UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 1026-i

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

PUBLIC ACCOUNTS COMMITTEE

SFO QUALIFICATION OF ACCOUNTS AND TAX AVOIDANCE

THURSDAY 7 MARCH 2013

RICHARD ALDERMAN and DAVID GREEN

Evidence heard in Public

Questions 1 - 122

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Public Accounts Committee

on Thursday 7 March 2013

Members present:

Margaret Hodge (Chair)

Mr Richard Bacon

Stephen Barclay

Chris Heaton-Harris

Mr Stewart Jackson

Fiona Mactaggart

Austin Mitchell

Nick Smith

Justin Tomlinson

Amyas Morse, Comptroller and Auditor General, Gabrielle Cohen, Assistant Auditor General, National Audit Office, Mandy Measures, Director, NAO, and Marius Gallaher, Alternate Treasury Officer of Accounts, were in attendance.

Examination of Witnesses

Witnesses: Richard Alderman, former Director, Serious Fraud Office, and David Green, CB, QC, Director, Serious Fraud Office, gave evidence.

Q1 Chair: Welcome to you both, and thank you very much for agreeing to give evidence this morning. I will start with Richard Alderman. We had a note from you yesterday, as well as one from the Cabinet Office. We have had lots and lots of notes on this. I refer you to one of the two reports that the Attorney-General has released to us-the one from Tim Hurdle-in which it says, pretty categorically, that the review "found that relevant Cabinet Office approval had not be obtained for the exit schemes and that HM Treasury approval had not been obtained for enhancements to the exit packages." Why?

Richard Alderman: Can I explain what happened, Mrs Hodge? First of all, thank you very much for the opportunity to come and explain what happened. The events are set out in my written statement. Basically, I do not agree with the comments made by Mr Hurdle in his report. I can give some views later about what more he should have done. My understanding is that we obtained Cabinet Office consent. My colleague, who was very experienced in this area, rang the pension providers and was told that there was a new system and that they could not take action on any exit package without Cabinet Office consent. He spoke to a number of people at the Cabinet Office and gave details of the packages. He was told that the Cabinet Office would consider them. He followed that up with an e-mail, and the next thing he heard was from the pension providers, contacting him to say, "That’s fine. We can now go ahead." His belief-I think it is the overwhelming inference-was that the Cabinet Office must have given consent.

There will be telephone logs. There will be text messages and e-mails that were flying around at the time. There is no evidence that Mr Hurdle looked for any of that in order to back up the statements that there were these discussions. In my view, my colleague was absolutely entitled to take the view that he had received Cabinet Office consent, because this could not have taken place without that consent.

Q2 Chair: Okay. The NAO undertook the audit to establish whether the relevant consents were obtained, and I would just like a clear statement, rather than to-ing and fro-ing, on this from the NAO: were the relevant consents obtained?

Mandy Measures: We were not given any evidence of consent being obtained. We were told, as Richard has just stated, that if they paid, the Cabinet Office must have approved it, but we need a document to evidence that.

Q3 Chair: I am sorry, Mr Alderman, but you have to accept that these accounts have been qualified on the basis that the relevant consents were not obtained. No matter how much you want to bang your head on a brick wall about this, I think that after having a perfectly proper review of those exits by Mr Hurdle-the finance director of the Treasury Solicitor’s Department-and the NAO, both of whom assert that consents were not obtained, you just have to accept that that is how it is. You may have thought that you had got them.

Before turning to Richard Bacon, let me say that two things surprised me. The feel I get, looking through these papers, is that you ran a pretty informal system. You took the decision yourself to put all your top team through redundancy. You do not appear to have consulted anybody on that. You negotiated the terms yourself. It is just somewhat surprising that, as a lawyer, you did not have some regard to due process in what might have been perfectly appropriate decisions. I am not challenging that-we will come back to that-but I would think that you would do them with due process in an organisation that is funded by the public purse and that therefore has to be accountable for the money it dispenses. I just don’t get why you did not follow due process.

Richard Alderman: Thank you, Mrs Hodge. Can I reply on the various points you have made? First of all, I was expecting the NAO to interview me; I was expecting the NAO to interview my colleague, who had gone to the Cabinet Office. It did not happen.

Q4 Chair: Are you saying everybody lied?

Richard Alderman: No, no. That is actually, it seems to me, what is being said against us. We said-my colleague and I-that we understood assurances had been given. We understood this package could not have gone ahead without Cabinet Office approval, and our understanding, based on that, was that there must have been Cabinet Office-

Q5 Chair: It was never written down? I have been around the public sector world for ever and ever. I was a Minister for 12 years. For a decision to spend this sort of money in this sort of climate, I would have got a bit of paper authorising me to do it. That’s all. It is very simple. That is what amazes me. Having been married to a lawyer who was a stickler about getting bits of paper to cover him and everything he did, I would have thought you would have done the same.

Richard Alderman: And maybe for the future that is something accounting officers ought to do, but could I just remind you, Mrs Hodge, of the eighth Report of this Committee, last July, in which you talked about exit agreements that were looked at by the Treasury? You commented on the fact that there was inadequate record keeping in the Treasury. The Treasury could not find details of a number of the exit agreements that they had approved. This was July, the time when Mr Hurdle was considering his report. Did he look at that possible explanation? If he did not, what he is doing, basically, is saying that both I and my colleague were actually not being frank-and we were. Did he consider that alternative explanation? There is no evidence that he did.

Q6 Mr Bacon: It may be, Mr Alderman, that there are files elsewhere in Government where there are not records as there should be; that is as may be. It may very well be true; I have encountered that many times on this Committee. I once asked the Department for Work and Pensions why they did not seem to be able to give me the answer to how many times their accounts had been qualified, and the reason was that they could not find the accounts, so it does happen. I accept that, but you say in your note to us: "It may be, though, that the Committee needs to give guidance to accounting officers on the documentation they must see to check that proper processes had been followed." My reaction, I must say, when I read that was, "No, I don’t think this Committee needs to give guidance," because there is already a thing called "Managing Public Money", which makes very clear what accounting officers’ responsibilities are.

