Examination of Witnesses (Questions 20-39)
14 OCTOBER 2004
MR RIC
NAVARRO, MR
JIM GRAY
AND MR
DAVID STOTT
Q20 Chairman: —in your subsequent
approach, whether to adopt enforcement measures or prosecution
or whatever.
Mr Stott: Yes; I am sorry I simply
cannot give you figures as to how many were intentional and how
many were caused by gross negligence for instance.
Q21 Mr Thomas: In your memorandum, you
have said that the Agency has detected a change in attitude in
some of the major operators in the water and waste industries
and I take it clearly that is an attitude change for the worse.
Which companies are you referring to?
Mr Stott: The ones that spring
to mind which probably led to that insertion are the water companies
where we have certainly had a change in attitude towards our enforcement
activity, for instance instructions to employees not to cooperate
initially with our enquiries, also a failure to provide us with
their explanation as to the causation of pollution incidents.
There has been a change from how it was some time ago.
Q22 Mr Challen: We have round about nine
or ten major water companies. Is it all of them?
Mr Stott: It is two in particular.
Q23 Mr Challen: Two in particular? Do
the others manifest this behaviour as well?
Mr Stott: Not to the same extent
as the two of them which provoked that comment.
Q24 Mr Challen: Which are the two in
particular?
Mr Stott: Probably Anglian and
Thames are the ones that we have had specific problems with.
Q25 Mr Challen: Any special reasons why
you think they might be doing this and not the others to the same
extent?
Mr Stott: No, I could not say.
Q26 Mr Challen: But the others might
look at the experience of those two and say "They have been
quite successful here because they have batted off enquiries".
Mr Stott: No, I did not say that.
We will fight to the end.
Mr Navarro: To some degree there
is a growing trend that as we are more successful in raising the
stakes in terms of reputation and financial consequences from
our enforcement activity and by publications such as Spotlight,
where we try to influence the City and business, having raised
the stakes on that side, it is inevitable that companies are going
to have a stronger response and try to avoid the consequences,
because they do not want to have the stigma of prosecution and
the economic consequences which might follow. We know that OFWAT
for example, in the water industry, take account of the enforcement
record of the water companies. In a sense, it is working because
the financial pressures are starting to bear on the companies
and therefore they are more combative in terms of our enforcement.
Mr Stott: I think there may be
a contractual aspect as well, for when they are bidding for contracts
abroad.
Q27 Mr Challen: I am glad there is a
reputation element, because they are our monopolies basically,
are they not? What real damage will they suffer? You say in the
memorandum, for example, in terms of the change of attitude, "In
refusing to provide representatives to attend for interviews and
challenging legal definitions". It seems as though they want
to run rings round you.
Mr Navarro: Yes.
Mr Stott: Well, they may want
to try to do that, but I think the reality is different.
Q28 Mr Challen: A lot succeed.
Mr Stott: They have succeeded
recently, but that is not the end of the game.
Q29 Mr Challen: Is that because their
methods of doing this are getting more sophisticated?
Mr Stott: It is taking it to the
nth degree, where there was probably common acceptance, say of
the definition of what treated sludge was for instance from the
water industry—
Q30 Mr Challen: So how are you responding
to this new challenge, this new aggressive behaviour of these
water companies?
Mr Stott: We follow the guidelines,
we follow the directive routes that we have, we will persist.
Q31 Mr Challen: Would you like more powers
and what powers might they be?
Mr Stott: I do not think that
is the main problem that we have: it is simply that we have to
be more aware of the interviewing techniques that we should adopt,
in the evidential gathering that we adopt, that we cannot take
anything for granted, which is probably right. I am not saying
that it is a problem, but it does create delay, it creates more
effort, more time in putting cases together. In terms of demanding
interviews etcetera, they have a right not to be interviewed,
which is a right that everybody has. I do not think we want to
change that; we simply have to be more efficient and slick in
putting our cases together.
Q32 Mr Challen: If somebody refuses to
be interviewed and face your inquiry—
Mr Stott: That does not help,
that is right.
Q33 Mr Challen: It does not help you
and it does not help the environment either, I suspect.
Mr Stott: No.
Q34 Mr Challen: Are there ways that you
can publicise the fact that you have not had cooperation from
a company? Is that not another kind of sanction?
Mr Stott: We certainly could,
yes, and we would say so in court.
Mr Navarro: And this is a factor
which we would take into account in our enforcement and prosecution
policies: the attitude of the company is either an aggravating
or a mitigating factor. Of course the other difficulty we have
generally, as the Committee well knows, is that the level of fines
really is not sufficient to make much of an impact on the companies.
We would be looking for a different approach, so that in imaginative
ways maybe we could bring transgressions more to the attention
of shareholders and try to get the range of pressures on the company
to conform.
Q35 Mr Challen: Moving on to the issue
of fines, we mentioned earlier this morning the Spotlight on
Business Environmental Performance document published in July
this year, where it was reported that 11 company directors have
received fines, personal fines that is, up to £20,000. You
also suggest that some companies have separate budgets to deal
with fines. I do not know if you would care to mention which companies,
a handful of those, do have such budgets. Can these budgets also
be used to pay off the directors' personal fines, to your knowledge?
Mr Stott: Actually that would
be an offence in its own right for somebody else to pay your fine.
I am not talking about environmental law; that is the law generally.
I am not aware that companies are actually budgeting for that.
Q36 Mr Challen: If a company has its
own budget to cover its own fines, then obviously if a company
is fined, the company has to pay. Do you know if that is tax deductible
just out of interest?
Mr Stott: I do not know.
Mr Navarro: I should not have
thought in a public policy sense that would be tax deductible,
but we could look at that.
Q37 Chairman: Is it possible to insure
against these kinds of personal fines?
Mr Navarro: I do not think it
is possible to insure against criminal conduct.
Q38 Mr Challen: You say you are keen
to use the lifestyle provisions of the Proceeds of Crime Act 2003
and hope to do so in the near future. Why can you not use it now?
Mr Navarro: Yes.
Mr Stott: Well it is new; it came
in in October of last year. The way the Act is written it is really
aimed at individuals, but we are keen to extend that to companies
and we are working very closely with the Assets Recovery Agency.
We would in fact be the first organisation which has used it against
companies. We have three cases on the stocks that we are developing
and we will be applying in due course for confiscation orders
against companies. In a sense, they will be test cases. We think
the legislation enables us to do that; no other organisation has
actually achieved that yet.
Q39 Mr Challen: How is it going to work
in practice?
Mr Stott: In practice, if we can
establish that a company, for instance, or a director—if
we prosecute a director as well, it would apply against him certainly—have
benefited from three or more offences to the value of over £5,000,
there is a presumption that the other assets of the company have
been acquired by unlawful means. The burden then is put onto the
company to establish that they have not been acquired by unlawful
means. If they cannot do that, the confiscation order can be made
for the totality of those assets. It is a very powerful piece
of legislation.
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