Private Eye 1240
Private Eye 1240 28
TAX AVOIDANCE
Taking the Michael
THE chairman of the Audit Commission - motto "protecting the public purse" - has
himself short-changed the public purse by millions of pounds through an
elaborate tax avoidance scheme, Private Eye can reveal.
Michael O'Higgins (pictured) - [ ex
http://www.guardian.co.uk/publicservicesawards/judge-michael-ohiggins ] was appointed to one of the most senior positions
guarding taxpayers' money in 2006 after 10 years as managing partner at the
management consultancy, PA Consulting. He ran the public services, which earns a
fortune advising on everything from health services to ID cards.
In 1999 his firm received a call from Bill Field, a tax avoidance specialist
with accountancy firm Ernst & Young who had a cunning plan for all PA staff to
dodge tax on their substantial annual bonuses. The call would lead to an
intricate tax avoidance scheme that has only now been exposed in a tax tribunal.
"The proposal," explained the tribunal, "was to re-route bonuses awarded to
employees so that they were paid as dividends" (which would be taxed more
lightly). But the greedy tax dodgers also wanted the payments tax deductible for
PA Holdings Ltd so they would slash its tax bill too, which ruled out simply
paying dividends from the company.
Field came up with a ruse to pull off a double whammy. At the end of 1999, PA
made a tax-deductible payment of £24m to a Jersey trust, Mourant, which then
handed the money to a Jersey-registered but British tax-resident company called
Ellastone Ltd. In return Mourant took shares in Ellastone; and in March 2000
awarded them to deserving PA employees who immediately became entitled to
dividends that happily equated to their bonuses. The wheeze earned Ernst & Young
a tidy £355,000, plus unspecified further payments when the scheme was repeated
in the following two years.
The taxman insisted that for all the scheme's
cleverness, the payments to PA staff should still have been subject to PAYE like
any other bonuses. As HM Revenue & Customs' QC Malcolm Gammie put it:
"Assume that North, East, South and West enter a room and sit at a table. North
(the employer) holds cash that he has already said he will share (as an annual
bonus) with West (his employee). The common understanding and intention of all
concerned is that North will hand the cash to East, East will hand the cash to
South and South will hand the cash to West. If the question is asked, has North
paid West his annual cash bonus, the answer is quite clearly yes ... The answer
does not change just because North produces a pack of cards so that the cash can
pass from North to East to South to West under the cover of a card game ... This
was effectively the 'game' that was played by the Appellant (North), the
Trustees (East), Ellastone (South) and employees (West)."
Alas, the tribunal did not agree, allowing the PA consultants to avoid tax on
the strict letter of the law. O'Higgins admitted to the Eye that his own
bonuses, much of them earned from the taxpayer in the first place, were
funnelled through the scheme. Over three years the sum is likely to have run
into millions. And that is not the limit of his raid on the public purse that he
now protects.
While O'Higgins was a managing partner, the tribunal found that "PA went out of
its way to 'sell' the arrangements to employees". He would also sit on the board
of the company behind the scheme, PA Holdings Ltd, for two years while it
disputed it with HMRC.
All of which sits a little oddly with O'Higgins' other taxpayer-funded job as
non-executive director of the Treasury, "shaping the vision, strategy and
priority" of that department - which perhaps ought not to include big-time tax
avoidance.
DEFENCE
Debt knell
• S EXPERTS draw up lists of defence il'aprojects to scrap in order to fIll the
multiibillion-pound black hole that is the Ministry of Defence, officials are
quietly pressing on with the planned £12bn privatisation of military training
even though they know it's unaffordable.
More than two years ago the then armed forces minister Des Browne admitted he
was privatising defence training because the up-front investment needed could
only be met if it was kept off-balance sheet by using the private finance
initiative (even though PFI costs more in the long run - see Eye 1177). This
meant that companies had to buy the buildings and rent them back to the MoD,
complete with the training of soldiers, sailors and air crew.
