Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 220-239)



  220. Okay. It says somewhere in the report that no-one knows for certain what crops he was growing and what was destroyed and yet he still got the subsidies which seems incredible. Yet, on the other hand, I think that is rather contradictory because how can someone be paid a subsidy if you are not 100 per cent certain what they are getting it for, do you see what I mean? You are paying a subsidy, you do not know what you are paying the subsidy for but I would have thought you paid a subsidy on the basis that you have seen what is there and you are giving a subsidy for what is there.
  (Mr McNeill) The inspections of 1994 and 1995, we were satisfied, following those, that he had grown fibre flax. As I mentioned earlier, that was actually the basis on which we were then able to seek prosecution after he made a claim for growing linseed under the AP scheme. Therefore the court accepted the view taken by our inspectors that, yes, flax was being grown in the fields and, therefore, it was reasonable for us to assume that was what was being stored in the barns even though we had not actually undertaken a physical inspection. That is the line of thinking behind it.

  221. In paragraph 2.22 it says "No harvested flax was available to examine because of a barn fire". Yet the inspector was satisfied. How could the inspector be satisfied if there was nothing there to see? He is easily satisfied, is he not?
  (Mr MacKinnon) I do not know the details of the inspection form but he could well have looked at the field post harvest and looked at things like stubble count.

  222. How could he be satisfied? It says a different inspector went along to the farm. There was no flax available to be examined because a fire had burned it down. He was satisfied. How could be satisfied?
  (Mr MacKinnon) He did check, also, such things as seed invoices and so forth to check that the seed for the flax had been purchased, that fertilisers and so forth had been purchased to ensure the proper agronomic practice was followed. He would have done a record check of the farm as well.

  223. I think we have got to say thank the Lord, have we not, for the inspector who went along and picked up the fact that a subsidy was being paid for two different crops on the same field? He was the only one who smelled a rat. No-one else seems to have thought anything was going wrong. What would have happened if he had not smelled a rat? Would it still be going on do you reckon?
  (Mr Bender) No. In the sense that we were by then beginning the cross checks that we should have begun rather earlier and, therefore, within a year or so it should have come to light through the cross checking arrangements. The fraud would have come to light. His diligence following a tip-off brought it to light maybe a year earlier, certainly a few months earlier.

  224. Further on in 2.26 and 2.27 there is this Anti-Fraud Unit mentioned. I only hope if I do a fraud that they are the ones who come after me, I really do. He had been at this fraud for two or three years and they were investigating him. It says it only emerged after more than two years of investigations. Then it goes on to say after more investigations, and another further 100 statements, something was done. This is a dynamic unit working for you.
  (Mr MacKinnon) There were three prosecuting authorities involved here: the Intervention Board's Anti-Fraud Unit led but the police were involved at some stage and the Ministry's own investigation branch. There were three organisations. There were also private sector people involved for the insurance companies and so forth. The Intervention Board's Anti-Fraud Unit was in the lead, leading the prosecution, but I am assured by the head of the Anti Fraud Unit, and indeed by our lawyers, there is nothing at all unusual about the amount of time that it took to get this investigation done and the case into court for something as complex as this and involving as many parties as this.

  225. How often would they work on this? Were they working on it full-time or one day a week or one day a month?
  (Mr MacKinnon) Once the investigation was opened it would be continuous working in some form. I cannot say that they would be out interviewing somebody every day but they would certainly be working to bring it to a conclusion. Some of the time taken, of course, is not in the gift of the investigators, it is getting court dates and so forth.
  (Mr McNeill) If I can just add to that. There was no adverse comment by the judge or by the very experienced defence counsel that was appointed by Mr Bowden to defend him as to the length of time taken. I think it was accepted this was a very complex case. There were a large number of statements and lots of work had to be put in and, in fact, the judge congratulated all those involved on their tremendous piece of work.

  226. In Appendix 1 it gives all the cases that he was accused of and whether he pleaded guilty or not guilty and what was found. What does it mean that with a number of counts it was allowed ". . . to lie on the file, not to be proceeded with without leave of the court". What does that mean?
  (Mr McNeill) I am not a lawyer. My understanding of it in answer to the question is that the judge took the view there was insufficient evidence to take this matter further at the hearing and asked for it to lie on the file, in other words not moving whether there was a case to answer or not. If this issue was to be taken further, this count, the judge involved would have to be consulted and his approval sought if further action was to be taken.