The basis of your case seems to be this, and you have used words that indicate that what I am about to say is correct. You have said this morning "my belief." You have said "we understood". You have said there was a clear-I think you used the words "overwhelming inference." But when I read that Cabinet Office permission must have been given-indeed, in your note you say: "It is reasonable to conclude, therefore, that Cabinet Office must have given MyCSP approval."

Richard Alderman: Yes.

Q7 Mr Bacon: As a layperson, not a lawyer-you are a barrister-the issue is that I would not treat this as a matter of belief, opinion or feeling. I would treat it as a matter of fact, and I would look for evidence. I cannot understand why, when your colleague received the call from MyCSP saying that they were now in a position to process the early exits, either you or your colleague did not say, "That’s great. Terrific. Can we please have a copy of the Cabinet Office letter giving that approval?" That just did not appear to happen. You did not say, "Where’s the evidence in writing?" did you?

Richard Alderman: No, we did not challenge them, because MyCSP-

Q8 Mr Bacon: You did not ask for the evidence in writing.

Richard Alderman: My CSP were telling us that they could now go ahead with this package in circumstances in which they had told us before they could not do it without Cabinet Office agreement.

Q9 Mr Bacon: "Tell"-the word is "tell". That is a word to describe speech, and this is the sort of thing where you are looking for something with one of these-a pen-and you did not do that. That seems to me the central failing. You are familiar with the expression "nil by mouth", are you? It is used in hospitals.

Richard Alderman: In a medical context, yes.

Q10 Mr Bacon: It is used in the medical context to describe how you treat patients, but it is also used, I think, in social security departments and jobcentres. I was seconded once to a mutual building society. In the arrears section, where they were dealing with people who were behind with their payments and had, by definition-for whatever reason, good or bad-become unreliable in the payments, there was a huge sign on the wall that said "nil by mouth". What it meant was, "Get it all in writing." You should have got this in writing and you did not, and that was the problem.

Richard Alderman: We did not have a "nil by mouth" sign in respect of the Cabinet Office.

Q11 Mr Bacon: You should not have needed one. You were paying out hundred of thousands of pounds; you should have had written evidence that it was okay to do it. That was the problem.

Richard Alderman: We were told by them that they can only proceed on the basis of Cabinet Office approval.

Q12 Mr Bacon: Told!

Richard Alderman: Yes.

Q13 Mr Bacon: That is my problem; you were told. I get told all kinds of things, Mr Alderman, some of them not printable, but you should have got written permission.

Richard Alderman: We were also told that the exit agreements could only take place on the basis of a number, which is given by the Cabinet Office and is nothing to do us. How did this happen? I remain absolutely perplexed, I have to say, as to how this happened, and how the pension providers actually took action on this if there was no Cabinet Office approval. I have received no explanation for that; I do not understand it.

Q14 Chair: Anyway, can we at least agree that you assumed a Cabinet approval that you never received in writing?

Richard Alderman: We were told there was Cabinet Office approval from what the pension providers told us. From the course of action that took place, it is right to assume-

Q15 Chair: Can I just ask you another question? There are two other Members who want to come in. Did you take the decision on your own that Phillippa Williamson, Chris Bailes and Ian McCall should all be made redundant? Did you take that decision alone?

Richard Alderman: They were basically given their marching orders in the summer.

Q16 Chair: Did you take the decision alone?

Richard Alderman: They were told, in the context-

Q17 Chair: Please answer the question.

Richard Alderman: They were told that they would have a month or two after my successor took office. They were given a month or two to stay on and then clear their desks and go.

Q18 Chair: By whom? You?

Richard Alderman: No, by the Treasury Solicitor’s Office and the Attorney-General’s Office.

Q19 Chair: Do you confirm that, Mr Green?

David Green: No.

Richard Alderman: Mr Green cannot speak for that.

Q20 Chair: Mr Green is now the accounting officer.

Richard Alderman: The Treasury Solicitor told me that the new director would move on the senior managers that I had. He would move them on within a month or two; he said he would clear them out and bring in his own people.

Q21 Chair: Mr Green, can you give us the evidence, please? Is that true? Then I will go to Nick and then Stewart on this one, because I think that the two link together.

David Green: I cannot say, Mrs Hodge, what Mr Alderman was told, but having understood what he said about this, I understand and accept that there were rumours about my intentions.

Q22 Chair: Did you two have a conversation about it?

David Green: No, I was not asked. My true mental state was that I had a completely open mind about whether or not I would keep senior managers on. I wanted some sort of continuity, starting in this job. The only firm decisions I had made were to get rid of exotic home-to-work travel arrangements, and also to ensure that the chief executive worked five days a week in London. Those were the only firm decisions I had made.

Q23 Mr Bacon: Can you just tell us, for the benefit of the Committee, what the exotic arrangements were? Was it because they were travelling from an exotic location and therefore required a private jet, or were they just mildly unusual?

David Green: Exotic is my word, but Mr Alderman can tell you the detail of the travel arrangements. Essentially, as I understand it, the chief executive lived in the Lake district and worked there two days a week, and came down to London for three days a week and had her travel and hotel accommodation paid.

Chair: Blimey!

David Green: Well, it was obviously something that received publicity-unwelcome to me-in the two weeks before I took up post. I had certainly decided that it would end.

Q24 Chair: How much did that cost over a year?

David Green: I do not know.

Q25 Chair: Does the NAO know? Well, look it up and come back to us.

David Green: That was the firm decision I had made. Indeed, I had agreed with the Treasury Solicitor, and spoken to him about all this, that I would actually try out these staff and see what they were like. I did not know; I had no idea. I had a genuinely open mind. In fact, the idea that I had already decided to make these people redundant is shown to be nonsense by two things: one is the fact that I kept Chris Bailes on until December, and the other is that Mr Alderman himself produced a document as early as 28 September 2011, which was sent to the Cabinet Office, asking for a quote on their pension payout. So there was obviously a decision to make them redundant. As for whether they knew, I do not know, but the decision to make them redundant had its roots way back in September 2011, before I was even on the scene. I was not actually appointed until December.

Q26 Nick Smith: Mr Alderman, who told you to clear out your top team in advance of the new boss?

Richard Alderman: The Treasury Solicitor told me-

Q27 Nick Smith: The Treasury Solicitor?