A read-out from an MoD meeting seen by the Eye now reveals that the project is
looking unaffordable precisely because it is a PFI deal. "Currently there is a
£1.3bn affordability issue in the programme," an official reports. "The problem
is borrowing money at a reasonable rate for PFI." The amount needed can't be met
from the £2bn "infrastructure fund" the government has already agreed to lend to
struggling PFI deals, as this is largely earmarked for schools and hospitals.
The deal, due to kick off next autumn, isn't helped by trouble with one area of
military training that is to be brought in but is already privatised: naval
training at HMS Sultan. Essential information from there can't be obtained "due
to their ongoing political issue with [private consortium] VT Flagship". Not
surprisingly the official reports gloomily: "Currently planned programme will be
hard to achieve."
But the MoD is determined to press ahead, going back to parliament for approval
for a further
£44m in "pre-contract allocation" to cover the escalating costs of the Metrix
consortium (QinetiQ, Sodexo, Raytheon, EDS and others), without which "Mx [Metrix]
could walk away, although it is anticipated that they will not". Very
encouraging .
• REVOLVING DOORS: With weapons spending under pressure, arms firms need all the
lobbying help they can get - which is why Italian arms giant Finmeccanica gave
not one but two jobs to one of the MoD's top buyers.
David Gould, former chief operating officer for equipment at the MoD, started
working for military electronics firm Selex last November and for military
consulting firm Vega this May. Finmeccanica owns both. The advisory committee on
business appointments recommended Gould be barred from lobbying for 12 months.
Unusually, one member dissented, presumably in favour of greater restrictions,
reflecting sensitivity about the revolving door between the MoD and the arms
trade.
Selex provides electronics for the Eurofighter and Joint Strike Fighter, both
expensive "multi-role" jets. Meanwhile, Vega supplies IT systems manageement for
the MoD.
iI GONGS UPDATE: The birthday honours last month threw the spotlight on Fujitsu,
part of the Atlas consortium supplying the MoD with a multipound computer
network. The system is nearly two years late and not fully working ... but this
didn't stop Mike Newman, boss of Fujitsu's defence unit, getting an OBE "for
services to the Ministry of Defence".
Arms firm EADS Defences & Security Systems Ltd is also involved in Atlas, and
chief executive Leonard Tyler also got an OBE. EADS is also working on the "FireControl"
system to replace regional 999 offices with big centralised, computerised
emergency call centres. FireControl is also very late and very expensive,
threatening the budget needed for firefighters and fire engines.
CHARITY SPENDING
Chal'npagne suppelr Novas
WHILE they were running out of cash to run hostels for the homeless, bosses at
national social care charity the Novas Scarman Group (NSG) were splashing their
funds on decorative woodwork and trips to Paris Fashion Week.
Nine months after a Housing Corporation inquiry was launched into NSG's alleged
misuse of public funds and financial mismanagement, the group finally admitted
in June that it was indeed in trouble, issuing an "unreserved apology" for its
"failure to manage elements of the finances".
Novas's founder and chief executive Michael Wake took redundancy in May,
accepting an £80,000 pay-off for his role in the debacle. Wake, who had been on
gardening leave in Malaysia since January, was not the only one: executive
director Matthew Pike swiftly followed with £32,000 redundancy. The entire board
of directors has also been replaced since November, mostly at the insistence of
the Housing Corporation's successor, the Tenant Services Authority (TSA). NSG
said the management had been "restructured" because it was "too complex and
top-heavy" .
Details of the award-winning charity's fall from grace are still emerging ahead
of the inquiry's final report, expected within weeks. But to some extent NSG
fell victim to its own hype
- investing heavily in ill-judged commercial enterprises and loss-making art
galleries in pursuit of "releasing enterprise and cultural expression ".
Arts director Erwina Aghafar is one of several managers criticised for taking
frequent trips abroad to purchase art for NSG galleries and "forge cultural
links". Ms Aghafar made at least three company trips to Malaysia in the past two
years, spending £60,000 on an "Oriental kitchen", shipped back for NSG's £13.8m
Contemporary Urban Centre in Liverpool. Thousands were also spent on decorative
woodwork for the centre and a £260,000 Chinese theatre, also in Liverpool, which
closed within months of its 2007 opening due to lack of use.
