Kent County Council says it could go to court to challenge a claim that it was negligent over its investments in Icelandic banks.

Council chiefs are exploring whether they can overturn the findings of a critical report issued by a public spending watchdog that said it and six other authorities failed to spot the warning signs that their money could be at risk.

In a damning report, the Audit Commission said KCC was negligent and failed to take account of other information that pointed to a deteriorating situation in Iceland.

It has also emerged KCC made an eleventh-hour bid to stop the report being published, demanding it be retracted because of what it claimed were conclusions based on "the flimsiest of evidence."

Cllr Nick Chard (Con), KCC cabinet member for finance, said KCC was exploring all options in its efforts to contest the claims by the Audit Commission, including a possible Judicial Review.

"We have not ruled anything out. We are going to explore all legal possibilities. The report is unbalanced and unfair which sidesteps the Audit Commission’s own shortcomings. We are not prepared to keep quiet- there is a matter of principle here."

The council has £50million tied up in three Icelandic banks.

It has admitted that £3.3million was deposited after it was advised against making further investments because a finance official failed to open an email.

Audio: Cllr Nick Chard, cabinet member for finance, talks to KM Group's political editor Paul Francis about the report's findings.

KCC chief executive Peter Gilroy and leader Cllr Paul Carter have written to the chairman of the Audit Commission formally complaining about the report.

The letter, sent the day before the report was published, states: "Conclusions are based upon supposition and the flimsiest of evidence, lacking in research, thorough anaylsis and empirical data."

~ Read the letter in full here >>>

It also accuses the commission of "reckless disregard" for the damaging effect that being labelled "negligent" could have for the authority.

But County Hall’s Labour opposition group said KCC should accept the findings. Labour group leader Cllr Mike Eddy said: "Whether or not KCC’s current Conservative leadership have been negligent in this case, their hypocrisy is astonishing. KCC’s leadership were more than happy to accept the Audit Commission’s recent judgement that they were a ‘four-star authority’. Now, just three weeks and one critical report later, they’re accusing the Audit Commission of acting in ‘a cavalier and unprofessional manner’. Surely they can’t have it both ways?"

KM Group's political editor Paul Francis blogs on the issue here >>>