| EXTENT OF IRREGULARITIES
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| (i) Procedures
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| C&AG's Report, paras 11-13
| 3. Payments to the Administration's pension beneficiaries resident in the United Kingdom are made directly into their bank accounts. In most overseas countries these pensions are generally paid by payable orders, normally sent to home or bank addresses. In some countries, such as Jordan, this is impracticable, partly because of the unreliability of the local postal service; such payments are therefore collected. These payments were made in cash but since 1982 have mostly been made by payable order.
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| 4. In April of each year the Administration's pensioners are issued with an Annual Declaration of Entitlement form which they are required to sign, have witnessed and return as proof of their continued existence. It is quite common for overseas pensioners to have an Embassy official attest these certificates. In the case of Ministry of Defence military pensioners, such declarations are required only every five years.
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| (ii) Pensions Irregularities
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| C&AG's Report, para 9
| 5. The loss of £333,000 recorded in the Administration's Appropriation Account represented 10 cases where there was evidence of misappropriation, valued at £173,000; and five others, valued at a maximum of £159,000, where death certificates were missing, partly because there is no formal register of deaths in Jordan.
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| C&AG's Report, paras 14-15
| 6. The Administration had first been alerted to the possibility of an irregularity in July 1992 when they learned of a pensioner who had died in 1984 but in respect of whom a pension had been paid until September 1989. They had continued to provide the pension on the basis of Annual Declarations of Entitlement but had stopped payment when a declaration was not returned. By June 1993 the Administration suspected that Mr Zureik had been misappropriating the pension. A lengthy investigation conducted by the Administration and the Embassy led them to the conclusion that the extent of the fraud was far wider than they had envisaged.
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C&AG's Report, paras 15 and 18
Qs 21-22
| 7. By August 1995 there was strong evidence that Mr Zureik had purloined payable orders in respect of 10 deceased pensioners over a number of years, including some after he had left his job at the Embassy in 1988. He was able to continue purloining payable orders because he had written to the Overseas Pensions Department asking for them and other correspondence, including the Annual Declarations of Entitlement, to be sent to a PO Box number in Amman. In addition there was strong circumstantial evidence relating to five other instances. The Administration stopped these payments immediately; they told us that there had been no reaction from the individuals concerned.
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C&AG's Report, para 16
Q 144
| 8. The Administration believed that Mr Zureik had started misappropriating pensions in 1973 and was diverting as many as 23 payable orders a month by 1988. The Foreign and Commonwealth Office told our predecessors, however, that there could be no certainty that the irregularities had not begun before 1973. Nevertheless, subject to the extent to which their records allowed them to be certain, the Administration were satisfied that they had discovered the maximum extent of the fraud.
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Q 26
Q 84
| 9. The Administration told our predecessors that since 1990 they had paid pensions amounting to about £980 million but had been subjected to fraud from the misappropriation of payable orders for only a very small amount. There systems had detected and prevented around 20 cases of attempted misappropriation of payable orders. Pensions was an area where they now knew it was worth being suspicious; they currently had two suspicions running.
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| (iii) Other Irregularities
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C&AG's Report, para 16
Qs 31-32
| 10. The Administration believed that Mr Zureik had made arrangements with pensioners whereby he encashed payable orders with their knowledge and consent through his own currency business at favourable exchange rates but taking a commission. The Foreign and Commonwealth Office told our predecessors that the running of a currency business contravened Mr Zureik's letter of appointment which made it clear that he was not allowed to have any outside activity in conflict with his Embassy duties; he was required to declare any commercial interests. Mr Zureik would have been dismissed had the Ambassador known that he was running a currency business.
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C&AG's Report, para 17
Q 137
Q 9
| 11. In 1987 Mr Zureik received warnings for inappropriately delegating to a junior officer the collection of cash from the bank; and for not cashing up at the end of the working day. Subsequently, in November 1988, he was asked to resign because he had forged a signature to authorise an adjustment to the Embassy's account in order to correct a mistake.
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Qs 9, 121
Qs 34-36
| 12. The Ambassador's judgement was that Mr Zureik had acted in panic and stupidly; there was no suggestion of financial gain and no suspicion that there was anything wrong with pensions. But because Mr Zureik had forged a signature, he had to resign. The Ambassador was satisfied that the Embassy's official account was not affected in any way. At that time there was no suspicion of fraud and it did not occur to the Embassy to tell the Administration about Mr Zureik's resignation.
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| (iv) Conclusions
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| 13. We are concerned that irregularities amounting to some £333,000 in the payment of the Administration's pensions in Jordan persisted for more than 20 years. We think it entirely unsatisfactory that the irregularities went undetected by the Administration and the Embassy for so long. While we take some assurance from the Administration's evidence that they have now discovered the maximum sum involved, we note that there is no certainty that the irregularities did not begin before 1973. And we share the Administration's suspicions that the lack of reaction in other pensions cases where payments were stopped may indicate that there had been fraudulent claims in those cases too.
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| 14. We recognise that it can be difficult to find conclusive evidence about what happened many years ago. Nevertheless we are dismayed that it took the Administration and the Embassy no less than three years to establish the size and extent of the irregularities. Given the seriousness of the matter, we would have expected them to have reached their conclusions much sooner.
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| 15. We are concerned that Mr Zureik was able to operate a currency conversion business without detection and contrary to the terms of his appointment as the Embassy's accountant. We look to the Foreign and Commonwealth Office to ensure that there are no other instances at their posts of people having outside interests that are inconsistent with their official duties.
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| 16. We note that the Embassy had occasion to warn Mr Zureik in 1987 about two misdemeanours; and that they required him to resign in November 1988 because he had forged a colleague's signature in order to correct an error in the Embassy's account. We find it astonishing that he was then still able to divert and purloin pension payments, and that he did so for a further seven years.
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| HC 330 (94-95)
| 17. In their thirty-third Report of Session 1994-95, our predecessors were critical of the lapses in control which had facilitated fraud at the Sana'a Embassy, including irregularities in currency conversion. We are concerned that there have been serious shortcomings in financial control at another overseas post.
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