Rough Sleepers was a "haute-couture boutique with a conscience" in Camden,
London, designed by Japanese artist Sonoko Obuchi to look like a giant shopping
trolley and envisaged to raise money for the socially disadvantaged. Despite
non-existent sales, its managers enjoyed several jaunts to Paris Fashion Week
"for networking purposes" on the company credit card. It closed in February 2008
with heavy losses.
Around the same time, reports began to emerge of inadequate levels of care in
some Novas hostels. Elderly residents in Arlington House, also in Camden,
complained of being without heating for weeks. NSG denies this, though it admits
staff numbers were cut from 800 to 380 in the last four years as the group sold
off all its 16 hostels, bar one in Kent that awaits sale.
For years, the true extent of Novas's problems was obscured by the group's
extensive property and social housing portfolio. The group reported operating
losses of £277,700 in the financial year 2006-07 - before Novas merged with
Scarman Trust and Path National and accumulated their debts in December 2007.
The same year, however, it sold assets worth £2.3m.
Novas Scarman Group has still not filed accounts for 2007-08 but two subsidiary
companies, Novas Social Enterprises and Path National, revealed losses
of£501,914 and £276,365 respectively over that period. Path National's accounts
include a cash loan from NSG of £595,000.
Even when government inspectors were at the door last October, the charity
claimed: "NSG has a robust balance sheet, with assets of over £40m with no loans
against these."
Private Eye 1240 30
FOSTER CARE
Put it down to Happen stance ....•
••• "THE record numbers of children being "'" taken into care in the wake of the
Baby P scandal and a chronic shortage of foster carers, one might have expected
that those who take in needy, often damaged, children would be valued and
respected. But not if the case of Christine and Tony Peters* is anything to go
by.
First, they learned that their own children and foster children in their care
had been put at risk when a teenage boy with a history of sexual abuse had twice
been placed in respite care with them. His unhappy history was not revealed to
them by the fostering agency Happen Fostercare Ltd, or by Northamptonshire
council.
Then, when the couple complained formally to the local authority, instead of
receiving help to deal with a traumatic and potentially damaging situation, they
were subjected to an investigation triggered by Happen Fostercare into their
suitability as foster carers. Christine Peters was subsequently falsely labelled
a "questionable foster carer with odd and distorted opinions" and "vexatious",
while Happen went on to receive an "outstanding" inspection report - and has
since been sold on.
In a scathing attack on the care regulators, the couple's MP, James Plaskitt,
later told the Commons it was nothing but an attempt to discredit the couple in
order to cover up professional failures. "First they were subject to
incompetence, then to intimidation, and then they were let down by the
inspecting organisation to which they turned."
That was five years ago. However, despite the then children's minister, Margaret
Hodge, acknowledging that the handling of the couple's complaint "had not been
good enough", their continuing attempts to bring to account those running Happen
at the time, and those behind the efforts to discredit them, have failed; as
have their attempts to have false allegations against them removed from local
authority and regulatory records.
Mr Plaskitt, MP for Warwick and Leamington, has been forced to enter the battle
on their behalf again, this time asking Ofsted, the new regulatory body, to
intervene. He told the Eye: "This couple have been subjected to a grave
injustice, which persistent institutional failure has failed to rectifY."
It started back in 2002, when the couple leamed (from another foster carer) that
a 13 year old who had been placed with them had been abused and was himself the
subject of concerns about sexualised behaviour with other children. The couple
were concerned for their own four small children and other children in their
care at the time, in particular a 12 year old who had been out bike riding with
the boy.
Mrs Peters raised the matter with the agency; and on advice from the Fostering
Network, which supports foster-carers, subsequently made a formal complaint to
the county council. It transpired that the boy's social worker had noted on his
referral records to the agency that he had been abused by a neighbour, a known
paedophile, but there was no further detail and none was requested by Happen.
Had Christine and Tony Peters been told of the boy's history, they would not
have taken him in. But why
would an authority and an agency place such a child with a family of young
children in the first place? Northamptonshire carried out its investigation and
subsequently apologised to the Peters for its failings, an apology the couple
were happy to accept.
Happen Fostercare, it seems, went into denial.
