Examination of Witnesses (Questions
WEDNESDAY 6 MARCH 2002
BENDER CB, MR
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
(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
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
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.
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
(Mr Bender) An irregularity could be a simple mistake.
231. What is the worst an irregularity could
(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.
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
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.
235. Does that make up the majority of the 375
(Mr McNeill) No, most of those turn out to be quite
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
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
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
Ev 29, Appendix 1. Back