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HC 360 House of Commons Committee of Public Accounts Serious Fraud Office– redundancy and severance arrangements Tenth Report of Session 2013–14

Serious Fraud Office redundancy and severance arrangements · redundancy and severance arrangements Tenth Report of Session 2013 14 ... A payment of over £400,000 was made to enhance

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HC 360

House of Commons

Committee of Public Accounts

Serious Fraud Office– redundancy and severance arrangements

Tenth Report of Session 2013–14

28705_HC360_COVER.indd 1 28/06/2013 03:04

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HC 360 [Incorporating HC 1026, Session 2012-13] Published on 17 July 2013

by authority of the House of Commons London: The Stationery Office Limited

House of Commons

Committee of Public Accounts

Serious Fraud Office– redundancy and severance arrangements

Tenth Report of Session 2013–14

Report, together with formal minutes, oral and written evidence

Ordered by the House of Commons to be printed 12 June 2013

£11.00

Committee of Public Accounts The Committee of Public Accounts is appointed by the House of Commons to examine ‘‘the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the committee may think fit’’ (Standing Order No 148). Current membership Rt Hon Margaret Hodge (Labour, Barking) (Chair) Mr Richard Bacon (Conservative, South Norfolk) Stephen Barclay (Conservative, North East Cambridgeshire) Guto Bebb (Conservative, Aberconwy) Jackie Doyle-Price (Conservative, Thurrock) Chris Heaton-Harris (Conservative, Daventry) Meg Hillier (Labour, Hackney South and Shoreditch) Mr Stewart Jackson (Conservative, Peterborough) Sajid Javid (Conservative, Bromsgrove) Fiona Mactaggart (Labour, Slough) Austin Mitchell (Labour, Great Grimsby) Nick Smith (Labour, Blaenau Gwent) Ian Swales (Liberal Democrats, Redcar) Justin Tomlinson (Conservative, North Swindon) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/pac. A list of Reports of the Committee in the present Parliament is at the back of this volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee is Adrian Jenner (Clerk), Rhiannon Hollis (Clerk), Sonia Draper (Senior Committee Assistant), Ian Blair and James McQuade (Committee Assistants) and Alex Paterson (Media Officer). Contacts All correspondence should be addressed to the Clerk, Committee of Public Accounts, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5708; the Committee’s email address is [email protected]

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Contents

Report Page

Summary 2 

Conclusions and recommendations 3 

1  Severance payments to senior staff 4 

2  Sir Alex Allan’s report 9 

Formal Minutes 10 

Witnesses 11 

List of printed written evidence 11 

List of Reports from the Committee during the current Parliament 12 

2

Summary

In October 2012, the Comptroller and Auditor General (C&AG) qualified his audit opinion on the 2011-12 accounts of the Serious Fraud Office (SFO) because of an irregular redundancy payment to the former Chief Executive Officer.1 There was no evidence that its then Director had followed due process in instigating this voluntary redundancy, or that he had secured the necessary approval for payment from the Cabinet Office. He had not complied with the safeguards set out in Managing Public Money.2

We took evidence from the current and former Directors of the SFO to determine the background to the irregular payment and examine how the former Director had discharged his responsibilities as an Accounting Officer.

In December 2012, the Attorney General reported that the former Director had agreed further severance payments to other senior SFO staff without following due process. In March 2013, an investigation commissioned by the new Director from the Treasury Solicitor’s Department reported that decisions to make both the Chief Executive Officer and the Chief Operating Officer redundant were taken by the former Director alone. The former Director had failed to gain Cabinet Office approval for the Chief Executive Officer’s severance agreement. However, the Cabinet Office did not prevent a payment of £407,000 going ahead to MyCSP to enhance her pension. The former Director also failed to gain approval for additional ‘special severance payments’ to both the Chief Executive Officer and Chief Operating Officer, disregarding the legal advice available to him.

A further report, commissioned by the Cabinet Secretary from Sir Alex Allan, found that the SFO lacked transparency in its arrangements for paying contractors. The new Director told us the SFO had used confidentiality clauses in its severance agreements and not maintained records about a promotion for the former Chief Executive Officer. This catalogue of errors amounts to a case study in how not to run a public body.

These failings have undermined the reputation of the SFO, and the morale of its staff, which the new Director has to rebuild. We welcome the positive start by the new Director, who appears to have a comprehensive understanding of Accounting Officer responsibilities and is addressing the problems identified.

Following our hearing the former Director Richard Alderman, to his credit, reflected on his evidence and wrote to the Committee to apologise, acknowledging that his actions fell short of what is expected from an Accounting Officer, and for his failures to ensure relevant approvals were obtained and documented.

1 Report of the Comptroller and Auditor General to the House of Commons into the Serious Fraud Office accounts

2011‐12

2 Managing Public Money is the Treasury publication which sets out the principles, standards and guidance to be followed in the use of funds by public sector organisations in the UK.It is available at http://www.hm-treasury.gov.uk/d/mpm_whole.pdf

3

Conclusions and recommendations

1. The former Director’s decisions on redundancy and severance packages showed a disregard for the proper use of taxpayers’ money. Mr Alderman failed to follow due process by deciding the amounts in special severance packages, and by not seeking alternative placements for staff. He ignored legal advice available to him, and did not gain the necessary Cabinet Office and Treasury approval for payments. He failed to comply with the principles that should underpin the use of public money. We welcome the new Director’s action to strengthen SFO governance and Board level decision making, aimed at preventing a Director from taking such actions independently. We want to see the rules in Managing Public Money strictly enforced to ensure compliance by the SFO and other public bodies. In particular, the requirement for Cabinet Office and Treasury approval for redundancy payments must be enforced by Boards. We look to the Cabinet Office and the Treasury for safeguards to ensure there is no repeat of this debacle.

2. The reputation of the SFO has been undermined by a catalogue of errors and poor judgement and the morale of its staff has suffered. Mr Alderman used taxpayers’ money to cover the Chief Executive Officer’s travel and hotel costs to London so she could continue to live in the Lake District. We are concerned that the SFO arranged its dealings with consultants to avoid the Cabinet Office requirement for approvals. We are also concerned about poor quality record keeping, and that senior civil servants received money in compromise agreements, in addition to exit payments. We also noted that records were not kept of the circumstances in which the former Chief Executive Officer was promoted and given a pay rise. The new Director should ensure the recommendations from Sir Alex Allan’s report are implemented, and that the Board and Audit Committee are kept fully informed and engaged in decision making.

3. A payment of over £400,000 was made to enhance the former Chief Executive Officer’s pension, despite not having the necessary approval. There is no evidence the former Director obtained the necessary Cabinet Office approval for the former Chief Executive Officer’s redundancy package. Nevertheless, this did not stop a payment of £407,000 going to MyCSP to enhance her pension. The Cabinet Office and MyCSP should explain how this payment could proceed without approval being granted.

4. The former Director agreed ‘special severance payments’ of £15,000 to the former Chief Executive Officer and the former Chief Operating Officer. The former Director agreed additional ‘special severance payments’ with the aim of avoiding grievance action, despite legal advice that there was no suggestion of any such claims. Such payments require approval by the Treasury, but this was not sought. As the Treasury did not approve the payments, the new Director should explore all possibilities to minimise the cost to the taxpayer. This should include writing to recipients to request they repay the money.

