Examination of Witnesses (Questions 160-179)
MR RICHARD BROADBENT AND MR MICHAEL HANSON MBE
WEDNESDAY 31 OCTOBER 2001
160. The year before it was £200,000.
(Mr Broadbent) Exactly.
161. That is a huge increase. It was 200,000 and then 9.3 million. You were saying that is minuscule but nine million compared with 200,000 is a huge increase.
(Mr Broadbent) I think you are right, there was a clear trend there. The briefing in 1995, which was on an individual investigation case, uncovered the fact this fraud was happening and that should have triggered—as you say the Department knew—a process within the organisation where it did focus on the fact that these enforcement cases were coming through in fairly large numbers. There was a delay.
162. If I may quote further from that paragraph "However, what is clear is that, at this point, there were no changes in policy or procedures in respect of the activities of local excise warehouse staff . . ." and on the following page "I find it surprising that this audit" this is in 1995, "which can only be described as damning, was not acted on more quickly". Are you confident that you now have procedures and policies in place that things like that will not occur again?
(Mr Broadbent) That was the 1996 audit, not the 1995 audit, I think you will find.
163. It says December 1995 here.
(Mr Broadbent) Okay. Am I confident? I think we are in a better position now. I think confidence is a dangerous commodity.
164. Can I ask you further about the question of letting loads run. You accept, do you, that more should have been done to knock more cases earlier?
(Mr Broadbent) No, I do not accept that. I think the NAO's judgment, which was that even with the benefit of hindsight it cannot be certain whether or not fewer loads should have run, is broadly correct.
165. So you disagree with Roques. At page 150 "My judgement is that the public interest may have been better served if some cases had been knocked earlier, even taking into account the fact that this may have risked the chance of a successful prosecution". You disagree with that, do you?
(Mr Broadbent) I think it is possibly the case. It may have been the case but we do not know.
166. Could I return to a question which fascinated me too that Mr Osborne raised earlier. Paragraph 1.19 states 40 per cent of the losses occurred from one warehouse. I think it was the London City Bond, was it?
(Mr Broadbent) Yes.
167. If so much was happening at one warehouse and so many people in your organisation knew that there were serious problems going on, why was it so difficult to do more about it earlier?
(Mr Broadbent) When you say "so many people in your organisation knew" about it, not many people did know about it, the information was compartmentalised and for me, as a manager, this is the heart of the issue that we keep coming back to. The organisation had pockets of information but it was not drawn together.
168. Even though this report was presented to the Chairman in 1995 so the top of the organisation knew?
(Mr Broadbent) That was a report on one operation, on one excise diversion operation, one investigation. I think the Chairman as a result of that said "this is clearly a serious fraud, I would like to have a review to see how these cases are being progressed". That review was done, it took seven months, the process was started.
169. Do you think your legal department represents good value for the taxpayer?
(Mr Broadbent) Yes.
170. You do?
(Mr Broadbent) Yes.
171. I heard, and you probably heard too, the radio programme File on 4 last night which referred to a particular case whereby only last month the judge, I think it was Judge Edward Bailey, threw out a case that your organisation had brought because he told Customs and Excise that they needed to disclose information to the other side in the normal course of a case and Customs repeatedly refused to do that. He warned Customs if they did not he would stay the trial. Customs did not, he stayed the trial and the defendants walked free. Have there been other cases like this one?
(Mr Broadbent) Almost all the cases that get stayed are stayed for this reason. The reason they are stayed is because we never disclose information which might compromise a source. These cases are very difficult to bring. To gather the evidence you need to prosecute large criminals who go nowhere near the activity, you need to use techniques which are not standard policing techniques and we have constant issues with courts where well paid defence barristers will come and spend months, sometimes years, looking for an abuse of process.
172. Of course defence barristers have got lots of money, have they not?
(Mr Broadbent) They have lots of money. I think you get excellent value for money from our legal department. We have a better prosecution rate than the CPS does.
173. If I may return to the business of the warehouses. The co-operation of the warehouses is essential, according to paragraph 2.8, for the surveillance activity to continue. I return to paragraph 1.19, this one warehouse where £350 million of the losses came from. If that operation was being surveyed with the co-operation of the warehousekeeper and so much money was going through one warehouse, is it not the case that you could have got a lot more revenue for the taxpayer by moving in earlier, you could have reduced losses significantly by moving in earlier?
(Mr Broadbent) I think, as Roques has said, it may have been the case that we could have reduced losses by moving in earlier but everyone who has looked at this issue has found it difficult to conclude that would necessarily have been the case. It would not necessarily have been one fraudulent operation. As I said, this is an enormous warehouse with 15 different units, probably more than one fraud.
174. Do you think there is any truth in the notion that the NIS inspired a culture of allowing frauds to take place which basically led honest people to become dishonest?
(Mr Broadbent) No.
175. So you would reject the allegations made in the File on 4 programme last night?
(Mr Broadbent) Yes.
176. How many of your staff are under criminal investigation?
(Mr Broadbent) A small number are under investigation in Leeds. I believe it is seven but I would need to check.
177. Is that in relation to the item referred to on the radio last night about Pakistan and heroin?
(Mr Broadbent) Yes.
178. Are there any people under criminal investigation in relation to fraud on alcohol duty?
(Mr Broadbent) I believe not but I would need to check and if I am wrong I will send you a note.
179. Perhaps you will let us have a note afterwards.
(Mr Broadbent) I will certainly.[5]
5 Note by witness: I can confirm that none of our officers are under investigation for such offences. Back
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