The day after it received a copy of the complaint, it sent two members of staff
to visit the Peters. This was not to offer practical support or to discuss any
issues of "harm" that may have arisen out of the teenager's contact with their
own children and the foster child who had contact with him. Instead they gave
the couple an agenda of "concerns" about their suitability as carers,
questioning their commitment and ability to cope. They were dumbstruck.
Happen also disseminated its concerns to local authorities forcing the couple to
withdraw from the agency. In the meantime it had also appointed an "independent"
social worker, Tony Williams, of Williams Ross consultancy, to review the
Peters' registration as foster carers. He never met the couple because
the review was abandoned when they left the agency - but he was still to playa
crucial part in events to come.
The Peters decided to make a formal grievance about Happen Fostercare's
treatment ofthem to the National Care Standards Commission (NCSC). They added a
further complaint about the agency after learning that, before obtaining a
criminal records check, it had employed a male support worker who turned out to
have been under investigation for watching porn and smoking dope with children.
It was to take two years and three subsequent reviews to finally get both
complaints upheld. The first report by the NCSC focused on Happen's concerns
about the foster carers (which only surfaced after the couple had complained);
the second rectified some inaccuracies in the first and partially upheld the
complaints - but then suggested Mrs Peters was partly to blame for the
overzealous manner in which she had pursued her complaints.
The Peters subsequently learned that the NCSC had received and depended on three
reports which were critical of them. Two were from people brought in and paid by
Happen to investigate, including Mr Williams, who although he had never met the
couple was still happy to pass on his "impressions" ofthem; questioning, among
other things, if the time spent pursuing their complaints could affect the day
to day care of the children in their care. The third was Tony Puliafito, then
commissioning officer for Warwickshire county council, which also used Happen.
He had never spoken to the couple, let alone met them, before he wrote that he
shared Happen's concerns. He was forced to retract fully his comments to the
NCSC
and apologise to the Peters after they complained to the ombudsman.
The many letters from social workers and others praising the couple's
"dedication" and "genuine commitment" to the children in their care were largely
ignored - as indeed was the devastating impact on the couple of the lack of
support for what they had been through and the subsequent attacks on their
suitability as carers. And little attention was paid to the potentially
disastrous placement in their home of a teenage boy with a history of sexual
abuse.
It was not until a third and final review, in March 2004, which was highly
critical of how the couple had been treated, that their complaints against
Happen were finally upheld. The report concluded that Happen's agenda of
concerns about the Peters "were manipulated" after the placement of the abused
child with them and that "considerable efforts were made to discredit the foster
carers' competence and reliability with the placing authorities, which could
have damaged their future careers." It said there had been too little emphasis
on the agency's failings and far too little focus on the fitness of the Happen's
then proprietors, Carol and Brian Henderson.
Armed with this report in the Commons, Mr Plaskitt accused the regulator of
"very serious failures". Finally the Peters believed that action would be taken
and their reputations restored. How wrong they were.
The regulatory body, by now the Commission for Social Care Inspection, (CSCI)
instead carried out an internal review of the way the couple's complaints had
been handled. It reported in 2006 and for the Peters it was back to square one.
It questioned the "tone, balance, objectivity" of the third report, and
concluded the complaints process had had a detrimental impact on those running
Happen Fostercare - never mind the Peters or the children at the centre of the
affair. Plaskitt said this was a shameful attempt to vindicate itself and turn
the onus back on to the Peters. The CSCI had reintroduced factual inaccuracies
about what the agency had been told about both the abused child, and over the
employment status of the support worker.
Amazingly the experience has not turned the couple away from fostering, but
their frustration at the way they have been treated has forced them to pursue
complaints through every channel they can. After the internal review, they even
took their file to the police, who in turn took it back to the regulators.
Their final push had been through Ofsted, which is now responsible for
regulating child care. But Christine Gilbert, its chief, has said that while she
is 'sympathetic' to the couple, there is nothing Ofsted can now do. That is not
accepted by Mr Plaskitt, who believes that at the very least Ofsted can issue a
public apology to the Peters and order that all untrue and damaging statements
about them be corrected on local authority and fostering records. He is waiting
for a response. "At a time when the need for good foster care has never been
greater, no one can afford to treat dedicated carers so shabbily," he said. *
The names o/the/oster carers have been changed to protect the identity 0/ the
children involved.