4

1 Severance payments to senior staff 1. The Serious Fraud Office’s (SFO) Director is also its Accounting Officer, directly accountable to Parliament for the money the SFO spends. Richard Alderman held the Director post from 2008 until 20 April 2012. David Green has held the Director post since 21 April 2012.3

2. In October 2012, the Comptroller and Auditor General (C&AG) qualified his audit opinion on the 2011-12 accounts of the SFO, because of the voluntary redundancy costs for the former Chief Executive Officer, Phillippa Williamson. Ms Williamson left the organisation on 16 April 2012, under a severance agreement which Mr Alderman entered into during 2011-12. The C&AG reported that there was no evidence that Mr Alderman had followed due process in instigating this voluntary redundancy. This would have involved, for example, determining whether alternative positions within the Civil Service were available, prior to the redundancy and severance payment.4

3. The Chief Executive Officer’s severance agreement provided for payment of £407,000 to MyCSP, which administers the Principal Civil Service Pension Scheme for the Government. The purpose of the payment was to cover all additional pension costs arising from her early departure. Mr Alderman was required to gain approval from the Cabinet Office for this payment, but the C&AG found no evidence that Cabinet Office approval was obtained. In addition, Mr Alderman agreed a £15,000 payment for Ms Williamson which, as a ‘special severance payment’ in excess of contractual amounts, would always require Treasury approval in advance. The C&AG had found no evidence that Mr Alderman had sought approval from either the Cabinet Office or the Treasury. The lack of Cabinet Office approval did not prevent the payment to MyCSP going ahead. In the absence of evidence, the payments associated with the Chief Executive Officer’s departure are deemed to be ‘irregular’.5

4. In December 2012 the Attorney General made a written Ministerial Statement on redundancy payments at the SFO. The Attorney General stated it had come to light that Mr Alderman had agreed further redundancy payment arrangements. In December 2012, the Chief Operating Officer (Christian Bailes) was made redundant under an agreement Mr Alderman had made in February 2012. In addition, the Attorney General stated that Mr Alderman had agreed a redundancy payment to the Head of Technology and Specialist Services (Ian McCall). The Attorney General also stated Mr Alderman had not disclosed details of the redundancy payments to superintending Ministers at the time he made the agreements.6

3 http://www.sfo.gov.uk/about-us/who-we-are/director.aspx

4 Report of the Comptroller and Auditor General to the House of Commons into the Serious Fraud Office’s accounts 2011‐12

5 Report of the Comptroller and Auditor General to the House of Commons into the Serious Fraud Office’s accounts 2011‐12

6 Attorney General, Written Ministerial Statement ‘Serious Fraud Office’, 4 December 2012 http://www.publications.parliament.uk/pa/cm201213/cmhansrd/cm121204/wmstext/121204m0001.htm

5

5. Shortly after taking up the position of Director of the SFO in Spring 2012, Mr Green became aware of these exit arrangements and invited Tim Hurdle, a senior civil servant at the Treasury Solicitor's Department, to review the exit terms agreed for Ms Williamson, Mr Bailes and Mr McCall. Mr Hurdle reviewed the process used, considerations given and authorisations obtained, and the SFO published his report on 4 March 2013.7

6. Mr Hurdle’s report found that the decisions to make the Chief Executive Officer and Chief Operating Officer redundant appeared to have been taken by Mr Alderman alone. There was no evidence found that he explored redeployment with the Cabinet Office or with the Attorney General’s Office. Both post holders were performing well and had received performance bonuses in 2011-12. The report concluded that Mr Alderman had agreed the special severance payments with the aim of avoiding grievance actions from the Chief Executive Officer and Chief Operating Officer in relation to whistleblowing investigations. However, they had submitted no such claims. Mr Hurdle found that Beachcroft, the solicitor acting for the SFO, had advised Mr McCall there was no suggestion of a grievance or claim and challenged the need for any special severance payment. Mr McCall’s own severance package included £34,545 to which he was not contractually entitled. The total severance packages were £464,905 for Ms Williamson, Chief Executive Officer, £473,167 for Mr Bailes, Chief Operating Officer and £49,885 for Mr McCall, Head of Technology and Specialist Services.8

7. Mr Hurdle’s report concluded that Mr Alderman decided on the £15,000 special severance payment each, to Ms Williamson and to Mr Bailes, based on his personal view of the likelihood of litigation and any outcome, despite, or in ignorance of legal advice. The report also concluded that Mr Alderman’s actions and decisions were based on a culture where external advice and scrutiny was to be avoided wherever possible, and with an apparent need for secrecy.9

8. We asked Mr Alderman about the findings and conclusions in the report from Mr Hurdle, and why he had not followed due process in instigating the voluntary redundancies, by obtaining approval from the Cabinet Office for the exit schemes, and from the Treasury for the enhancements to these packages.10 Mr Alderman told us he did not agree with the comments in the report from Mr Hurdle. Mr Alderman told us that he understood he had obtained Cabinet Office consent for the severance agreement for the Chief Executive Officer. He said he was perplexed that MyCSP would have gone ahead with processing the payment to cover the additional pension costs arising from Ms Williamson’s early departure, if the Cabinet Office had not given approval. He was of the view that there would be evidence at the SFO to confirm his understanding, such as text messages and emails.11

7 Serious Fraud Office – Review of senior staff exits, Tim Hurdle, Treasury Solicitors’ Department, March 2013

http://www.SFO.gov.uk/media/242368/report_by_tim_hurdle.pdf

8 Serious Fraud Office – Review of senior staff exits, Tim Hurdle, Treasury Solicitors’ Department, March 2013

9 Serious Fraud Office – Review of senior staff exits, Tim Hurdle, Treasury Solicitors’ Department, March 2013

10 Qq 1-3

11 Qq 4-14

6

9. Mr Alderman told us that the Treasury Solicitor’s Office and the Attorney General’s Office informed Ms Williamson, Mr Bailes and Mr McCall they would be required to move from the SFO, within one to two months of the new Director taking office.12 Mr Alderman did not produce any records of communications with the Treasury Solicitor to verify his statement.13 Mr Green told us he had found no evidence in the SFO of any external instructions to make the senior staff redundant and denied Mr Alderman’s claim.14 Mr Green subsequently wrote to the Committee to report he had contacted the Treasury Solicitor’s Office and the Attorney General’s Office again, and that neither had any recollection of meetings or discussions with Mr Alderman on this subject. Mr Green had also consulted the non-executive directors of the SFO who confirmed Mr Alderman had not had engaged in any discussions with them on this subject. He had also not found any management board minutes which covered discussions on senior staff redundancies.15 Mr Green reported that, since taking up the Director post, he had taken steps to strengthen governance and Board level knowledge and decision making, aimed at preventing a Director from taking such actions independently.16

10. Mr Green referred to documentation from Mr Alderman from September 2011, conveying his intention then to make these people redundant, and Mr Green emphasised this occurred well before he was being considered as a potential new Director. Mr Green also reported that when he took on the Director role he had an open mind on whether to keep the senior managers to provide continuity. He stated he had agreed with the Treasury Solicitor to do so, and kept Mr Bailes in post until December 2012.17

11. We asked Mr Alderman about the findings and conclusions in the report from Mr Hurdle that there was very little legal advice or evidence to support the need to make any ex-gratia payments.18 Given this finding, Mr Alderman’s decision to agree special severance payments of £15,000 appeared to ignore the advice from the SFO’s solicitors, Beachcroft. Mr Alderman told us he had received information that Ms Williamson and Mr Bailes had received advice from their lawyers, Farrers, that they could receive damages from an employment tribunal. Mr Alderman acknowledged he did not have written confirmation on this point.19 However, he reported he had made a note of his assessment of the potential damages likely to be paid. The National Audit Office had seen the note and considered it to be a narrative of Mr Alderman’s reasons for the special severance payments.20

12. The Treasury has not approved the £15,000 special severance payments and declined permission for the SFO to make a payment to Mr Bailes on his departure in December 2012, as this would be irregular. However, Mr Green has received legal advice that the

12 Qq 15-20, 26-31

13 Q 38

14 Q37

15 Ev 25

16 Ev 25, Ev 26

17 Q 25, 35-37

18 Qq 43-44

19 Qq 44-50

20 Qq 55-56

7

payment is part of an enforceable contract. He was not clear how to proceed.21 Following our hearing, Mr Green wrote to us stating he may be obliged to make the payment without Treasury approval and that he is not able to recover the sum from Mr Alderman.22

13. Mr Alderman told us he did not know how many senior civil servants left the SFO during his time as Director, and whether any of the people had confidentiality clauses in their termination agreements. He said he did not seek to have any such clauses included.23 At our request, Mr Green subsequently provided the National Audit Office with information that 11 senior civil service staff had left the SFO during Mr Alderman’s period as Director. Eight people left under compulsory early retirement terms, one person left under approved early retirement terms, one person transferred to another Government department (receiving no benefits) and one person’s employment was terminated. Six of the eleven people entered into compromise agreements, in which they received money (averaging six month’s pay) for agreeing to make no further claim against the SFO as a result of any breach of a statutory obligation. Mr Green emphasised he was unable to provide full records and data due to deficiencies in management record keeping that had occurred in the SFO.24

