Examination of Witnesses (Questions 1-19)
MR DAVID
GREEN QC
21 MAY 2008
Q1 Chairman: Good afternoon, welcome
to the Committee of Public Accounts where today we are considering
the Comptroller and Auditor General Reports on the Revenue and
Customs Prosecution Office 2005-06 and 2006-07 and these provided
the background to the C&AG's qualification of his audit opinion
on the 2005 accounts recording significant internal financial
control weaknesses within the Department and how the Department
is improving its procedures and, in addition, it highlights potential
impropriety regarding the appointment of the Chief Operating Officer's
wife as a consultant to the Department. We welcome David Green
QC, who is Director and Accounting Officer of the Revenue and
Customs Prosecution Office since its inception on 1 April 2005.
Mr Green, tell us what happened then. The Department employed
the Chief Operating Officer's wife as a consultant to review and
implement the Department's human resource policies and procedures.
The Chief Operating Officer completed all the steps of the appointment
process. The NAO did not consider that the appointment constituted
the "proper" behaviour expected for the stewardship
of public funds. HM Treasury gave retrospective approval for the
2005-06 payments but the Department made payments totalling £97,907
to the Chief Operating Officer's wife over the two financial years.
Why did this happen and why did nobody do something about it?
Mr Green: I should make clear
from the beginning this should not have happened and I deeply
regret it. It did happen in a very particular context which I
would be very happy to describe to you.
Q2 Chairman: Please explain to us.
Mr Green: Thank you. There are
really three aspects to this context. The first is the background
to the establishment of RCPO in April 2005 and what my priorities
were. Just by way of detail, at the end of the 90s and the early
2000s you will know that a series of Customs and Excise prosecutions
went disastrously wrong and, as a result, Butterfield J recommended
that the prosecution function be taken out of Customs and Excise
and put in a separate department. I was appointed in December
2004 after 25 years at the criminal Bar in private practice to
head this new organisation, and I am sure you will readily understand
that my priorities at that time were restoring public and judicial
confidence in Customs prosecutions, restoring battered staff morale,
forging a new relationship with HMRC and providing leadership,
so that is the first aspect, that was my priority. Secondly, at
the time of our launch it is quite clear in retrospect that no
sufficient thought had been given to selection and matching of
staff on the corporate side to the needs of a small, new Government
department. It was anticipated quite clearly that we would buy
in services under the Gershon principles from HMRC but the fact
of the matter is that at the time of our launch in April 2005
there were seven people in the HR department on the corporate
side in RCPO; two of them were qualified and of those two one
was just back from long term sick and was not well yet, the second
was inexperienced. Our HR policies which we had adopted for our
new department were essentially those we had inherited from HMRC
and by September 2005 when I had been in the job for nine months
and Mr Partridge started as our first fulltime Chief Operating
Officer, I was extremely concerned, frankly, that on the corporate
side as it were a wheel might come off because we lacked policies
that were suitable and were adapted for the needs of a small department.
In that context I told Mr Partridge on his arrival to, frankly,
do what was necessary to get the HR policies we needed, and his
solution was to get interims in. The third aspect and final aspect
to the context is that as you rightly say, Chairman, Mr Partridge
conducted the process and he told me as follows: firstly, that
the process was fully documented and that there was a complete
audit trail. I understood some 20 CVs had been considered from
three agencies. She was value for money in that she cost us £550
plus VAT per day; the OGC framework agreement as of today quotes
an HR consultant at £775 a day plus VAT.
Q3 Chairman: He was pretty upfront
that she was his wife.
Mr Green: Yes.
Q4 Chairman: You decided that it
was a good deal.
Mr Green: There was more to it,
as I hope I will explain. In addition what was attractive to me
and the reason I understood it was that it was time-limited, her
first contract was six months. She was available immediately;
in other words we did not have to go through a two or three months
recruitment exercise. She had a proven track record from working
in other government departments, the conflict had been notified
to me and was always to go into the accounts. Looking back, Chairman,
I readily appreciate this was not perfect but I was reassured
by those matters and she did a very good job; indeed, so did Mr
Partridge. It is perhaps ironic that the first person to be dealt
with under the disciplinary procedure she wrote was her husband.
In addition, no public money was wasted, this is not a question
of public money being given to someone who did nothing, far from
it. The lesson for me, obviously, is that I should have got outside
advice but it is also right to say that I relied on the judgment
of an experienced civil servant, in fact a civil servant of 40
years experience.
