Detection and prosecution
16. The initial investigation in 1996 by the Intervention
Board focussed on Mr Bowden's claims under the two crop schemes.
Once fraudulent activity had been suspected, there was no trigger
to check for claims under other farming schemes. It was not until
1997 that his claim for Objective 5b monies began to be investigated,
and that investigation was only triggered because of the chance
movement of a member of staff.
17. A report by our predecessor Committee in 1998-99
showed that almost half of the 25 cases of suspected fraud referred
for investigation resulted from tip-offs to the Ministry's regional
offices by farmers.
It recommended that the Ministry should do more to encourage the
exposure of those trying to defraud the taxpayer, and to take
account of the experience of other departments. It also recommended
that the Ministry review its criteria for prosecution, such as
the potential size of judicial penalties, the value of the irregularity
and the claimant's past behaviour. It suggested taking account
of the deterrent effect of prosecution on others tempted to abuse
the system, and noted the approach of other government departments
such as the Benefits Agency (now Jobcentre Plus, within the Department
for Work and Pensions).
The Department had not acted fully upon these recommendations,
particularly to compare its approach with those of other Departments
and Agencies. It has now undertaken to do so.
18. The Agency operated a freephone fraud line that
received, on average, 2,500 calls a year based on the experience
of the Intervention Board. Not all of these related to suspected
fraud. For example, in 2001 only 46 freephone calls were identified
as relating to possible fraud, and of these only 11 were found
to be worthy of more detailed investigation with a view to taking
action in the courts.
19. In addition to tip-offs, investigations arose
from other sources such as office checks and physical inspections.
The Agency had seen no perceptible shift in the proportion of
investigations originating from tip-offs, which on average is
6 per cent. The Agency did not pay incentives to those who provided
information leading to savings in public money. It agreed to consider
the experience of others, and the Department planned to consider
extending the free phone fraud line approach beyond the Rural
20. Since 1997, the average time from start of an
investigation to conclusion of court proceedings has increased
from over one year to three years (Figure 4). The Department noted
that the time taken could be beyond the control of investigators.
Taking the figures for the last five years, 39 out of 558 investigations
(7 per cent) had resulted in prosecution. A further 15 cases,
10 in 2000 and 5 in 2001, had resulted in warning letters to claimants
where there was no public interest in taking the case to prosecution.
Successful criminal prosecutions were publicised.
21. The Department and Agency said that where the
evidence of the case was insufficient for a prosecution, it could
still provide the basis for other action such as administrative
penalties. Penalties ranged from a specified reduction in aid
payment to complete loss of entitlement for up to three years.
Administrative penalties were summarised in the Department's annual
report and accounts but there was no system to name offenders.
The Agency is reviewing the scope for more frequent reporting
of the level of administrative action taken.
Figure 4: Investigations and prosecutions in 1997-2001
Note: Due to the time taken to investigate the cases prosecuted
in a year do not necessarily relate to the cases investigated
in that year.Source: Ex-Intervention Board prosecution statistics
Number of investigations started
Number of prosecutions (all successful)
Average time taken (in months) from start of investigation to conclusion of court proceedings
22. Figure 5 shows the administrative penalties applied in 2000
on the main Common Agricultural Policy Schemes, as reported to
the European Commission. The Agency was unable to provide us with
details of the people to whom administrative penalties had been
Figure 5: Administrative penalties applied on livestock and
arable schemes in 2000
Number of Applicants
23. The Committee questioned the success of the Anti-Fraud Unit
given the time taken to bring prosecutions to court, and the small
number of prosecutions. The Department noted that the Unit consisted
of 60 people, of whom only a third were involved in investigations
which might lead to prosecutions. There was no direct correlation
between the number of investigations and the number of prosecutions,
as shown in Figure 6. Out of 81 prosecutions by the Board in 1991
- 2001, 79 had been "successful".
Figure 6: Number of investigators and prosecutions
Number of investigators
Number of prosecutions per investigator
24. In the year 2000, for the first time, European Union member
states were required to report fraud cases separately from cases
of irregularity. Irregularities involve errors or omissions, rather
than intentional attempts to deceive. In 2000 member states reported
2,967 irregularities amounting to some £298 million. 393
of the cases, worth £12 million, related to the United Kingdom.
Of the 408 cases identified as suspected fraud in that year 34
related to the United Kingdom. Further analysis by the Department
showed that the United Kingdom generally accounted for 10 to 13
per cent of the volume of irregularities but only two to five
per cent by value. The Department suggested that these figures
showed that control mechanisms were minimising irregularities
in the United Kingdom, and that where problems and errors occurred,
controls were effective in identifying them.