14. Mr Alderman also used taxpayers’ money to cover the travel and accommodation costs for the former Chief Executive Officer. Ms Williamson’s contract specified that her place of work was her home address, and that attendance at the SFO’s offices was required as necessary. She lived in the Lake District and worked at home two days a week. She travelled to London to work at the SFO three days a week and had her travel and hotel expenses paid. Mr Alderman argued that the National Audit Office had approved the arrangements, but the C&AG clarified that the National Audit Office only made sure benefits in kind were recorded accurately in the SFO accounts, the decision to approve and pay such benefits was for Mr Alderman as Accounting Officer.25 Mr Green told us that on taking on the role of Director, his decision was that the Chief Executive Officer post would be filled five days a week in London.26 Mr Green subsequently provided additional information to the Committee that the cost to the SFO of covering Ms Williamson’s travel and hotel bills was £98,946, from the time of her appointment in 2008 through to her redundancy in April 2012.27

15. Mr Alderman’s actions and decisions while Director have harmed the reputation of the SFO and damaged the morale of its staff. A staff survey indicated they were suffering from both generally low morale and relatively poor satisfaction with the SFO as employer, compared to staff working for other Civil Service employers.28

21 Qq 83-86

22 Ev 25

23 Qq 108-110

24 Ev 26

25 Qq 32-34; Ev 25

26 Qq 22-23

27 Ev 25

28 Q 121

8

16. Following our hearing, Mr Alderman wrote to the Committee to acknowledge he had failed to ensure all the relevant consents had been given and were documented, and that his actions fell well short of the standards expected of an Accounting Officer. He apologised for the way he had handled the exits of the senior staff.29

29 Ev 23

9

2 Sir Alex Allan’s report 17. The Cabinet Secretary asked Sir Alex Allan to investigate other allegations affecting the SFO. The most serious allegation was that senior members of staff had received gifts and payments from consultants employed by the SFO. Sir Alex found no evidence this had happened. There was also an allegation over the processes by which the SFO awarded consultancy contracts. Sir Alex did not find evidence of improper conduct, but had concerns about the lack of documentation for decisions. A further allegation had been made that the SFO arranged its dealings with consultants to avoid Cabinet Office requirement for approvals. Sir Alex recommended the SFO aggregate payments to consultancy contractors. It should treat these as part of a single continuing contract for the purpose of applying the Cabinet Office rule requiring its approval when the duration of the contracts extended beyond nine months. Approval and re-approval of the contract should also be sought from the Law Officers every three months. 30

18. Sir Alex also investigated concerns that relatives of SFO staff had been employed without proper recruitment processes and that former consultants were offered fixed-term contracts. He did not find improper conduct, but recommended the SFO canvass expressions of interest rather than making appointments without competition. Sir Alex also recommended the SFO comply with Treasury guidance to have a professionally qualified Finance Director.31

19. We asked Mr Alderman about the allegations examined by Sir Alex. Mr Alderman told us that he, Ms Williamson, Mr Bailes, and Mr McCall had not received any benefit in kind from consultants, and Mr Alderman had no relatives working for the SFO. The C&AG asked Mr Alderman if he could confirm whether Ms Williamson had been appointed through a competitive process to the SFO. Mr Alderman reported she joined as part of a move within the Civil Service in 2008 - the year in which he had become Director of the SFO.32 Mr Alderman confirmed he had previously worked with Ms Williamson, in HM Revenue & Customs.33 Mr Green told us that Ms Williamson was promoted within the senior Civil Service grades, but he had not been able to find any evidence of the circumstances of that promotion and her consequent pay rise.34

30 Serious Fraud Office – Inquiry report, Sir Alex Allan, March 2013

http://www.sfo.gov.uk/media/242360/report_by_sir_alex_allan.pdf

31 Serious Fraud Office – Inquiry report, Sir Alex Allan, March 2013

32 Qq 87–95, 110-115

33 Q 116

10

Formal Minutes

Wednesday 12 June 2013

Members present:

Mrs Margaret Hodge, in the Chair

Mr Richard Bacon Stephen Barclay Jackie Doyle-Price Chris Heaton-Harris Meg Hillier

Mr Stewart JacksonFiona Mactaggart Nick Smith Ian Swales Justin Tomlinson

Draft Report (Serious Fraud Office– redundancy and severance arrangements), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 19 read and agreed to.

Summary agreed to.

Resolved, That the Report be the Tenth Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

Written evidence was ordered to be reported to the House for printing with the Report (in addition to that ordered to be reported for publishing on 7 March.

[Adjourned till Monday 17 June at 3.00 pm

11

Witnesses

Thursday 7 March 2013 Page

Richard Alderman, former Director, Serious Fraud Office and David Green CB, QC, Director, Serious Fraud Office Ev 1

List of printed written evidence

1 Richard Alderman Ev 12;Ev23

2 The Public and Commercial Services Union (PCS) Ev 17

3 Cabinet Office Ev 18

4 HM Treasury Ev 24

5 Serious Fraud Office Ev 19; Ev 24;Ev 25; Ev 26

12

List of Reports from the Committee during the current Parliament

The reference number of the Government’s response to each Report is printed in brackets after the HC printing number.

Session 2013–14

First Report Ministry of Defence: Equipment Plan 2012-2022 and Major Projects Report 2012

HC 53

Committee of Public Accounts: Evidence Ev 1

Oral evidenceTaken before the Committee of Public Accounts

on Thursday 7 March 2013

Members present:

Margaret Hodge (Chair)

Mr Richard BaconStephen BarclayChris Heaton-HarrisMr Stewart Jackson

________________

Amyas Morse, Comptroller and Auditor General, Gabrielle Cohen, Assistant Auditor General, NationalAudit Office, Mandy Measures, Director, NAO, and Marius Gallaher, Alternate Treasury Officer ofAccounts, 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 verymuch for agreeing to give evidence this morning. Iwill start with Richard Alderman. We had a note fromyou yesterday, as well as one from the Cabinet Office.We have had lots and lots of notes on this. I refer youto one of the two reports that the Attorney-General hasreleased to us—the one from Tim Hurdle—in which itsays, pretty categorically, that the review “found thatrelevant Cabinet Office approval had not be obtainedfor the exit schemes and that HM Treasury approvalhad not been obtained for enhancements to the exitpackages.” Why?Richard Alderman: Can I explain what happened,Mrs Hodge? First of all, thank you very much for theopportunity to come and explain what happened. Theevents are set out in my written statement. Basically,I do not agree with the comments made by Mr Hurdlein his report. I can give some views later about whatmore he should have done. My understanding is thatwe obtained Cabinet Office consent. My colleague,who was very experienced in this area, rang thepension providers and was told that there was a newsystem and that they could not take action on any exitpackage without Cabinet Office consent. He spoke toa number of people at the Cabinet Office and gavedetails of the packages. He was told that the CabinetOffice would consider them. He followed that up withan e-mail, and the next thing he heard was from thepension providers, contacting him to say, “That’s fine.We can now go ahead.” His belief—I think it is theoverwhelming inference—was that the Cabinet Officemust have given consent.There will be telephone logs. There will be textmessages and e-mails that were flying around at thetime. There is no evidence that Mr Hurdle looked forany of that in order to back up the statements thatthere were these discussions. In my view, mycolleague was absolutely entitled to take the view thathe had received Cabinet Office consent, because thiscould not have taken place without that consent.

Fiona MactaggartAustin MitchellNick SmithJustin Tomlinson

Q2 Chair: Okay. The NAO undertook the audit toestablish 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 therelevant consents obtained?Mandy Measures: We were not given any evidenceof consent being obtained. We were told, as Richardhas just stated, that if they paid, the Cabinet Officemust have approved it, but we need a document toevidence that.