Richard Alderman: The Treasury Solicitor. I had a discussion in June or July, and soon after that I briefed my senior management board on some of the points he made. He said to me that he expected a new director to move out senior management within a month or two of his arrival. Ms Williamson and Mr Bailes were told by people from the Treasury Solicitor’s Office and the Attorney-General’s Office in the summer that they could stay on for a month or two after a new appointment, but they would then be expected to clear their desks and leave. I am sure they would be willing to give evidence to the Committee about that. That is what they were told.

Q28 Nick Smith: How did they tell you? Was it a telephone call at the end of the day, or was it a round-table meeting at which minutes were taken? Was it formal or informal?

Richard Alderman: I do not think there is such a thing as an informal meeting with the Treasury Solicitor. I briefed my management board afterwards, without giving details of some of the issues. In my normal way I would have made a few notes of what the Treasury Solicitor told me.

Q29 Nick Smith: Did you keep those notes? Are they available?

Richard Alderman: This would be an SFO issue. I have not got any notes now; I did not take any papers away with me. That was what I was told by the-

Q30 Nick Smith: Sorry to interject, but so far as you know, those notes are at the SFO and available for us to look at?

Richard Alderman: I do not know if they are available, or what. I make scribbled notes during the course of meetings; sometimes I make a more formal e-mail message to myself, summarising various things. That is what the Treasury Solicitor told me.

Q31 Nick Smith: This is pretty big-ticket stuff involving your top team and a lot of money, and you say you have scribbled notes, and you do not know where they are.

Richard Alderman: That is what he told me. That is what the Treasury Solicitor told me, and that was fine.

Chair: I would like to bring in Amyas Morse.

Amyas Morse: When we look at this, Mr Alderman, we are left asking whether there is a reasonable explanation for getting rid of these people at the end of your tenure, apart from expectations as to the incoming chief executive. It was not a question of clearing the decks so that you could get rid of all these exotic arrangements we were talking about before somebody else came in, was it?

Richard Alderman: No, these exotic arrangements had been the subject of discussion, and of review by internal audit and by the NAO over many years. They had been approved and they were in line with civil service rules, and they had been looked at by the NAO and approved. There was nothing wrong with these arrangements.

Q32 Chair: You said there was nothing wrong. Just for the Committee’s sake, I have been told by the NAO that it cost the taxpayer £27,600 for Phillippa Williamson’s benefits in kind in the year 2010-11, which I assume was both her travel and accommodation. That seems unacceptable to me. It is not a proper use of taxpayers’ money.

Richard Alderman: No, I do not agree, for two reasons. First, this package was agreed in accordance with civil service rules, and it was approved by internal audit and the NAO because of concerns about it in the press. It was looked at and approved; it was perfectly all right. Secondly, Ms Williamson-and also Mr Bailes, but Ms Williamson in particular-was the prime person responsible for enabling us to reduce our budget over four years from about £55 million to £32 million. Not many civil servants can do that, and she did it.

Q33 Mr Bacon: If you are sitting by Lake Windermere, not having to deal with people face to face, and just sending out e-mails and texts telling people they are sacked, I can see how you could do that quite easily. It seems to me rather an odd way for the boss to run the organisation. You would expect the boss to be more fully engaged, and to talk to people.

Richard Alderman: Not particularly, not in this day and age. In this day and age-

Q34 Mr Bacon: You would expect them not to be?

Richard Alderman: I had a job before I joined the SFO in which I was in my office perhaps one morning a week, and the rest of the time I was out travelling, because I had different offices. Ms Williamson was perfectly able to do the work within the days she was in the office, and when she needed to be in the office on those other days, she was in the office.

Amyas Morse: Just as a matter of record, it is not our job in the NAO to approve or disapprove employment packages; that is a decision for the accounting officer, as I am sure you must know. We simply make sure that the benefits in kind have been accurately recorded in the accounts, which, as far as we could tell, they were.

Mandy Measures: Yes.

Chair: So it was not approved; it was your decision.

Q35 Nick Smith: Mr Alderman, I just want to pursue this business of you being told to clear out your top team. You kept a note of it, although you do not have it to hand; as far as you know, it is at the SFO. Mr Green, Mr Alderman has been told to give the bum’s rush to his top team. It is not in the public eye. It is a lot of money. Does the SFO have confirmation of what he has just told us? Do you have a written agreement that the Treasury told him to get rid of his top team in the records you keep in your office now?

David Green: Certainly not.

Q36 Nick Smith: Have you looked for them?

David Green: Yes.

Q37 Nick Smith: So you absolutely, categorically deny what Mr Alderman has just said?

David Green: I am afraid I do.

Richard Alderman: And I categorically affirm the truth of what I have said.

Q38 Nick Smith: So where is your note of it? I would keep a note of something like that; it is pretty important.

Richard Alderman: I used to keep notes in one of those spiral notebooks, that I would keep with me at all times, and I would sometimes, for some issues, record them in a formal, A4-type Word document or in an e-mail to myself. I briefed my non-executives and my executive board on my discussion with the Treasury Solicitor, in particular on the issue about not recruiting a general counsel. So there is confirmation and corroboration of the meeting that I had.

David Green: May I say that Mr Alderman is most welcome to come to the SFO and to have access to any papers whatever from his time in office, if he wishes to?

Richard Alderman: Can I say that, at the meeting that I had with the Treasury Solicitor, that is what he told me? He told me as well that he had been impressed by the way, when I was the director, I had moved out members of my senior team very quickly. That was what he was expecting.

Q39 Stephen Barclay: I just wonder, if you cannot find your own notes, how you are going to find the notes of fraudsters, as an organisation. It does not really say much for the organisation, does it?

Mr Bacon: Just in case you are in any doubt, Mr Alderman, I should make it clear for the record that waving your hands in the air in despair does not show in Hansard.

David Green: May I assist here, please? Obviously, we have very different processes for hoovering up and recording evidence, and a director’s personal notes, which are a rather different kettle of fish.

Q40 Chair: It is a culture, if I may say so, Mr Green-led from the top, Mr Alderman. It looks to me like you took the decisions yourself. You have not denied that you did; you said you had chats here and there. You decided the packages yourself. You decided yourself that you did not need written agreement; you had had a natter with somebody on the phone. It is all indicative of a culture that you led, which does not, to take Steve’s point, give confidence that it was the sort of culture you require if you are trying to find fraud.