  227. Basically what you are saying is there was not enough evidence to make a decision one way or the other on these particular accusations and if more evidence had been found then they would pursue it. Is that what it means?
  (Mr McNeill) That is my understanding. We are happy to get you the full legal definition on that and send that to the Committee.[14]

  228. I do not suppose it would be worth proceeding now, he has done 13 months, he has got no money to get back from him, it is hardly worth bothering, I suppose, but it is a bit galling that he has also got away with a number of cases that clearly he was guilty of but could not be proved. Never mind, we will move along. Checks at this stage were pretty woeful, were they not? I get the impression that there were no checks at all. I remember the Sheep Premium check where an inspector would go along to a field and if there were 150 or 200 sheep in the field he actually had to count them, did he not? Am I right? "One, two, three, four"—

  John Trickett: That is how I go to sleep!

  Mr Steinberg: ". . . Oh, wait a minute. One, two . . ." That was one check on the Sheep Premium. This was not even as good as that, was it?
  (Mr Bender) The failing, as I said earlier, was the failure to check one scheme against another and that is what he exploited. It was inadequate.

  229. Not only was this man having contracts with more than one contractor and this was not picked up, but in figure three on page 12 it shows that not only was he having contracts with different contractors for the same flax but at the same time he was also claiming for a different crop as well on the same field and yet there were no cross-checks. That has been put right now, has it?
  (Mr Bender) The department began the cross-checks in, I think, 1996 and, therefore, his fraud would have been discovered but they were not there at the time and that was a failure and it has been put right. It was being put right from 1996 onwards.

  Mr Steinberg: Okay, fine. Thank you.

Mr Gibb

  230. Just a couple of questions on the definition of irregularity and fraud. What is the definition of irregularity and what is the definition of fraud?
  (Mr MacKinnon) There is a note in my papers but I cannot lay hands on it. Basically it is the intent which determines the fraudulent activity as opposed to irregularity which is simply wrong claiming for any other reason. There is a definition being worked on by the European Union which we are using for reporting irregularities and fraud to Brussels. Basically it turns on the intent.
  (Mr Bender) An irregularity could be a simple mistake.

  231. What is the worst an irregularity could be?
  (Mr Bender) I can read you the irregularity definition in EU law, and apologies for the length of time it has taken us to find this. "Any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities or by an unjustified item of expenditure." It is an infringement that has an effect on the money either by omission or other prejudice rather than necessarily deliberate intent.

  232. So fraud must be narrower.
  (Mr Bender) There is a Convention at EU level on fraud. "The Convention on the protection of the Communities' financial interests . . ." which defines it in relation to expenditure as follows: "Any intentional act or omission relating to: the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the misappropriation or wrongful retention of funds from the general budget . . ." or non-disclosure of information with the same effect or the misapplication of such funds. Plainly we will provide this note in the supplementary material to the Committee.[15]

  233. That would be very helpful. I am just puzzled by the 2,500 people that ring in to this fraud hotline, that most of those seem to be in relation to error. People are ringing up late at night clandestinely to this line that they are aware of a clerical error, is that what is going on?
  (Mr McNeill) My understanding is that a number of the claims relate to the issue of black milk regarding the milk quota where one farmer will identify that a different lorry has called to collect milk at a farm and they think that perhaps something untoward is going on and as a consequence will make a report on the hotline.


  234. Could you raise your voice a bit, you are starting to mumble.
  (Mr McNeill) I beg your pardon. A significant number of the cases relate to black milk where a farmer will identify that a milk tanker from a different company than normal goes to a farm to pick up milk and thinks perhaps something untoward is going on and will make a report on that and when we investigate there is just a change in lorry or something else of that nature.

Mr Gibb

  235. Does that make up the majority of the 375 criminal investigations?
  (Mr McNeill) No, most of those turn out to be quite innocent.

  236. Of these 375 criminal investigations, are you saying that all of those bar one turned out to be clerical errors or inadvertent errors filling in a form?
  (Mr McNeill) I do not think the hotline produces information on clerical errors in that those making the calls probably have no idea what was put on the application forms in the first place. Clerical errors are usually identified as part of the processing of those applications, as I understand it, and as such they would be identified then. In the definition it goes on to make a distinction between what is very clear clerical error, as in someone could clearly see it is a slip of the pen, and what is a significant error.

  237. I will rephrase the question. In these 375 criminal investigations, did none of them involve intentional acts to take money by deceit?
  (Mr McNeill) They must have done in that they resulted in prosecutions.

  238. How many of the 375 resulted in prosecution? I thought that was two.
  (Mr McNeill) Yes, but if you look at 1997, 130 investigations resulted in seven prosecutions.

  239. But I do not have the equivalent tip-off figures for 1997, I do have them for 2000.
  (Mr McNeill) I do not have that information to hand, I will endeavour to provide it.

14   Ev 28-29, Appendix 1. Back

15   Ev 29, Appendix 1. Back

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