Examination of Witness (Questions 120
WEDNESDAY 14 NOVEMBER 2001
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.
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.
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
(Mr Broadbent) We have two and I am in the process
of trying to recruit three more.
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
(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
129. Can you assure us that you will?
(Mr Broadbent) Yes, I will look at that.
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
(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
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