Q3 Chair: I am sorry, Mr Alderman, but you have toaccept that these accounts have been qualified on thebasis that the relevant consents were not obtained. Nomatter how much you want to bang your head on abrick wall about this, I think that after having aperfectly proper review of those exits by Mr Hurdle—the finance director of the Treasury Solicitor’sDepartment—and the NAO, both of whom assert thatconsents were not obtained, you just have to acceptthat that is how it is. You may have thought that youhad got them.Before turning to Richard Bacon, let me say that twothings surprised me. The feel I get, looking throughthese papers, is that you ran a pretty informal system.You took the decision yourself to put all your top teamthrough redundancy. You do not appear to haveconsulted anybody on that. You negotiated the termsyourself. It is just somewhat surprising that, as alawyer, you did not have some regard to due processin what might have been perfectly appropriatedecisions. I am not challenging that—we will comeback to that—but I would think that you would dothem with due process in an organisation that isfunded by the public purse and that therefore has tobe accountable for the money it dispenses. I just don’tget why you did not follow due process.Richard Alderman: Thank you, Mrs Hodge. Can Ireply on the various points you have made? First ofall, I was expecting the NAO to interview me; I wasexpecting the NAO to interview my colleague, whohad gone to the Cabinet Office. It did not happen.

Ev 2 Committee of Public Accounts: Evidence

7 March 2013 Serious Fraud Office

Q4 Chair: Are you saying everybody lied?Richard Alderman: No, no. That is actually, it seemsto me, what is being said against us. We said—mycolleague and I—that we understood assurances hadbeen given. We understood this package could nothave gone ahead without Cabinet Office approval, andour understanding, based on that, was that there musthave been Cabinet Office—

Q5 Chair: It was never written down? I have beenaround the public sector world for ever and ever. Iwas a Minister for 12 years. For a decision to spendthis sort of money in this sort of climate, I would havegot a bit of paper authorising me to do it. That’s all.It is very simple. That is what amazes me. Havingbeen married to a lawyer who was a stickler aboutgetting bits of paper to cover him and everything hedid, I would have thought you would have done thesame.Richard Alderman: And maybe for the future that issomething accounting officers ought to do, but couldI just remind you, Mrs Hodge, of the eighth Report ofthis Committee, last July, in which you talked aboutexit agreements that were looked at by the Treasury?You commented on the fact that there was inadequaterecord keeping in the Treasury. The Treasury couldnot find details of a number of the exit agreementsthat they had approved. This was July, the time whenMr Hurdle was considering his report. Did he look atthat possible explanation? If he did not, what he isdoing, basically, is saying that both I and mycolleague were actually not being frank—and wewere. Did he consider that alternative explanation?There is no evidence that he did.

Q6 Mr Bacon: It may be, Mr Alderman, that thereare files elsewhere in Government where there are notrecords as there should be; that is as may be. It mayvery well be true; I have encountered that many timeson this Committee. I once asked the Department forWork and Pensions why they did not seem to be ableto give me the answer to how many times theiraccounts had been qualified, and the reason was thatthey could not find the accounts, so it does happen. Iaccept that, but you say in your note to us: “It maybe, though, that the Committee needs to give guidanceto accounting officers on the documentation they mustsee to check that proper processes had been followed.”My reaction, I must say, when I read that was, “No, Idon’t think this Committee needs to give guidance,”because there is already a thing called “ManagingPublic Money”, which makes very clear whataccounting officers’ responsibilities are.The basis of your case seems to be this, and you haveused words that indicate that what I am about to sayis correct. You have said this morning “my belief.”You have said “we understood”. You have said therewas a clear—I think you used the words“overwhelming inference.” But when I read thatCabinet Office permission must have been given—indeed, in your note you say: “It is reasonable toconclude, therefore, that Cabinet Office must havegiven MyCSP approval.”Richard Alderman: Yes.

Q7 Mr Bacon: As a layperson, not a lawyer—youare a barrister—the issue is that I would not treat thisas a matter of belief, opinion or feeling. I would treatit as a matter of fact, and I would look for evidence.I cannot understand why, when your colleaguereceived the call from MyCSP saying that they werenow in a position to process the early exits, either youor your colleague did not say, “That’s great. Terrific.Can we please have a copy of the Cabinet Office lettergiving that approval?” That just did not appear tohappen. You did not say, “Where’s the evidence inwriting?” did you?Richard Alderman: No, we did not challenge them,because MyCSP—

Q8 Mr Bacon: You did not ask for the evidence inwriting.Richard Alderman: My CSP were telling us that theycould now go ahead with this package incircumstances in which they had told us before theycould not do it without Cabinet Office agreement.

Q9 Mr Bacon: “Tell”—the word is “tell”. That is aword to describe speech, and this is the sort of thingwhere you are looking for something with one ofthese—a pen—and you did not do that. That seemsto me the central failing. You are familiar with theexpression “nil by mouth”, are you? It is used inhospitals.Richard Alderman: In a medical context, yes.

Q10 Mr Bacon: It is used in the medical context todescribe how you treat patients, but it is also used, Ithink, in social security departments and jobcentres. Iwas seconded once to a mutual building society. Inthe arrears section, where they were dealing withpeople who were behind with their payments and had,by definition—for whatever reason, good or bad—become unreliable in the payments, there was a hugesign on the wall that said “nil by mouth”. What itmeant was, “Get it all in writing.” You should havegot this in writing and you did not, and that was theproblem.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 okayto do it. That was the problem.Richard Alderman: We were told by them that theycan only proceed on the basis of Cabinet Officeapproval.

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 ofthem not printable, but you should have got writtenpermission.Richard Alderman: We were also told that the exitagreements could only take place on the basis of anumber, which is given by the Cabinet Office and isnothing to do us. How did this happen? I remain

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absolutely perplexed, I have to say, as to how thishappened, and how the pension providers actuallytook action on this if there was no Cabinet Officeapproval. I have received no explanation for that; I donot understand it.

Q14 Chair: Anyway, can we at least agree that youassumed a Cabinet approval that you never receivedin writing?Richard Alderman: We were told there was CabinetOffice approval from what the pension providers toldus. From the course of action that took place, it isright 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 PhillippaWilliamson, Chris Bailes and Ian McCall should allbe made redundant? Did you take that decision alone?Richard Alderman: They were basically given theirmarching 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 wouldhave a month or two after my successor took office.They were given a month or two to stay on and thenclear their desks and go.

Q18 Chair: By whom? You?Richard Alderman: No, by the Treasury Solicitor’sOffice 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 methat the new director would move on the seniormanagers that I had. He would move them on withina month or two; he said he would clear them out andbring 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 thenStewart on this one, because I think that the two linktogether.David Green: I cannot say, Mrs Hodge, what MrAlderman was told, but having understood what hesaid about this, I understand and accept that therewere rumours about my intentions.

Q22 Chair: Did you two have a conversation aboutit?David Green: No, I was not asked. My true mentalstate was that I had a completely open mind aboutwhether or not I would keep senior managers on. Iwanted some sort of continuity, starting in this job.The only firm decisions I had made were to get rid ofexotic home-to-work travel arrangements, and also toensure that the chief executive worked five days a

week in London. Those were the only firm decisionsI had made.

Q23 Mr Bacon: Can you just tell us, for the benefitof the Committee, what the exotic arrangements were?Was it because they were travelling from an exoticlocation and therefore required a private jet, or werethey just mildly unusual?David Green: Exotic is my word, but Mr Aldermancan tell you the detail of the travel arrangements.Essentially, as I understand it, the chief executivelived in the Lake district and worked there two daysa week, and came down to London for three days aweek and had her travel and hotel accommodationpaid.Chair: Blimey!David Green: Well, it was obviously something thatreceived publicity—unwelcome to me—in the twoweeks before I took up post. I had certainly decidedthat 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 upand come back to us.David Green: That was the firm decision I had made.Indeed, I had agreed with the Treasury Solicitor, andspoken to him about all this, that I would actually tryout these staff and see what they were like. I did notknow; I had no idea. I had a genuinely open mind. Infact, the idea that I had already decided to make thesepeople redundant is shown to be nonsense by twothings: one is the fact that I kept Chris Bailes on untilDecember, and the other is that Mr Alderman himselfproduced a document as early as 28 September 2011,which was sent to the Cabinet Office, asking for aquote on their pension payout. So there was obviouslya decision to make them redundant. As for whetherthey knew, I do not know, but the decision to makethem redundant had its roots way back in September2011, before I was even on the scene. I was notactually appointed until December.

