Select Committee on Treasury Minutes of Evidence


Examination of Witness (Questions 120 - 134)

WEDNESDAY 14 NOVEMBER 2001

MR RICHARD BROADBENT

  120. But he does say about the £340 million which got lost at the London City Bond warehouse, "It seems remarkable that a warehouse could operate throughout the period of this fraud in a way which allowed products to be diverted in such high volumes".
  (Mr Broadbent) My own view is that it was taking place over a period of time and there was probably a period of time when the amount of fraud was too high. That goes back to the balance of judgement in individual cases.

  121. He also made some serious criticisms of the way the Board operated. You are from outside. You have come into the organisation from outside. He criticises the structure of the Board. He even says at the beginning of his report that it proved impossible to obtain a full set of Board minutes dating prior to 1997. How can we have a great public department like Customs and Excise where there are not even board minutes?
  (Mr Broadbent) I believe that the answer to this is that the Board as an entity was in fact created relatively recently. It is not a statutory board; the Commissioners are the statutory entity of the organisation. There was a point in the 1990s when one of my predecessors decided that it would be sensible to draw the Commissioners together and have discussions and it was called a board. It was only over a period of time that the concept of a board developed in a true governing sense and it is right that certain records from before that time were lost.

  122. No minutes were taken.
  (Mr Broadbent) I believe minutes were taken but they just do not exist any more.

Mr Beard

  123. It was not just board minutes, was it? It said numerous other relevant documents had been destroyed.
  (Mr Broadbent) There were a number of documents around the Board at that time which were not kept. He also criticises our document retention policy which is something we are now paying more attention to.

Chairman

  124. Is the Board now operating as a board as you understand it from the commercial sector.
  (Mr Broadbent) The Board is operating as a strategic overseer. It has a set of terms of reference which relate to its need to oversee the strategies adopted by the management committee and the discharge by the Commissioners of their statutory duty for revenue. I should perhaps add for the sake of clarity that I am still trying to build the Board. I do believe it needs more-non-executive representation to bring it to a level with . . . You asked me whether it was parallel with good private sector practice. I think we are getting there but it is not there yet.

  125. How many non-executives do you have at the moment?
  (Mr Broadbent) We have two and I am in the process of trying to recruit three more.

  Mr Bear

  126. Coming back to the question the Chairman was raising about the fraud originating at various warehouses, what sort of investigation of background do you do on the staff who are employed in the warehouse? Plainly with fraud of this magnitude some people you were employing must have been co-operating. What is the background of the people? Is that the source of the problem?
  (Mr Broadbent) I have to tread a bit carefully here, if you will forgive me, for legal reasons. It is of course entirely possible then and now that some of the people running the warehouse, the warehouse keepers, were complicit in the fraud. Equally many of them were not.

  127. Let me put the question another way. What steps do you take to ensure that members of the criminal fraternity are not being employed in your warehouses?
  (Mr Broadbent) We do now have a different system for warehouse approvals and that involves not just the warehouse keeper, but also the owners and indeed the owner of the goods registering, whereas before it was simply the person who manned the warehouse and that was a weakness in the system.

  128. Are you satisfied now that that possible weakness in the system is plugged?
  (Mr Broadbent) No, I am not wholly satisfied. I do not think we conduct any background checks which you would call sophisticated and this is possibly an area we should be looking at.

  129. Can you assure us that you will?
  (Mr Broadbent) Yes, I will look at that.

Mr Plaskitt

  130. On this subject, Roques describes the regime in relation to warehouse keepers as lax.
  (Mr Broadbent) Yes.

  131. He does not mince his words on it.
  (Mr Broadbent) No.

  132. And you are saying you still have not got it right.
  (Mr Broadbent) The regime was lax and we accept that. We have tightened up the regime very considerably, not least implementing 62 of his 65 recommendations. On the specific point of the question on whether we conduct background checks on individual warehouse keepers, I would not want this Committee to believe that we conducted sophisticated background checks. Listening to the question I am accepting that is perhaps something we should look into.

  133. Is it hard to do these checks?
  (Mr Broadbent) It is usually a question of having the statutory powers, because you have to access confidential data.

Chairman

  134. Perhaps you could let us have a note on what you do do or the changes you are going to make.
  (Mr Broadbent) Yes.

  Chairman: We must end it there. Thank you very much indeed.






 
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