25. If Joseph Bowden had succeeded in all his applications
for payments during the period 1994 to 1997, he might have received
up to £415,000 from public sector schemes. (Figure 7). In
fact he received only £221,000 since doubts about his claims
were discovered in time for some payments to be withheld.
Figure 7: Value of applications by Mr Bowden and
amounts paid 1994-1997
Arable area scheme
Fibre flax scheme
26. The Ministry did not immediately attempt to recover the £80,000
paid to him under the Arable Area Payments Scheme, awaiting criminal
court proceedings. By 1998, however, Mr Bowden was in financial
difficulty and sought an Individual Voluntary Arrangement with
his creditors. This enabled him to continue in business whilst
seeking to pay off a portion of his debts. The Ministry, holding
38 per cent of his debt, voted in favour of the proposal. In the
event, the Ministry received only £1,325 under the arrangement.
It wrote off the debt, together with accrued interest thereon
amounting by 2001 to some £111,000.
27. Before supporting the Individual Voluntary Arrangement proposed
by Mr Bowden, the Department ought to have reviewed the financial
position of Mr Bowden and related parties. Mr Bowden's application
for Objective 5b monies included a tender from a trading company
with an address where the council tax was paid in the name of
Bowden; and J H Bowden & Son was one of the trading names
used in his dealings with contractors under the Fibre Flax Scheme.
Mr Bowden was, however, on the verge of bankruptcy by 1998 despite
having received significant income fraudulently from the private
and public sector. The Department said that they had no evidence
of money being hidden away.
28. The Department had not sought to recover from Joseph Bowden
any of the £141,000 he received via flax processors operating
the Fibre Flax Scheme. Inspection reports in 1994 and 1995 had
indicated that he was growing flax, and the Judge had directed
that not guilty verdicts be entered in respect of charges of false
accounting under the Fibre Flax Scheme. The claims in respect
of land on which he had entered into contracts with more than
one flax processor amounted to some £11,000. This had been
written off as irrecoverable, and no claim had been made for recovery
from the flax processors, on the grounds that the processors had
believed the claims to be in good faith, and that it was not in
the public interest to seek recovery from them.
29. We asked if the Department could penalise farmers caught defrauding
under one scheme by stopping all other claims. The Department
acknowledged this happened within discrete elements of Common
Agricultural Policy schemes. For example, if there was a fraudulent
claim within livestock subsidies the farmer would jeopardise all
his livestock claims. The farmer could, however, still claim successfully
for crop subsidies. The difficulty in extending penalties beyond
the scheme under which a fraud had been proved lay partly in the
need to prove intent to defraud.
30. Procedures for beginning recovery proceedings had been tightened
since the case. The Department's guidance was amended in 2000
to ensure action would be taken promptly to recover money. The
Department was now reviewing the clarity of this guidance.
25th Report from the Committee of Public Accounts,
MAFF: Arable Area Payments Scheme (HC 306, Session 1998-99) Back
ibid para 48 Back
25th Report from the Committee of Public Accounts,
MAFF: Arable Area Payments Scheme (HC 306, Session 1998-99),
paras 6, 7(x), 7(xi) Back
Qs 38, 55, 125-129, 288-289 Back
Qs 41-43; Ev 26-27, Appendix 1, ref. to Qs 44, 65-74, 148, 150,156,
235-242, 295, 298 Back
Qs 45-51, 156 Back
Ev 26-27, Appendix 1, ref. to Qs 44, 65-74, 148, 150,156, 235-242,
295, 298; Ev 30, Annex A Back
Qs 56-58 Back
Ev 30, Annex A Back
Qs 59-64; Ev 27, Appendix 1, ref. to Q 64 Back
Ev 31, Appendix 1, Annex B Back
Qs 224-225, 245-247, 252-254, 259-262, 267 Back
Ev 30, Appendix 1, Annex A Back
Qs 14, 121-124, 230-232; Ev 26, Appendix 1, ref. to Qs 44, 65-74,
148, 150,156, 235-242, 295, 298 Back
C&AG's Report, Figure 2 Back
ibid, paras 3.13-3.16; Qs 7-8, 285 Back
Qs 74-82, 269-270; C&AG's Report, paras 2.16, 3.7, 3.12 Back
Qs 163, 220; Ev 28-29, Appendix 1, ref. to Qs 227, 275-288 Back
Qs 191-197 Back
Qs 9, 268-271 Back