Q26 Nick Smith: Mr Alderman, who told you toclear 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 adiscussion in June or July, and soon after that I briefedmy senior management board on some of the pointshe made. He said to me that he expected a newdirector to move out senior management within amonth or two of his arrival. Ms Williamson and MrBailes were told by people from the TreasurySolicitor’s Office and the Attorney-General’s Office inthe summer that they could stay on for a month ortwo after a new appointment, but they would then beexpected to clear their desks and leave. I am sure theywould be willing to give evidence to the Committeeabout that. That is what they were told.

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Q28 Nick Smith: How did they tell you? Was it atelephone call at the end of the day, or was it a round-table meeting at which minutes were taken? Was itformal or informal?Richard Alderman: I do not think there is such athing as an informal meeting with the TreasurySolicitor. I briefed my management board afterwards,without giving details of some of the issues. In mynormal way I would have made a few notes of whatthe Treasury Solicitor told me.

Q29 Nick Smith: Did you keep those notes? Arethey available?Richard Alderman: This would be an SFO issue. Ihave not got any notes now; I did not take any papersaway with me. That was what I was told by the—

Q30 Nick Smith: Sorry to interject, but so far as youknow, those notes are at the SFO and available for usto look at?Richard Alderman: I do not know if they areavailable, or what. I make scribbled notes during thecourse of meetings; sometimes I make a more formale-mail message to myself, summarising variousthings. That is what the Treasury Solicitor told me.

Q31 Nick Smith: This is pretty big-ticket stuffinvolving your top team and a lot of money, and yousay you have scribbled notes, and you do not knowwhere they are.Richard Alderman: That is what he told me. That iswhat 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 reasonableexplanation for getting rid of these people at the endof your tenure, apart from expectations as to theincoming chief executive. It was not a question ofclearing the decks so that you could get rid of all theseexotic arrangements we were talking about beforesomebody else came in, was it?Richard Alderman: No, these exotic arrangementshad been the subject of discussion, and of review byinternal audit and by the NAO over many years. Theyhad been approved and they were in line with civilservice rules, and they had been looked at by the NAOand approved. There was nothing wrong with thesearrangements.

Q32 Chair: You said there was nothing wrong. Justfor the Committee’s sake, I have been told by theNAO that it cost the taxpayer £27,600 for PhillippaWilliamson’s benefits in kind in the year 2010–11,which I assume was both her travel andaccommodation. That seems unacceptable to me. It isnot a proper use of taxpayers’ money.Richard Alderman: No, I do not agree, for tworeasons. First, this package was agreed in accordancewith civil service rules, and it was approved byinternal audit and the NAO because of concerns aboutit in the press. It was looked at and approved; it wasperfectly all right. Secondly, Ms Williamson—andalso Mr Bailes, but Ms Williamson in particular—wasthe prime person responsible for enabling us to reduceour budget over four years from about £55 million to

£32 million. Not many civil servants can do that, andshe did it.

Q33 Mr Bacon: If you are sitting by LakeWindermere, not having to deal with people face toface, and just sending out e-mails and texts tellingpeople they are sacked, I can see how you could dothat quite easily. It seems to me rather an odd way forthe boss to run the organisation. You would expect theboss to be more fully engaged, and to talk to people.Richard Alderman: Not particularly, not in this dayand 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 theSFO in which I was in my office perhaps one morninga week, and the rest of the time I was out travelling,because I had different offices. Ms Williamson wasperfectly able to do the work within the days she wasin the office, and when she needed to be in the officeon those other days, she was in the office.Amyas Morse: Just as a matter of record, it is not ourjob in the NAO to approve or disapprove employmentpackages; that is a decision for the accounting officer,as I am sure you must know. We simply make surethat the benefits in kind have been accurately recordedin the accounts, which, as far as we could tell, theywere.Mandy Measures: Yes.Chair: So it was not approved; it was your decision.

Q35 Nick Smith: Mr Alderman, I just want to pursuethis business of you being told to clear out your topteam. You kept a note of it, although you do not haveit to hand; as far as you know, it is at the SFO. MrGreen, Mr Alderman has been told to give the bum’srush to his top team. It is not in the public eye. It is alot of money. Does the SFO have confirmation of whathe has just told us? Do you have a written agreementthat the Treasury told him to get rid of his top teamin 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, categoricallydeny what Mr Alderman has just said?David Green: I am afraid I do.Richard Alderman: And I categorically affirm thetruth of what I have said.

Q38 Nick Smith: So where is your note of it? Iwould keep a note of something like that; it is prettyimportant.Richard Alderman: I used to keep notes in one ofthose spiral notebooks, that I would keep with me atall times, and I would sometimes, for some issues,record them in a formal, A4-type Word document orin an e-mail to myself. I briefed my non-executivesand my executive board on my discussion with theTreasury Solicitor, in particular on the issue about notrecruiting a general counsel. So there is confirmationand corroboration of the meeting that I had.

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David Green: May I say that Mr Alderman is mostwelcome to come to the SFO and to have access toany papers whatever from his time in office, if hewishes to?Richard Alderman: Can I say that, at the meeting thatI had with the Treasury Solicitor, that is what he toldme? He told me as well that he had been impressedby the way, when I was the director, I had moved outmembers of my senior team very quickly. That waswhat he was expecting.

Q39 Stephen Barclay: I just wonder, if you cannotfind your own notes, how you are going to find thenotes of fraudsters, as an organisation. It does notreally say much for the organisation, does it?Mr Bacon: Just in case you are in any doubt, MrAlderman, I should make it clear for the record thatwaving your hands in the air in despair does not showin Hansard.David Green: May I assist here, please? Obviously,we have very different processes for hoovering up andrecording 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, MrGreen—led from the top, Mr Alderman. It looks tome like you took the decisions yourself. You have notdenied that you did; you said you had chats here andthere. You decided the packages yourself. You decidedyourself that you did not need written agreement; youhad had a natter with somebody on the phone. It is allindicative of a culture that you led, which does not, totake Steve’s point, give confidence that it was the sortof culture you require if you are trying to find fraud.Richard Alderman: What it is also indicative of, MrsHodge, is the fact that, in my last year, the SFO wasunder considerable stress, for all sorts of reasons, notleast of which was that my senior management teamwas operating at about 50% of what it should havebeen. The organisation was under a lot of stress,because we were all picking up a couple of jobs. Wehad a long transition, and as I look back on this—

Q41 Mr Jackson: Can I come in there? Really, thisis dilatory, this is sloppy, this is slovenly. There is notone iota of contrition or apology from you for theculture that existed. Presumably, you were under suchstress because you were the chief executive, shuttlingbetween the Waldorf Astoria and Lake Windermere,and you were really feeling it acutely. I have to askyou specifically, coming back to the legal advice,whether you have any speciality as a lawyer inemployment law.Richard Alderman: I have been involved verydirectly in employment law litigation for about fiveyears.

Q42 Mr Jackson: So that’s your speciality, is it?Richard Alderman: No. I have a range of differentareas of work.

