Tens of thousands of pounds had been paid out to officers who no longer worked at Hackney Council, the Gazette reported this week 30 years ago.
That cash was apparently "just the tip of a huge £187,000 iceberg" of overpayments doled out to current and former employee in a wages fiasco.
A top level probe was launched as chief executive Jerry White confirmed that three building managers who had been off the payroll for five months had racked up £20,000 between them. Legal action was to be used to recover the money if they refused to pay it back.
Mr White said: "These are only the ones we know about. We are very concerned. It is a problem we have known about for some time."
At a council meeting, Democrat councillor Colin Beadle was furious that members were not allowed to discuss the issue.
Tory leader Cllr Joe Lobenstein said: "If these figures are true the police should be called in to investigate."
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