Richard Alderman: What it is also indicative of, Mrs Hodge, is the fact that, in my last year, the SFO was under considerable stress, for all sorts of reasons, not least of which was that my senior management team was operating at about 50% of what it should have been. The organisation was under a lot of stress, because we were all picking up a couple of jobs. We had a long transition, and as I look back on this-

Q41 Mr Jackson: Can I come in there? Really, this is dilatory, this is sloppy, this is slovenly. There is not one iota of contrition or apology from you for the culture that existed. Presumably, you were under such stress because you were the chief executive, shuttling between the Waldorf Astoria and Lake Windermere, and you were really feeling it acutely. I have to ask you specifically, coming back to the legal advice, whether you have any speciality as a lawyer in employment law.

Richard Alderman: I have been involved very directly in employment law litigation for about five years.

Q42 Mr Jackson: So that’s your speciality, is it?

Richard Alderman: No. I have a range of different areas of work.

Q43 Mr Jackson: So, if we refer to the addendum to the Hurdle report, "The Beachcroft Employment Partner"-that is, the legal adviser, specifically-"states in an e-mail to The Head of Technology & Special Services that ‘There is no suggestion of a grievance or a claim risk from their’"-that is, the CEO and COO’s-"‘respective employments and/or their terminations so I challenge the requirement for a compensation payment of £5000’." Additionally, Beachcroft said that a "note of a phone call states that…The Head of Technology & Special Services...appreciates the advice that we provided to date and the confirmation that there is no legal justification for the payment of an ex gratia" and that "the likelihood of litigation…the likely outcome…and the amount would be awarded by an Employment Tribunal."

That was the advice you had secured as a result of public funding. You ignored that advice; you considered you knew better. You contravened the guidelines. If you challenge what I am saying, bring the written evidence forward that you sought sanction for this, because in the absence of the evidence you cannot prove it and the case stands that you wilfully ignored that, that you were not considering value for money, and you should apologise for that.

Richard Alderman: No, I don’t agree with that. Looking at Mr Hurdle’s report, Beachcroft were talking about damages as a result of the premature bringing to an end of the careers of Ms Williamson and Mr Bailes. That was not what the £5,000 was about at all. The £5,000 was about what I described as issue 1, where Ms Williamson and Mr Bailes were being strongly advised by Farrer & Co, who know a thing or two about this area of work. I have said there that my understanding is that Farrer had told Ms Williamson she would receive about £70,000 damages. What I was doing was thinking to myself, "Well, look, if I am back in the employment tribunal and there are various offers being made outside the court in the usual way, and I am being told that they’re prepared to settle for £5,000"-

Q44 Mr Jackson: But the report says-please listen carefully-that there was no suggestion of a claim and that no written claim or grievance was received. Is it written down that there was any risk of a claim in an employment tribunal?

Richard Alderman: Yes, I wrote it down in a note. I did a full note-

Mr Jackson: No, it’s tautology. Let’s not have weasel words here.

Richard Alderman: I am sorry. You’re accusing me of not writing a note. I did a full note on all of this-

Q45 Mr Jackson: No, no, answer the question directly. Did you receive any written confirmation of a likely or actual claim in respect of an employment tribunal or higher court relating to the employment of these individuals?

Richard Alderman: I knew that they were being advised by their lawyers-

Mr Jackson: No, that’s not my question. Answer the question. Did you receive, in an e-mail or a letter or any other written means, confirmation that there was a claim pending in a court or an employment tribunal?

Richard Alderman: I knew that there was a potential claim from what I was being told.

Q46 Mr Jackson: That is not the answer to my question. Answer the question. Did you receive at any stage, on your desk or by any other means-or, perhaps, over a croissant at the Waldorf Astoria with the chief executive-a written confirmation that a claim was pending from an employment solicitor, for instance, or a barrister?

Richard Alderman: Right, first of all, I have no piece of paper on that but I knew that it was going to happen-I knew the likelihood of that-and I did a full note about the issues and the likelihood of this.

Q47 Chair: How did you know?

Richard Alderman: Because Farrer’s were advising them. I was told that this was what they were maintaining.

Q48 Chair: By whom? Who told you that Farrer’s was advising them?

Richard Alderman: My HR colleague.

Q49 Mr Jackson: So, you are saying that we are setting a precedent now that, if you get rumours that senior people in the civil service might be minded to issue a claim through barristers or solicitors in order to expedite the matter-not to the advantage, incidentally, of the taxpayer-you just shove them cash because there’s a rumour that they might? There is no claim on the table but, because you’ve had a chat with a mate somewhere, you think that it’s going to happen. It’s like Fred Karno’s circus; it’s not the Serious Fraud Office. It is not the way to spend public money and it is absolutely outrageous that you should have done that.

Richard Alderman: First of all, you’ve got to look not just at the claims on the table but what likely claims there are. What you do not want to produce is a situation where somebody leaves and then shortly after that they bring their claim. You want to close it all off so that you can then move on, they can move on and nothing more happens.

Q50 Mr Jackson: How much did you pay Beachcroft for this advice, which you ignored?

Richard Alderman: I don’t know how much Beachcroft were paid. That would be a matter of record that the SFO will have. From my point of view, I knew the issues. I set it all out. You are telling me that I should make detailed notes, and there is a very detailed note of the issues and of my assessment of the likely result of all that and of the damages likely to be paid.

Q51 Chair: Mr Green, have you got that detailed note? Have you looked for it?

David Green: No. Mr Hurdle had open access to go through any contemporaneous documents whatever to do with this. I am totally unaware of it. I repeat my offer that Mr Alderman is very welcome to come to the SFO and have access to any document pertaining to the case.

Richard Alderman: This is a document that I prepared for the NAO, because I was told-

Q52 Chair: Have you got it?

Mandy Measures: We have a memo that was prepared by Mr Alderman, but, again, it just rehearses the reasons why he decided to make the people redundant. It does not-again-give us any evidence of any approvals being obtained.