Q43 Mr Jackson: So, if we refer to the addendumto the Hurdle report, “The Beachcroft EmploymentPartner”—that is, the legal adviser, specifically—“states in an e-mail to The Head of Technology &

Specialist Services that ‘There is no suggestion of agrievance or a claim risk from their’”—that is, theCEO and COO’s—“‘respective employments and/ortheir terminations so I challenge the requirement for acompensation payment of £5000’.” Additionally,Beachcroft said that a “note of a phone call statesthat…The Head of Technology & SpecialistServices...appreciates the advice that we provided todate and the confirmation that there is no legaljustification for the payment of an ex gratia” and that“the likelihood of litigation…the likely outcome…andthe amount would be awarded by an EmploymentTribunal.”That was the advice you had secured as a result ofpublic funding. You ignored that advice; youconsidered you knew better. You contravened theguidelines. If you challenge what I am saying, bringthe written evidence forward that you sought sanctionfor this, because in the absence of the evidence youcannot prove it and the case stands that you wilfullyignored that, that you were not considering value formoney, and you should apologise for that.Richard Alderman: No, I don’t agree with that.Looking at Mr Hurdle’s report, Beachcroft weretalking about damages as a result of the prematurebringing to an end of the careers of Ms Williamsonand Mr Bailes. That was not what the £5,000 wasabout at all. The £5,000 was about what I describedas issue 1, where Ms Williamson and Mr Bailes werebeing strongly advised by Farrer & Co, who know athing or two about this area of work. I have said therethat my understanding is that Farrer had told MsWilliamson she would receive about £70,000damages. What I was doing was thinking to myself,“Well, look, if I am back in the employment tribunaland there are various offers being made outside thecourt in the usual way, and I am being told that they’reprepared to settle for £5,000”—

Q44 Mr Jackson: But the report says—please listencarefully—that there was no suggestion of a claim andthat no written claim or grievance was received. Is itwritten down that there was any risk of a claim in anemployment tribunal?Richard Alderman: Yes, I wrote it down in a note. Idid a full note—Mr Jackson: No, it’s tautology. Let’s not have weaselwords here.Richard Alderman: I am sorry. You’re accusing meof not writing a note. I did a full note on all of this—

Q45 Mr Jackson: No, no, answer the questiondirectly. Did you receive any written confirmation ofa likely or actual claim in respect of an employmenttribunal or higher court relating to the employment ofthese individuals?Richard Alderman: I knew that they were beingadvised by their lawyers—Mr Jackson: No, that’s not my question. Answer thequestion. Did you receive, in an e-mail or a letter orany other written means, confirmation that there wasa claim pending in a court or an employment tribunal?Richard Alderman: I knew that there was a potentialclaim from what I was being told.

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Q46 Mr Jackson: That is not the answer to myquestion. Answer the question. Did you receive at anystage, on your desk or by any other means—or,perhaps, over a croissant at the Waldorf Astoria withthe chief executive—a written confirmation that aclaim was pending from an employment solicitor, forinstance, or a barrister?Richard Alderman: Right, first of all, I have no pieceof paper on that but I knew that it was going tohappen—I knew the likelihood of that—and I did afull note about the issues and the likelihood of this.

Q47 Chair: How did you know?Richard Alderman: Because Farrer’s were advisingthem. I was told that this was what they weremaintaining.

Q48 Chair: By whom? Who told you that Farrer’swas advising them?Richard Alderman: My HR colleague.

Q49 Mr Jackson: So, you are saying that we aresetting a precedent now that, if you get rumours thatsenior people in the civil service might be minded toissue a claim through barristers or solicitors in orderto expedite the matter—not to the advantage,incidentally, of the taxpayer—you just shove themcash because there’s a rumour that they might? Thereis no claim on the table but, because you’ve had achat with a mate somewhere, you think that it’s goingto happen. It’s like Fred Karno’s circus; it’s not theSerious Fraud Office. It is not the way to spend publicmoney and it is absolutely outrageous that you shouldhave done that.Richard Alderman: First of all, you’ve got to looknot just at the claims on the table but what likelyclaims there are. What you do not want to produce isa situation where somebody leaves and then shortlyafter that they bring their claim. You want to close itall off so that you can then move on, they can moveon and nothing more happens.

Q50 Mr Jackson: How much did you payBeachcroft for this advice, which you ignored?Richard Alderman: I don’t know how muchBeachcroft were paid. That would be a matter ofrecord that the SFO will have. From my point of view,I knew the issues. I set it all out. You are telling methat I should make detailed notes, and there is a verydetailed note of the issues and of my assessment ofthe likely result of all that and of the damages likelyto be paid.

Q51 Chair: Mr Green, have you got that detailednote? Have you looked for it?David Green: No. Mr Hurdle had open access to gothrough any contemporaneous documents whatever todo with this. I am totally unaware of it. I repeat myoffer that Mr Alderman is very welcome to come tothe SFO and have access to any document pertainingto his period in office.Richard Alderman: This is a document that Iprepared for the NAO, because I was told—

Q52 Chair: Have you got it?

Mandy Measures: We have a memo that was preparedby Mr Alderman, but, again, it just rehearses thereasons why he decided to make the people redundant.It does not—again—give us any evidence of anyapprovals being obtained.Richard Alderman: We are talking about the wrongnote. My note set out the details of the three issues. Itwas a note that I did probably in early April, and itwas a note that I said to my colleagues must be givento the NAO, because it set out all the detail of theseclaims and why in my view it was proper to makethe settlement.

Q53 Stephen Barclay: Could I just clarify? Are yousaying 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 youacted without making any contemporaneous recordthat you can share with us?Richard Alderman: No, the legal advice was, as Isee it from Mr Hurdle’s opinion, on the basis of thetermination, so this is nothing to do with that. Thesecosts were not given—

Q54 Stephen Barclay: No, no. You said that theinformation came to you from your HR person.Richard Alderman: My HR person told me thatFarrer’s, the legal advisers, were pressing on this.

Q55 Stephen Barclay: Your HR person is not thelawyer. Was your HR person a lawyer?Chair: Mr Green is waving.David Green: We do indeed have a document, whichis a memo from Mr Alderman to the head of HR dated20 April, his last day, which deals with the £15,000ex gratia payments and his reasoning for them. I amsure that that is the document he is talking about.Forgive me; when he said a note, I thought it was anote in the notebook. I will hand it over, because itmay assist.Richard Alderman: Yes, that’s right. I did a detailednote about all these issues, and it was a note for theNAO.

Q56 Chair: But that does not alter your view,Amyas.Amyas Morse: It is just a narratival treatment. It isnot evidence. It is just a narrative of reasons, muchlike what we have just heard.Chair: Oh, dear. Stephen, have you finished?

Q57 Stephen Barclay: The person on whose adviceyou relied—were they a lawyer? The HR person?Richard Alderman: He was a senior HR professionalwith a lot of experience. Ultimately, it was mydecision. I thought to myself, if I am sitting therelooking at an employment tribunal, would I pay£5,000 for this? I knew the strength of their case onissue 1 and the other issues, and I thought they wouldget 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 inherentinability to say yes or no. Either the HR person whoadvised you was a lawyer, or they were not. In

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essence, you took advice from someone who was nota lawyer, as opposed to the advice from those whowere lawyers, which you were paying for. You tookthe HR person’s advice—non-legally qualifiedadvice—based on discussions with the other party.Could it possibly be the case that the other party wastrying to push their claim more than they might beable to substantiate? It would not be an alien conceptfor a litigation party, their partner from the other side,to be trying to push the boundaries of what theymight claim.Richard Alderman: There were various areas wherethey pushed, and we rejected them. We were notprepared to make the payments that they were lookingfor, so we pushed back on that and refused to pay. Onthis one, my view was that they would have succeededin an employment tribunal.

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

Q60 Nick Smith: Do you have internationalobligations as part of your job for all those trips?Richard Alderman: First, the trips that I picked upwere partly my trips, but also I was covering for thepeople who had left the organisation. In the past, ifyou looked at the pattern of my foreign travelling forabout the first three years, you would see that Iprobably did about three or four trips a year.Nick Smith: Hold on a second. The year before youdid six, actually.Richard Alderman: Right, fine. In my last year, I hadlost my general counsel who had done a lot of thisforeign travelling. I had lost my head of anti-corruption and various other people who also did a lotof this foreign travelling. We were trying to talk topeople in a number of countries about the Bribery Actand about the approach of the UK to that Act. Therewas a lot of demand and interest in that. If I had stillhad my general counsel and my other people, I wouldhave done a fraction of that travelling. Since they hadleft for various reasons to do with the fact that theydid not think that the SFO had a future, I had to pickall of that up. It was a real problem. In this day andage of communications, it is possible to keep in touchwith the office, as I did, when you are in other places.