CONTAMINATED BLOOD
Widows pique
IN THE row following the government's contemptuous response to the Archer
inquiry's demands for better compensation for haemophiliacs condemned to death
or prootracted illness from the use of contaminated blood products, one set of
victims was forgotten.
They are the 230 widows whose lives were ruined by what was described as "the
worst treatment scandal in NHS history" when their husbands died from liver
cancers and cirrhosis caused by hepatitis infection - and who have never
qualified for a penny in "discretionary" payments.
Unlike the widows of those infected with HI\!, who qualify for payments from the
Macfarlane and Eileen Trusts, the widows of those with Hep C rely on the Skipton
Fund, which only makes payments to widows whose husbands had already applied for
assistance before their death.
Lord Archer had demanded much larger payouts for hardship caused to all 3,000
surviving haemophiliacs as well as widows and dependants. Around 4,800
haemophiliacs were originally infected by the use of contaminated blood products
in the 70s and 80s, much of it imported from prisoners and drug addicts in the
US.
The government's response was to agree to double the £12,800 annual payment to
the 600 with
mv while doing nothing at all for the majority who have Hep C, and whose fate is
equally devastating. Ministers promised only a review of the way the Skipton
Fund operates in 2014.
That may be too late for widows like Harriet Bullock, 75, whose husband suffered
a protracted death from liver failure caused by the Hep C he conntracted from
blood transfusions and clotting treatment after having a tooth removed in 1982.
She was forced to sell the family home to make ends meet.
But then government reaction to the bad blood scandal has always been marked by
delay. Since the Archer inquiry was set up in 2007, another 200 haemophiliacs
have died. How many will be left when the government agrees to compensate them
fairly?
Private Eye 1240 31
It remains a principle of the greatest
importance that, unless there are compelling reasons for doing otherwise, which
will not exist in the generality of cases, there should be public access to
hearings in chambers and information as to what occurred at such hearings."
So said Lord Woolf, then Master of the Rolls
and later to become Lord Chief Justice, in a 1998 Appeal Court ruling. The
following year Woolf emphasised: "It is so important not to forget why
proceedings are required to be subjected to the full glare of a public hearing
... It also maintains 's confidence in the administration of justice. It enables
the public to know that justice is being administered impartially."
Open justice is something much talked about by
judges but increasingly not seen in courts especially where powerful vested
interests are involved who can afford to throw money at obtaining the secrecy
they want - even if that thwarts the public interest, such as in effective City
regulation. All too often, narrow private interest is considered far more
important than the Woolf principles by judge, especially where the
reputations or embarrassment of prominent individuals or companies are
concerned.
The response of High Court judges the
unprecedented, and until the intervention of Private Eye, successful efforts of
leading accountants Ernst & Young to prevent one City regulator, the
beancounters' Joint Disciplinary Scheme, communicating the adverse findings of a
tribunal into the firm's flawed audits at Equitable Life to top regulator, the
Fundamentally Supine Authority, evidenced just how readily Woolf is ignored.
For six months the High Court - at a time
government is under pressure to compensate Equitable pension policyholders for
accepted "maladministration" by its regulators - allowed E&Y to gag the JDS.
This not only vetoed the decision to send the tribunal's findings against the
firm and one of its former partners who had audited Equitable to the FSA, but
also the JDS from even stating that the had reached a decision, or that E& Y was
appealing against that decision.
The JDS was prevented from even admitting that
the E & Y injunction existed, or why it had been made. And the entire
proceedings were cloaked in secrecy. The interim injunction granted to E& Y two
days before Christmas by Mr Justice Flaux gives a whole new meaning to
regulatory capture.
This occurred at a time when the effectiveness
of City regulation in general and that by the FSA in particular had been called
into severe question and ridiculed for its failures over the banks in the run-up
to the credit crisis. But such matters, like the secrecy of the proceedings, did
not seem to bother first Mr Justice Flaux or later Mr Justice Silber, who in
April confirmed that secrecy should continue while giving E& Y permission to
obtain a judicial review of the JDS decision to tell the FSA.