Richard Alderman: We are talking about the wrong note. My note set out the details of the three issues. It was a note that I did probably in early April, and it was a note that I said to my colleagues must be given to the NAO, because it set out all the detail of these claims and why in my view it was proper to make the settlement.

Q53 Stephen Barclay: Could I just clarify? Are you saying that you took, third hand from a non-lawyer, legal advice based on what the other side were saying, which contradicted your own legal advice, and you acted without making any contemporaneous record that you can share with us?

Richard Alderman: No, the legal advice was, as I see it from Mr Hurdle’s opinion, on the basis of the termination, so this is nothing to do with that. These costs were not given-

Q54 Stephen Barclay: No, no. You said that the information came to you from your HR person.

Richard Alderman: My HR person told me that Farrer’s, the legal advisers, were pressing on this.

Q55 Stephen Barclay: Your HR person is not the lawyer. Was your HR person a lawyer?

Chair: Mr Green is waving.

David Green: We do indeed have a document, which is a memo from Mr Alderman to the head of HR dated 20 April, his last day, which deals with the £15,000 ex gratia payments and his reasoning for them. I am sure that that is the document he is talking about. Forgive me; when he said a note, I thought it was a note in the notebook. I will hand it over, because it may assist.

Richard Alderman: Yes, that’s right. I did a detailed note about all these issues, and it was a note for the NAO.

Q56 Chair: But that does not alter your view, Amyas.

Amyas Morse: It is just a narratival treatment. It is not evidence. It is just a narrative of reasons, much like what we have just heard.

Chair: Oh, dear. Stephen, have you finished?

Q57 Stephen Barclay: The person on whose advice you relied-were they a lawyer? The HR person?

Richard Alderman: He was a senior HR professional with a lot of experience. Ultimately, it was my decision. I thought to myself, if I am sitting there looking at an employment tribunal, would I pay £5,000 for this? I knew the strength of their case on issue 1 and the other issues, and I thought they would get a lot more in an employment tribunal and that £5,000 was a reasonable amount to pay.

Q58 Stephen Barclay: You seem to have an inherent inability to say yes or no. Either the HR person who advised you was a lawyer, or they were not. In essence, you took advice from someone who was not a lawyer, as opposed to the advice from those who were lawyers, which you were paying for. You took the HR person’s advice-non-legally qualified advice-based on discussions with the other party. Could it possibly be the case that the other party was trying to push their claim more than they might be able to substantiate? It would not be an alien concept for a litigation party, their partner from the other side, to be trying to push the boundaries of what they might claim.

Richard Alderman: There were various areas where they pushed, and we rejected them. We were not prepared to make the payments that they were looking for, so we pushed back on that and refused to pay. On this one, my view was that they would have succeeded in an employment tribunal.

Q59 Nick Smith: Mr Alderman, you said that in your last year the organisation was under some stress. Yesterday we were shown a response to a freedom of information request about your travel for your last year in office. According to the information we received, you in your last year you had 12 trips overseas for 52 days. Roughly one day a week, 20% of your time was overseas on one trip or another, 12 in total.

Richard Alderman: Yes.

Q60 Nick Smith: Do you have international obligations as part of your job for all those trips?

Richard Alderman: First, the trips that I picked up were partly my trips, but also I was covering for the people who had left the organisation. In the past, if you looked at the pattern of my foreign travelling for about the first three years, you would see that I probably did about three or four trips a year.

Nick Smith: Hold on a second. The year before you did six, actually.

Richard Alderman: Right, fine. In my last year, I had lost my general counsel who had done a lot of this foreign travelling. I had lost my head of anti-corruption and various other people who also did a lot of this foreign travelling. We were trying to talk to people in a number of countries about the Bribery Act and about the approach of the UK to that Act. There was a lot of demand and interest in that. If I had still had my general counsel and my other people, I would have done a fraction of that travelling. Since they had left for various reasons to do with the fact that they did not think that the SFO had a future, I had to pick all of that up. It was a real problem. In this day and age of communications, it is possible to keep in touch with the office, as I did, when you are in other places.

Q61 Chair: But Mr Alderman, your chief executive was sitting up in the Lake district. More than 20% of your time-if you have regard to holiday and other things a quarter of your time-was abroad talking to people about legislation. Is that really a way to lead an organisation?

Richard Alderman: If you look at the figures, a quarter of my time was not spent in overseas travel.

Chair: 52 days.

Nick Smith: 52 days. Take off your holiday-

Richard Alderman: No. It was less time than that. Of course, don’t forget that a lot of that was over weekends. In terms of whether it was the right way for a senior management team: no, because we were too thin. One of my regrets-

Q62 Nick Smith: Can I just stop you? You say you were too thin, some senior people had left, but you chose to go out of the country and travel around the world.

Richard Alderman: Because that was what was needed on the Bribery Act. I thought there was cover in the SFO. Indeed, we had a number of other people there to keep going.

Q63 Nick Smith: Can you please list the places you went?

Richard Alderman: I was asked by the Foreign Office to go to China and the Philippines. I was a member of the executive committee of an association of anti-corruption authorities and I had a trip to China and one to Tanzania over a weekend for them.

Q64 Nick Smith: And the other eight trips?

Richard Alderman: Eight trips?

Nick Smith: There were 12 altogether in the last year. Where were the other eight places?

Richard Alderman: I went to Paris for meetings of the OECD. I can’t remember off-hand some of the other ones.

Nick Smith: I’m not surprised, whizzing around the globe like that.

Q65 Mr Jackson: Coming back to the circumstances surrounding the exit of these individuals, faced with the decision about the severance payments, which is obviously contentious, was an option sought via an HR specialist or an employment lawyer to reconfigure the office, essentially to place the individuals in alternative jobs?

Richard Alderman: They had eight or nine months to look for other jobs. They were told by the Attorney General’s Office and the Treasury Solicitor’s Office in the summer that they could stay on for a month or two, then they were expected to clear their desks and leave. So they had about eight or nine months’ notice that they had to find something. They both had extensive networks in different parts of Whitehall and elsewhere, but they were unable to find anything, and I could not see anything in the Departments I know anything about. That is not surprising, because the senior civil service is slimming down at an unprecedented rate. There are not the opportunities. So there was nothing else for them.

