accountability, conflicts of interest are inevitable. What is the connection between Mike Bear, head of a local authority in the heart of our capital, and Mike Bear, property developer for Hammerson?
"This question is especially difficult to answer when the local authority and Hammerson are working together on multi-million pound projects. It's high time a clear light was shone on this murky world."