The fact that the JDS was on E&Y's case over Equitable was no secret. It brought
a disciplinary complaint against the firm and two former partners involved in
the Equitable audit - Paul McNamara and Richard Combes, although the case
against Combes was dropped because of ill health - in September 2004 for
producing unqualified audit opinions from 1990 to 2000, failing to understand
Equitable's business and failing to act with independence and objectivity.
Equitable all but collapsed in 2000 after it was faced with a potential
liability of at least £1.5bn.
The tribunal proceedings were suspended in November 2004 pending the outcome of
Equitable's abortive civil claim against its auditors. This ended in 2005 when
the insurers dropped their negligence claim. Throughout, the E&Y public position
has been to deny any negligence or failing in its Equitable audits. So keeping
the bad news of the tribunal's contrary opinion out of the public domain for as
long as possible was clearly job one.
The tribunal's private hearing lasted 66 days over five months in 2007. Its
report was finalised on 9 October 2008, and the following month it decided on
the penalties and costs to be imposed. Both report and penalties will not be
disclosed until after an appeal due in October.
On 9 December the JDS executive committee decided to send a copy of the report
to the FSA, Equitable's regulator, in accordance with rules introduced in 2005.
E&Y was informed of this decision by a letter dated 19 December. The firm
strongly objected.
There were "undoubted present strong public interest considerations in matters
touching the Equitable Life failure," JDS executive committee secretary Matthew
Ives told E&Y's lawyers, Mayer Brown International, on 22 December. He repeated
this on 23 December. "The present public interest importance of matters
involving Equitable Life and the FSA's role as regulator both before and after
2001 were the overriding factors which lead the committee to detennine that the
report should be sent."
But E& V's lawyers insisted that the public interest in Equitable was "an
irrelevant consideration" and that sending the report to the FSA amounted to
publication before any appeal and so was against the JDS's own rules. The JDS
agreed to delay sending the report for further discussion, but that same day E&Y
went to court.
Despite the JDS's objections that there was no publication in the sense of
making the findings public, Mr Justice Flaux decided that E& V's interests were
somehow more important than the public interest or those of the FSA. The
accountants obtained an injunction preventing the JDS from disclosing the report
to anyone until the completion of an appeal process, which at that stage had not
even begun. The injunction also forbade the JDS from disclosing its existence to
any third party. It was to remain in place pending a judicial review of the
decision to send the report to the FSA. Remarkably, the JDS was forced to pay
the costs of the hearing that had silenced it!
There was no question under JDS rules of the tribunal's findings being published
or made public until after the appeal. But E& Y claimed that even sending the
report to the FSA amounted to "publication" in the narrow legal sense used in
defamation cases and so should not happen. The FSA itself would also have
treated the report in confidence, but for Flaux that did not matter.
Flaux also ordered that the JDS could not even
make a statement that there was an appeal by E& Y. In previous disciplinary
situations the JDS would confirm that the tribunal had made a finding and that
it was being appealed. The firm did not want anyone to know that it had been
found at fault over Equitable.
The JDS wanted to have the injunction removed quickly. But no substantial
hearing took place until 3 April, before Mr Justice Silber. The hearing was
described in that day's court list as "The Queen on the application of E v E".
Private Eye attended that hearing and requested it be held in public on the
grounds of the presumption of open justice and the public interest relating to
both Equitable and City regulation. If necessary, as in the criminal courts, it
was suggested reporting restrictions could be imposed until the judicial review
was decided.
Silber - who admitted that he, like many judges and lawyers, had been an
Equitable policyholder - stated that reporting restrictions were not
appropriate, decided to continue the proceedings in secret and refused to
provide a copy of either his order or that by Flaux. The normal procedure is for
the media to be provided with court orders so journalists can see what can be
published. Silber sided with E&Y against the JDS and gave permission for the
judicial review hearing in private. This was later set for 22 June.
On 12 June, Private Eye's lawyers, Davenport Lyons, applied to the High Court
for copies of the court orders and requested that the 22 June hearing be in
public. Davenport Lyons had tried and failed to examine the court file for E v E
because of an order - which they could not see - preventing third parties
from seeing the court documents.