Q66 Mr Jackson: Did you conclude at the time that their roles and responsibilities were redundant, and that effectively their jobs had disappeared? That is crucial to a value judgment on constructive dismissal.

Richard Alderman: Their jobs had changed. My view was that the new director would probably not want to continue with those roles.

Q67 Chair: Why didn’t you talk to him? There you are, sitting with a chair between you-you could have talked to each other. Why didn’t you? You are very good at picking up the phone, Mr Alderman, but you didn’t pick up the phone to the key person, your successor.

Richard Alderman: Because Mr Green was appointed in December, and a lot of the discussions about their roles took place the previous summer.

Q68 Mr Jackson: My final point is, did the controversy and ongoing debate about whistleblowing have no bearing on the future of their employment prospects?

Richard Alderman: None at all.

Mr Jackson: Categorically?

Richard Alderman: Categorically.

Q69 Chair: I want to follow on from that. Were they, in effect, dismissed? And was this, in fact, a disguised dismissal to just ensure that they got more money?

Richard Alderman: No. They were terminating their civil service careers 10 years early, but it had nothing whatsoever to do with the whistleblowing allegations.

Q70 Chair: No, but were they, in effect, being dismissed, ns rather than dismiss them you made them redundant? Of course, you hung on until after they were 50, so they qualified for a better pension deal.

Richard Alderman: I am not sure that is exactly right on the figures, according to Mr Hurdle’s report.

Chair: I think it is. That is where I picked it up from.

Richard Alderman: He said it didn’t actually make much difference.

Q71 Chair: Were they being dismissed?

Richard Alderman: No, they agreed to an early exit package. Probably, in terms of employment law, that technically means a dismissal, for which the Government would need to produce justification. The Government’s justification would be that jobs are disappearing, things are changing and the civil service is slimming dramatically.

Chair: There might be other issues, to which Stewart Jackson alluded.

Q72 Mr Jackson: You have been pretty categorical about that. My final point, going back to my substantive question, is how long did it take you to conclude that they did not have a future at the SFO? In other words, was there any meaningful attempt to find alternative employment, and how much time did that take? Was it a decision made in a week, or was there an effort over a few months to look at alternative options for them?

Richard Alderman: If they could have found something between the summer, when they were given the messages, and the time when they signed the agreement, which was some time in the first quarter of 2012, they would have gone for those other opportunities. But there was nothing. It is not surprising, with the civil service slimming down so much, that they could not find anything. I certainly was not aware of anything they could do in another Department.

Q73 Chair: Mr Green, just out of interest, have you appointed a chief executive officer?

David Green: No.

Q74 Chair: Have you appointed a chief capability officer?

David Green: No.

Q75 Chair: And have you appointed a head of technology and specialist services?

David Green: We have a head of IT, yes.

Q76 Chair: So you have restructured?

David Green: I have completely restructured.

Q77 Chair: We have a busy morning. Mr Alderman, did you read "Managing Public Money"?

Richard Alderman: When I first became an accounting officer, I was sent a copy of it. Actually, it was not immediately on my appointment, but the Treasury sent me a copy of it some months after I was appointed, and I read it.

Q78 Chair: Okay. I think if the Treasury were here they would say that they sent it straight away. We are pretty insistent that accounting officers understand their responsibilities. In that, you would have seen that it is necessary to get relevant approvals to any redundancy agreements you make. I just want to draw that to your attention.

Richard Alderman: Certainly, if there were any failures in respect of the Whitehall processes on the finance, then, yes, the Committee has my apology. We needed to improve on what we were doing on finance. That was something that Alex Allan said to me, and I immediately brought in an interim SCS finance manager in order to help and to scope out what was needed so that Mr Green could be advised on what was needed. In terms of any problems about finance, yes, they are my responsibility and I apologise.

Q79 Chair: You are in fact apologising for having reached agreements that were beyond-

Richard Alderman: No, I am not.

Chair: Well, they are financial.

Richard Alderman: Indeed, but I have given my explanation for why I did what I did. If I should have gone to the Treasury for approval for the £5,000-I wouldn’t have done it if we were negotiating in respect of court, but if I should have done it in those circumstances and gone to the Treasury for the £5,000-

Chair: £15,000.

Richard Alderman: No, for the £5,000. That was the original decision: £5,000.

Chair: £15,000.

Richard Alderman: It went up to £15,000 right at the end, but the initial claim-

Chair: But you authorised the £15,000.

Richard Alderman: I authorised £5,000, on the basis that that was for me-

Chair: It was £15,000.

Richard Alderman: It then went up to £15,000 because of two further issues.

Q80 Mr Jackson: They said £5,000 and you said, "That’s not enough, let’s do £15,000"?

Richard Alderman: No, that is not what happened. Issue 1 was one that we were talking about, where I agreed £5,000 and they would have been seeking significantly more. That was the only issue on the table at that time. Later on, issues 2 and 3 came to light, as the note explains, and they said that they wanted to settle those issues before they left as well. That is when I agreed that I would increase it to £15,000.

Q81 Mr Jackson: What were issues 2 and 3?

Richard Alderman: It is all set out in the note that I have done. It was in respect of malicious allegations that were being made and various other things.

Q82 Mr Bacon: By whom and about whom?

Richard Alderman: Sorry?

Mr Bacon: You said there were malicious allegations being made. By whom and about whom?

Richard Alderman: Issue two relates to some malicious allegations that were being made by some members of staff about a particular issue. It is all set out in the note, and that will be available to the Committee. There are names mentioned. As a retired civil servant I am not able to release these documents, particularly thinking about the disclosure of names. That is a civil service matter and I am out of the civil service.

Q83 Chair: Mr Green, the Treasury has not authorised the payment of the £15,000. That is my understanding.

David Green: No.

Q84 Chair: So what are you doing now?

David Green: That is the problem. In relation to Mr Bailes, who had an agreement that he was entitled to, amongst other things, a £15,000 payment, I took legal advice that said it was an enforceable contract. When we asked the Treasury for permission to make that payment upon Mr Bailes’s departure at the end of December, it declined permission because it was an irregular payment. I am therefore in this position: I am the head of the prosecuting authority, the Serious Fraud Office; having had legal advice saying that a contract is enforceable, am I actually to say to Mr Bailes, "You can’t have it; sue me," and then pay it, thus occasioning more expense?