Q5 Chairman: You did not think it
was odd that he was doing all the steps in the appointment process.
Mr Green: I was only told once
it had been done. He told me "I have found someone to do
this but you should be aware she is my wife."
Q6 Chairman: I am going to ask the
Treasury, why did the Treasury say after this when they gave retrospective
approval "we have no real problems with this payment"?
Do you stand by that?
Ms Diggle: I do. Actually, Mr
Green has very ably summarised the reasons why we were not as
troubled as you might expect. We do think that the process was
irregular, of course we do, but we think that the spending was
perfectly reasonable, it was value-for-money, everyone knew about
the relationship and it was planned to be properly notified and
disclosed.
Q7 Chairman: I will pass on to different
issues now. These counsel fees are dealt with in paragraph 14
of the C&AG's report and it seems that you negotiated counsel
fees after work was complete. You have just told us you were working
for 25 years at the Bar.
Mr Green: Yes.
Q8 Chairman: Is this normal, is this
an acceptable business practice do you think?
Mr Green: Forgive me, I am not
quite clear what the question is.
Q9 Chairman: You negotiated these
counsel fees after the work was completed.
Mr Green: Yes.
Q10 Chairman: Is that the right way
of going about things, do you not think you should have negotiated
these fees before the work was done?
Mr Green: This is exactly what
we inherited from Customs and Excise, Chairman. Indeed, when I
was at the Bar doing this kind of work for Customs and Excise
that is exactly what I did; I did the work for a case and I then
put in my bill and I put in the bill at the time of my choosing,
and the fact of the matter is that this system had operated for
years under Customs and Excise.
Q11 Chairman: You think it is a good
system, do you?
Mr Green: No, I do not, that is
why I changed it, but certainly nobody complained from the National
Audit Office about this previous system because it was not material,
but of course materiality levels changed overnight. To Customs
and Excise in the old days a fee budget of £17 million was
literally lost in the roundings with an overall departmental budget
of £42 billion, but overnight when we were set up that was
nearly half our budget, and that is why I designed a new fee scheme
in September 2006 which took some designing, I know you will understand,
Chairman.
Q12 Chairman: Okay, we will put that
aside. In November 2006, eight months after year end, you were
still incapable of presenting proper accounts apparently to the
NAO. Do you think this is normal or the right way of going about
things?
Mr Green: It is a matter, you
can imagine, of deep disappointment to me that we were unable
to produce timely accounts. There was, again, a background to
that which I am happy to tell you about if it would assist.
Q13 Chairman: Go on then.
Mr Green: First of all it is perfectly
clear that in 2005-06, our first year of operation, there was
no proper financial control environment in place, there were no
month end processes. Indeed, what we had at the beginning was
two accounts staff in the finance department, one of whom was
qualified, and their job in the context of a large department
from which they had come was merely reporting data to the centre.
We certainly seriously under-estimated the task of producing our
first set of accounts; we had inadequate staffing in finance,
we were awaiting fee notes for work done, as you will have read,
by counsel before April 2005, so the opening balance that we inherited
from Customs and Excise was completely inaccurate and, indeed,
we did not even get towards accuracy with the help of the National
Audit Office until November 2006.
Q14 Chairman: What I cannot understand
is here you have a body whose purpose is to prosecute fraud.
Mr Green: Yes.
Q15 Chairman: Presumably employing
highly intelligent people. How can you have a system where your
own internal processes are so weak and apparently people were
so negligent in controlling the whole organisation? How can we
have any confidence—
Mr Green: Are you talking particularly
about the counsel fees?
Q16 Chairman: About the whole office.
Mr Green: I think I have explained
that the counsel fees business is something that we inherited
and we merely kept that system on, and as soon as we realised
that it was a problem we changed it and we now have a system which
works pretty well.
Q17 Mr Bacon: May I just return to
the question of Mr Partridge briefly. It says in the original
2005-06 accounts that Mr Partridge with the consent of the Director
(the Accounting Officer—that is you) completed all of the
steps that led to the appointment of his spouse. You have made
it clear that you knew about that from the outset, that it was
his wife who was doing it.
Mr Green: Yes.
Q18 Mr Bacon: That was a six-month
contract so it therefore presumably expired in March or April
or so 2006.
Mr Green: April/May.
Q19 Mr Bacon: There was then a hiatus
because the contract was not renewed until July.
Mr Green: That is right.
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