The response from Mayer Brown was to seek a court order preventing any
publication or access by Private Eye at a hearing on 19 June before Mr Justice
Gross. Their position was that E&Y's right to confidentiality and privacy was in
the interests of justice.
Private Eye was not represented at that hearing but Davenport Lyons wrote to the
court on 18 June requesting that the judicial review be in public, pointing to
the Woolf rulings on the importance of open justice, suggesting that there could
be reporting restrictions and asking that the existing court orders be made
available.
Mr Justice Gross indicated during the 19 June hearing that he was concerned
about the issue of secrecy. And, perhaps most tellingly, he stated that he
wanted to read the Appeal Court ruling in May over the case involving Private
Eye and solicitor Michael Napier (Eye 1237). On that occasion the Appeal Court
removed an injunction which for five months had prevented Private Eye reporting
that Napier and his law firm Irwin Mitchell had been formally reprimanded by the
Law Society and were the subject of a highly critical ombudsman's report into
the Law Society's investigation. "It is singularly unattractive to argue that
confidentiality should be recognised by the law in order to protect the
interests of a solicitor against whom an adverse finding has been made,"
declared Lords Justice Toulson, Hughes and Sullivan.
Gross did not agree to either the 19 June hearing or the judicial review hearing
being in public. But he indicated that maintaining secrecy beyond that hearing
was debatable. What he did agree was that for the first time the existence of
the proceedings between E& Y and the IDS could be published. The Equitable cat
was about to jump out of the bag.
That Friday evening, E&Y threw in the towel and informed the court it was
abandoning the judicial review. The following Monday morning Mr Justice Gross
discharged the Flaux injunction and awarded costs to the JDS, which are expected
to be between £50,000 and £75,000.
E& Y will have probably spent another £l00,000-plus itself to prevent the world
knowing that it has been criticised for its role in the Equitable scandal. It
estimated its costs for the two-hour Silber hearing alone at £40,000. But it has
managed to keep government, the FSA and policyholders in the dark since December
while maintaining that it was in no way to blame for Equitable's near collapse.
The E& Y tactics were all about delaying inevitable reputational damage and
embarrassment. The tribunal findings would have become known irrespective of the
result of the appeal. This publication will probably now be by the end of the
year. Had the E& Y gambit worked, only they would have known the verdict on
their role in the Equitable scandal for more than 12 months.
SO NOW the Serious Farce Office is to be handed the MG Rover parcel four years
and £16m after outside inspectors have completed an investigation into the car
company's collapse and the £40m enrichment of its owners, the Phoenix Four.
Passing the report to the SFO will ensure that the report (which, it can be
assumed, is not complimentary about the MG Rover directors) will not be
published for months ifthere is no prosecution and years if there is - because
of the risk of prejudicing any trial or appeals. That was why, after the
Guinness fiasco where the report was not published for II years after the events
it investigated, then trade secretary Michael Heseltine said never again to such
futile history lessons.
But of course, just as the announcement of the investigation ahead of the 2005
general election saved Labour red faces after it backed the Phoenix Four with
taxpayers' money, so this move by Peter Mandelson could save Labour some
embarrassment all over again before next year's election.
TAND by for a blizzard of positive PR from the SFO and its media fans with the
publication next week of the first annual report under new director Richard
"Grey Man" Alderman.
One item which may be overlooked is the £81,697 spent on a one-day bonding
session for all staff at the Park Plaza Riverbank Hotel in London earlier this
year. This was to "talk the organisation through its vision and 2009-10 business
plan and then allow staff to explore these in more detail through a series of
practical workshops".
That included actors voicing the complaints of "victims" of SFO treatment and
attractive female consultants from Involve UK - paid £52,848 explaining to
increasingly disenchanted SFO staff how "transformation" was like the grieving
process. No doubt all that will strike fear into the Phoenix Four.
'Slicker'
QUOTE OF THE WEEK
Also, I only go to places where I have an account. Settling the bill is such an
irksome waste of time.
City PR guru ROLAND RUDD , Financial Times 'How to Spend It' magazine