Q61 Chair: But Mr Alderman, your chief executivewas sitting up in the Lake district. More than 20% ofyour time—if you have regard to holiday and otherthings a quarter of your time—was abroad talking topeople about legislation. Is that really a way to leadan organisation?Richard Alderman: If you look at the figures, aquarter 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. Ofcourse, don’t forget that a lot of that was overweekends. In terms of whether it was the right wayfor a senior management team: no, because we weretoo thin. One of my regrets—

Q62 Nick Smith: Can I just stop you? You say youwere too thin, some senior people had left, but youchose to go out of the country and travel around theworld.Richard Alderman: Because that was what wasneeded on the Bribery Act. I thought there was coverin the SFO. Indeed, we had a number of other peoplethere to keep going.

Q63 Nick Smith: Can you please list the places youwent?Richard Alderman: I was asked by the Foreign Officeto go to China and the Philippines. I was a memberof the executive committee of an association of anti-corruption authorities and I had a trip to China andone 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 ofthe OECD. I can’t remember off-hand some of theother ones.Nick Smith: I’m not surprised, whizzing around theglobe like that.

Q65 Mr Jackson: Coming back to the circumstancessurrounding the exit of these individuals, faced withthe decision about the severance payments, which isobviously contentious, was an option sought via anHR specialist or an employment lawyer to reconfigurethe office, essentially to place the individuals inalternative jobs?Richard Alderman: They had eight or nine months tolook for other jobs. They were told by the AttorneyGeneral’s Office and the Treasury Solicitor’s Office inthe summer that they could stay on for a month ortwo, then they were expected to clear their desks andleave. So they had about eight or nine months’ noticethat they had to find something. They both hadextensive networks in different parts of Whitehall andelsewhere, but they were unable to find anything, andI could not see anything in the Departments I knowanything about. That is not surprising, because thesenior civil service is slimming down at anunprecedented rate. There are not the opportunities.So there was nothing else for them.

Q66 Mr Jackson: Did you conclude at the time thattheir roles and responsibilities were redundant, andthat effectively their jobs had disappeared? That iscrucial to a value judgment on constructive dismissal.Richard Alderman: Their jobs had changed. My viewwas that the new director would probably not want tocontinue with those roles.

Q67 Chair: Why didn’t you talk to him? There youare, sitting with a chair between you—you could have

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talked to each other. Why didn’t you? You are verygood at picking up the phone, Mr Alderman, but youdidn’t pick up the phone to the key person, yoursuccessor.Richard Alderman: Because Mr Green was appointedin December, and a lot of the discussions about theirroles took place the previous summer.

Q68 Mr Jackson: My final point is, did thecontroversy and ongoing debate about whistleblowinghave no bearing on the future of their employmentprospects?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 disguiseddismissal to just ensure that they got more money?Richard Alderman: No. They were terminating theircivil service careers 10 years early, but it had nothingwhatsoever to do with the whistleblowing allegations.

Q70 Chair: No, but were they, in effect, beingdismissed, ns rather than dismiss them you made themredundant? Of course, you hung on until after theywere 50, so they qualified for a better pension deal.Richard Alderman: I am not sure that is exactly righton 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 makemuch difference.

Q71 Chair: Were they being dismissed?Richard Alderman: No, they agreed to an early exitpackage. Probably, in terms of employment law, thattechnically means a dismissal, for which theGovernment would need to produce justification. TheGovernment’s justification would be that jobs aredisappearing, things are changing and the civil serviceis slimming dramatically.Chair: There might be other issues, to which StewartJackson alluded.

Q72 Mr Jackson: You have been pretty categoricalabout that. My final point, going back to mysubstantive question, is how long did it take you toconclude that they did not have a future at the SFO?In other words, was there any meaningful attempt tofind alternative employment, and how much time didthat take? Was it a decision made in a week, or wasthere an effort over a few months to look at alternativeoptions for them?Richard Alderman: If they could have foundsomething between the summer, when they weregiven the messages, and the time when they signed theagreement, which was some time in the first quarter of2012, they would have gone for those otheropportunities. But there was nothing. It is notsurprising, with the civil service slimming down somuch, that they could not find anything. I certainlywas not aware of anything they could do in anotherDepartment.

Q73 Chair: Mr Green, just out of interest, have youappointed a chief executive officer?David Green: No.

Q74 Chair: Have you appointed a chief capabilityofficer?David Green: No.

Q75 Chair: And have you appointed a head oftechnology 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 anaccounting officer, I was sent a copy of it. Actually,it was not immediately on my appointment, but theTreasury sent me a copy of it some months after I wasappointed, and I read it.

Q78 Chair: Okay. I think if the Treasury were herethey would say that they sent it straight away. Weare pretty insistent that accounting officers understandtheir responsibilities. In that, you would have seen thatit is necessary to get relevant approvals to anyredundancy agreements you make. I just want to drawthat to your attention.Richard Alderman: Certainly, if there were anyfailures in respect of the Whitehall processes on thefinance, then, yes, the Committee has my apology. Weneeded to improve on what we were doing on finance.That was something that Alex Allan said to me, and Iimmediately brought in an interim SCS financemanager in order to help and to scope out what wasneeded so that Mr Green could be advised on whatwas needed. In terms of any problems about finance,yes, they are my responsibility and I apologise.

Q79 Chair: You are in fact apologising for havingreached agreements that were beyond—Richard Alderman: No, I am not.Chair: Well, they are financial.Richard Alderman: Indeed, but I have given myexplanation for why I did what I did. If I should havegone to the Treasury for approval for the £5,000—Iwouldn’t have done it if we were negotiating inrespect of court, but if I should have done it in thosecircumstances and gone to the Treasury for the£5,000—Chair: £15,000.Richard Alderman: No, for the £5,000. That was theoriginal decision: £5,000.Chair: £15,000.Richard Alderman: It went up to £15,000 right at theend, but the initial claim—Chair: But you authorised the £15,000.Richard Alderman: I authorised £5,000, on the basisthat that was for me—Chair: It was £15,000.Richard Alderman: It then went up to £15,000because of two further issues.

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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, whereI agreed £5,000 and they would have been seekingsignificantly more. That was the only issue on thetable at that time. Later on, issues 2 and 3 came tolight, as the note explains, and they said that theywanted 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 Ihave done. It was in respect of malicious allegationsthat 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 allegationsbeing made. By whom and about whom?Richard Alderman: Issue two relates to somemalicious allegations that were being made by somemembers of staff about a particular issue. It is all setout in the note, and that will be available to theCommittee. There are names mentioned. As a retiredcivil 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 thecivil service.

Q83 Chair: Mr Green, the Treasury has notauthorised the payment of the £15,000. That is myunderstanding.David Green: No.

Q84 Chair: So what are you doing now?David Green: That is the problem. In relation to MrBailes, who had an agreement that he was entitled to,amongst other things, a £15,000 payment, I took legaladvice that said it was an enforceable contract. Whenwe asked the Treasury for permission to make thatpayment upon Mr Bailes’s departure at the end ofDecember, it declined permission because it was anirregular payment. I am therefore in this position: Iam the head of the prosecuting authority, the SeriousFraud Office; having had legal advice saying that acontract is enforceable, am I actually to say to MrBailes, “You can’t have it; sue me,” and then pay it,thus occasioning more expense?

Q85 Mr Bacon: That would be in the time-honouredtraditions 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, butwith great respect I am not sure that is the right wayfor a public authority to behave.

Q86 Chair: So what are you going to do?David Green: I welcome any advice the Committeemight feel able to give. I will have to think about it.

Q87 Chair: Get the money out of Mr Alderman. MrAlderman, 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 youreceive any benefit in kind from either of thoseconsultants during your time?Richard Alderman: I received nothing from PAConsulting; the only benefit I received from Corvenwas a ham sandwich, consisting of two slices of whitebread, a piece of ham and no lettuce.

Q88 Chair: Did Phillippa Williamson, Ian McCall orChristian Bailes receive any benefit in kind at all fromeither of those two consultants?Richard Alderman: No.