Q85 Mr Bacon: That would be in the time-honoured traditions of your profession. You would then have £200,000 more in legal fees spread around the system.

David Green: Mr Bacon, that is a very good line, but with great respect I am not sure that is the right way for a public authority to behave.

Q86 Chair: So what are you going to do?

David Green: I welcome any advice the Committee might feel able to give. I will have to think about it.

Q87 Chair: Get the money out of Mr Alderman. Mr Alderman, can I ask you some other questions, because you refer to them? First, on the use of the two consultants, PA Consulting and Corven: did you receive any benefit in kind from either of those consultants during your time?

Richard Alderman: I received nothing from PA Consulting; the only benefit I received from Corven was a ham sandwich, consisting of two slices of white bread, a piece of ham and no lettuce.

Q88 Chair: Did Phillippa Williamson, Ian McCall or Christian Bailes receive any benefit in kind at all from either of those two consultants?

Richard Alderman: No.

Q89 Chair: Did either you or they have any relatives employed through an agency working in the SFO?

Richard Alderman: No.

Q90 Chair: Are you sure?

Richard Alderman: I have no relatives working for the SFO.

Q91 Chair: Not now. During your time there, did either you, or Phillippa Williamson or Christian Bailes or Ian McCall have a relative working in the SFO, directly or perhaps through an agency?

Richard Alderman: I think Ian McCall’s daughter came to us for a short while through an agency, but she was recruited in the normal way-through an agency.

Q92 Chair: Do you think that that was appropriate and proper, given the nature of the organisation that you were running?

Richard Alderman: I heard about one or two of these-

Q93 Chair: One or two?

Richard Alderman: I think that the sister of a former head of IT was recruited through an agency, but I think she started after the head of IT had left. When I heard about it, no, I was not satisfied.

Q94 Chair: What action did you take?

Richard Alderman: I told people that this was not something that I wanted to see.

Q95 Chair: Did you make sure that they left the premises-did you sack them?

Richard Alderman: I think that I heard about some of this after the event. And these people were only with us for a short time. It was not something that I wanted to see.

Q96 Mr Bacon: Just a couple of quick points for clarification, Mr Alderman, if I may. On Beachcroft, you said in your note, "I asked what advice our private sector lawyers Beachcrofts were giving to us." The "I asked" in that is you asking your HR person-is that right?

Richard Alderman: I did.

Q97 Mr Bacon: Okay. "I was informed that their advice was that we could deny liability"-that is, you were advised by your HR person that Beachcroft’s advice was that you could deny liability-"and take the cases to litigation if we wanted." So, once again, it was your HR person responding to your question.

Richard Alderman: He did.

Q98 Mr Bacon: Did you see, and read, Beachcroft’s advice?

Richard Alderman: No. That is what I was told.

Q99 Mr Bacon: So Mr Barclay was absolutely correct when he said that you relied on a non-lawyer, an HR person’s interpretation of what your lawyers, Beachcroft, had said-as Mr Jackson pointed out, you paid for that with public money-without reading the legal advice yourself. That is correct, isn’t it? Yes? You did not read the legal advice yourself?

Richard Alderman: The legal advice-

Mr Bacon: Did you read it?

Richard Alderman: The legal advice-

Mr Bacon: Did you read it?

Richard Alderman: The legal advice was not on-

Mr Bacon: Mr Alderman, I am not asking what the advice was on. With respect, I am asking you a very simple question: did you read it?

Richard Alderman: No, I did not read the legal advice-

Mr Bacon: Thank you. That is the answer to my question-

Richard Alderman: Because it did not cover all the issues-

Q100 Mr Bacon: Thank you. I wanted the answer to my question, and you have given that: you did not read the legal advice. You go on to say: "Against this I had to balance the fact that very experienced lawyers for Ms Williamson and Mr Bailes were supporting them in these claims." When I read that, I must admit that I thought surely the interesting things there would be the facts and the law, but it turns out that you did not read the legal advice.

Three more questions. How many senior civil servants left the SFO between your appointment and March 2010?

Richard Alderman: The SFO would know the numbers for that. There were quite a number of SCS people-

Mr Bacon: How many?

Richard Alderman: I don’t know. I am no longer in the SFO, so I don’t have access to-

Mr Bacon: But you were there when they left. Between your appointment and their departure, how many?

Richard Alderman: Probably eight or nine or 10, but I don’t know. It would be a matter of record for the SFO.

Q101 Mr Bacon: How many of them had confidentiality clauses in their termination agreements?

Richard Alderman: I don’t know.

Mr Bacon: You don’t know?

Richard Alderman: Nope.

Q102 Mr Bacon: Are you aware whether any of them had confidentiality clauses in their termination agreements?

Richard Alderman: No idea.

Q103 Mr Bacon: Did you seek confidentiality clauses to be included?

Richard Alderman: Nope.

Mr Bacon: You didn’t?

Richard Alderman: Nope. This was left-

Q104 Mr Bacon: Was that because you left it all to your HR person?

Richard Alderman: To the HR team, yes.

Q105 Mr Bacon: So you didn’t have a conversation on a park bench in St James’s Park where you said, "For Christ’s sake, make sure there are confidentiality clauses," or anything like that?

Richard Alderman: Nope.

Q106 Mr Bacon: So you know nothing about whether there were or were not confidentiality clauses?

Richard Alderman: I don’t know whether-

Q107 Mr Bacon: Presumably, it is a matter of record whether there were or were not confidentiality clauses?

Richard Alderman: Yes.

Q108 Mr Bacon: That is presumably something that we can look into further. Mr Green, would you perhaps be able to help us with that?

David Green: Certainly.

Q109 Mr Bacon: Okay, good. Perhaps you can let us have a note in due course via the National Audit Office. Could you let us know who they were-Mr Green, it may be more helpful if you do this, as Mr Alderman is no longer there and he doesn’t seem to remember much about it.

David Green: Of course.

Q110 Mr Bacon: Could you let us know who they were, their names, the basis for departure in each case and also the cost of their departures, including any enhancements to pensions and other payments?

Finally, Mr Alderman, were some of these people who left replaced during your tenure?

Richard Alderman: Some of them, yes.

Q111 Mr Bacon: Were they recruited according to the requirements of open and fair competition?

Richard Alderman: Yes.

Q112 Mr Bacon: Not simply by direct appointment?

Richard Alderman: No, there were some open competitions in the normal civil service way and there were also expressions of interest within the SFO.

Q113 Mr Bacon: So it wasn’t all through open and fair competition; some of it was, as it were, internal.

Richard Alderman: It was all open and fair competition, but some of it was restricted to the SFO. I did not have the money to just go out and bring in new people and pay them salaries. It was a mixture of both.

Q114 Mr Bacon: I am not quite sure what the "both" is that we are talking about. You said that they were all open and fair, but some of them were restricted. Restricted sounds to me like the antonym of open and fair.

Richard Alderman: They were open and fair, but the target audience could have been more restricted. In some cases, I think it was restricted to the SFO and we did expressions of interest and interviews-that sort of thing. In some cases, we actually did adverts in the newspapers, so it would have been open to a much wider range of people.

Mr Bacon: Okay. We will await further details from Mr Green.

Q115 Chair: Very finally, before we get to Austin-sorry Austin, it is my fault.

Amyas Morse: Can you confirm whether Phillippa Williamson was appointed through a competitive competition?

Richard Alderman: It was a managed move within the civil service back in 2008. I think that later there was a process managed by my then No. 2, but I cannot remember the details.

David Green: There is an important detail here. Phillippa Williamson was promoted, apparently, from SCS1 to SCS2, and we have been unable to find any evidence of the circumstances of that promotion and consequent pay rise.

Q116 Chair: Is she an old friend of yours?

Richard Alderman: Nope. She had worked with me in the Revenue and she was an exceptionally talented civil servant-

Chair: So she is an old friend of yours.

Richard Alderman: That’s why I thought that, in view of the problems in the SFO, that was the sort of approach I needed.

Chair: It is shocking, just shocking. It is against every principle of how public service organisations should operate. It is so against the ethos that we around this table all share about serving-serving-in the public sector.

Q117 Austin Mitchell: It looks to me, from the outside, like this is an organisation run by lawyers for lawyers and the prolongation of their perks and predilection for easy money. I was therefore interested in what The Times said on Monday:

"An investigation by The Times has found that senior figures at the agency"-under your period, Mr Alderman-"were accused of fostering a culture in which favourites and family members were allegedly given plum jobs and expensive management consultants were used in breach of government rules.

"Executives were also accused of accepting expensive free gifts from the consultants, including, on one occasion, a luxury spa weekend"-wahoo!-"worth more than £1,000, confidential documents reveal." Is that a fair characterisation of the way the place was run?

Richard Alderman: Mr Mitchell, if you read further down that article, you will see that the journalist says that these issues were investigated and were found to be incorrect and without substance.

Q118 Austin Mitchell: It says that, but did those things actually happen?

Richard Alderman: No, not at all.

Q119 Austin Mitchell: So none of those allegations were true?

Richard Alderman: That’s right, none of them were true. The journalist makes it clear in that article that the investigation into those issues found that there was no substance in them.

Q120 Austin Mitchell: Okay, so there wasn’t a £1,000 luxury spa weekend.

Richard Alderman: No.

Q121 Austin Mitchell: Let me turn to Mr Green, who has had a quiet time this morning. We have had a memo from the PCS, which says:

"We have serious concerns about payments made to senior officials regarding bonuses and compromise agreements as well as other governance matters. PCS raised concerns about these payments with the new Director"-that’s you-"back in April 2012"-when you were appointed-"to which a response has never been received. We are concerned that the payments to senior officials-including the former Chief Executive-which were yet to be made-were highlighted by us to the incoming Director and a suggestion made to him that these payments were deferred pending a review. The Director did not respond or explain why he chose to ignore this opportunity to stop the payments."

It goes on, without saying that this has been investigated and proved to be false: "We are also concerned that money has been wasted on office refurbishments and away days for senior staff" and "The findings of the staff survey released in December continued to show the SFO as an employer"-this is now, in your period-"rife with bullying and harassment of staff and general low morale. The survey results keep the SFO towards the bottom of the civil service staff survey results table." It looks like you have ignored their suggestions and not improved matters.

David Green: I think I ought to make absolutely clear what I have done about the allegations contained in that letter since I came to office-sunlight being the best disinfectant. As soon as I heard about the circumstances of these departures, I informed the Attorney-General’s office on 17 May. I spoke to the Treasury Solicitor, who eventually agreed to the appointment of Tim Hurdle to do a full investigation. I arranged for Treasury Solicitors to brief senior leading counsel to advise me on whether I could prevent the payments. I carried out my own inquiries by e-mail with Mr Alderman to try to elicit the facts. I sought an explanation from him and made full disclosure in our accounts published on 1 November. There was a written ministerial statement on 4 December. With great respect, Mr Mitchell, what else should I have done?

Chair: I am going to draw this to a close, because we are going off the end. Thank you very much indeed. We will be issuing a report shortly.

Q122 Stephen Barclay: Just one question to the Treasury. What we have heard from the witnesses is about payments being made without Treasury sign-off and what we heard from Sir David Nicholson yesterday was about compromise agreements, such as the one to Gary Walker, being made without Treasury sign-off. Sir David used the phrase "a judicial mediation process". Could we have an urgent note from the Treasury to the Committee on how many payments have been made through judicial mediation processes and how you are assessing bodies within both the NHS and the SFO in terms of payments being made that are not being signed off by the Treasury? What is your mechanism for making that assessment? Can we set a time scale as a Committee for receiving that note?

Chair: What is reasonable? Two weeks?

Stephen Barclay: A week.

Marius Gallaher: We will certainly provide that information, if we have got it to hand, but we do not always know about these cases if they have not come to us.

Stephen Barclay: One would hope that if, as potentially is the case, this is a way around the Treasury’s own controls, the Treasury will be keen to investigate that. Also, if that is the case, there would be very few such cases and therefore there would not be too many to investigate.

Chair: I would hope that there are very few. Mr Green will have to seek that £15,000-the three or four who got it; however many got it-from somewhere else, outside Government. Thank you very much indeed.

Prepared 11th March 2013