Q89 Chair: Did either you or they have any relativesemployed through an agency working in the SFO?Richard Alderman: No.

Q90 Chair: Are you sure?Richard Alderman: I have no relatives working forthe SFO.

Q91 Chair: Not now. During your time there, dideither you, or Phillippa Williamson or Christian Bailesor Ian McCall have a relative working in the SFO,directly or perhaps through an agency?Richard Alderman: I think Ian McCall’s daughtercame to us for a short while through an agency, butshe was recruited in the normal way—through anagency.

Q92 Chair: Do you think that that was appropriateand proper, given the nature of the organisation thatyou were running?Richard Alderman: I heard about one or two ofthese—

Q93 Chair: One or two?Richard Alderman: I think that the sister of a formerhead of IT was recruited through an agency, but Ithink she started after the head of IT had left. When Iheard about it, no, I was not satisfied.

Q94 Chair: What action did you take?Richard Alderman: I told people that this was notsomething that I wanted to see.

Q95 Chair: Did you make sure that they left thepremises—did you sack them?Richard Alderman: I think that I heard about some ofthis after the event. And these people were only withus for a short time. It was not something that I wantedto see.

Q96 Mr Bacon: Just a couple of quick points forclarification, Mr Alderman, if I may. On Beachcroft,you said in your note, “I asked what advice our privatesector lawyers Beachcrofts were giving to us.” The“I asked” in that is you asking your HR person—isthat right?Richard Alderman: I did.

Q97 Mr Bacon: Okay. “I was informed that theiradvice was that we could deny liability”—that is, youwere advised by your HR person that Beachcroft’sadvice was that you could deny liability—“and take

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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 absolutelycorrect 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, youpaid for that with public money—without reading thelegal 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 theadvice was on. With respect, I am asking you a verysimple question: did you read it?Richard Alderman: No, I did not read the legaladvice—Mr Bacon: Thank you. That is the answer to myquestion—Richard Alderman: Because it did not cover all theissues—

Q100 Mr Bacon: Thank you. I wanted the answer tomy question, and you have given that: you did notread the legal advice. You go on to say: “Against thisI had to balance the fact that very experienced lawyersfor Ms Williamson and Mr Bailes were supportingthem in these claims.” When I read that, I must admitthat I thought surely the interesting things there wouldbe the facts and the law, but it turns out that you didnot read the legal advice.Three more questions. How many senior civil servantsleft the SFO between your appointment and March2010?Richard Alderman: The SFO would know thenumbers for that. There were quite a number of SCSpeople—Mr Bacon: How many?Richard Alderman: I don’t know. I am no longer inthe SFO, so I don’t have access to—Mr Bacon: But you were there when they left.Between your appointment and their departure, howmany?Richard Alderman: Probably eight or nine or 10, butI don’t know. It would be a matter of record for theSFO.

Q101 Mr Bacon: How many of them hadconfidentiality clauses in their terminationagreements?Richard Alderman: I don’t know.Mr Bacon: You don’t know?Richard Alderman: Nope.

Q102 Mr Bacon: Are you aware whether any ofthem had confidentiality clauses in their terminationagreements?

Richard Alderman: No idea.

Q103 Mr Bacon: Did you seek confidentialityclauses 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 toyour HR person?Richard Alderman: To the HR team, yes.

Q105 Mr Bacon: So you didn’t have a conversationon a park bench in St James’s Park where you said,“For Christ’s sake, make sure there are confidentialityclauses,” or anything like that?Richard Alderman: Nope.

Q106 Mr Bacon: So you know nothing aboutwhether there were or were not confidentialityclauses?Richard Alderman: I don’t know whether—

Q107 Mr Bacon: Presumably, it is a matter of recordwhether there were or were not confidentialityclauses?Richard Alderman: Yes.

Q108 Mr Bacon: That is presumably something thatwe can look into further. Mr Green, would youperhaps be able to help us with that?David Green: Certainly.

Q109 Mr Bacon: Okay, good. Perhaps you can let ushave a note in due course via the National AuditOffice. Could you let us know who they were—MrGreen, it may be more helpful if you do this, as MrAlderman is no longer there and he doesn’t seem toremember much about it.David Green: Of course.

Q110 Mr Bacon: Could you let us know who theywere, their names, the basis for departure in each caseand also the cost of their departures, including anyenhancements to pensions and other payments?Finally, Mr Alderman, were some of these people wholeft replaced during your tenure?Richard Alderman: Some of them, yes.

Q111 Mr Bacon: Were they recruited according tothe requirements of open and fair competition?Richard Alderman: Yes.

Q112 Mr Bacon: Not simply by direct appointment?Richard Alderman: No, there were some opencompetitions in the normal civil service way and therewere also expressions of interest within the SFO.

Q113 Mr Bacon: So it wasn’t all through open andfair competition; some of it was, as it were, internal.Richard Alderman: It was all open and faircompetition, but some of it was restricted to the SFO.I did not have the money to just go out and bring innew people and pay them salaries. It was a mixtureof both.

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Q114 Mr Bacon: I am not quite sure what the “both”is that we are talking about. You said that they wereall open and fair, but some of them were restricted.Restricted sounds to me like the antonym of openand fair.Richard Alderman: They were open and fair, but thetarget audience could have been more restricted. Insome cases, I think it was restricted to the SFO andwe did expressions of interest and interviews—thatsort of thing. In some cases, we actually did advertsin the newspapers, so it would have been open to amuch wider range of people.Mr Bacon: Okay. We will await further details fromMr Green.

Q115 Chair: Very finally, before we get to Austin—sorry Austin, it is my fault.Amyas Morse: Can you confirm whether PhillippaWilliamson was appointed through a competitivecompetition?Richard Alderman: It was a managed move withinthe civil service back in 2008. I think that later therewas a process managed by my then No. 2, but I cannotremember the details.David Green: There is an important detail here.Phillippa Williamson was promoted, apparently, fromSCS1 to SCS2, and we have been unable to find anyevidence of the circumstances of that promotion andconsequent pay rise.

Q116 Chair: Is she an old friend of yours?Richard Alderman: Nope. She had worked with mein the Revenue and she was an exceptionally talentedcivil servant—Chair: So she is an old friend of yours.Richard Alderman: That’s why I thought that, in viewof the problems in the SFO, that was the sort ofapproach I needed.Chair: It is shocking, just shocking. It is against everyprinciple of how public service organisations shouldoperate. It is so against the ethos that we around thistable all share about serving—serving—in the publicsector.

Q117 Austin Mitchell: It looks to me, from theoutside, like this is an organisation run by lawyersfor lawyers and the prolongation of their perks andpredilection for easy money. I was therefore interestedin what The Times said on Monday:“An investigation by The Times has found that seniorfigures at the agency”—under your period, MrAlderman—“were accused of fostering a culture inwhich favourites and family members were allegedlygiven plum jobs and expensive managementconsultants were used in breach of government rules.“Executives were also accused of accepting expensivefree gifts from the consultants, including, on oneoccasion, a luxury spa weekend”—wahoo!—“worthmore than £1,000, confidential documents reveal.” Isthat a fair characterisation of the way the place wasrun?Richard Alderman: Mr Mitchell, if you read furtherdown that article, you will see that the journalist saysthat these issues were investigated and were found tobe incorrect and without substance.

Q118 Austin Mitchell: It says that, but did thosethings actually happen?Richard Alderman: No, not at all.

Q119 Austin Mitchell: So none of those allegationswere true?Richard Alderman: That’s right, none of them weretrue. The journalist makes it clear in that article thatthe investigation into those issues found that there wasno 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 hada memo from the PCS, which says:“We have serious concerns about payments made tosenior officials regarding bonuses and compromiseagreements as well as other governance matters. PCSraised concerns about these payments with the newDirector”—that’s you—“back in April 2012”—whenyou were appointed—“to which a response has neverbeen received. We are concerned that the payments tosenior officials—including the former ChiefExecutive—which were yet to be made—werehighlighted by us to the incoming Director and asuggestion made to him that these payments weredeferred pending a review. The Director did notrespond or explain why he chose to ignore thisopportunity to stop the payments.”It goes on, without saying that this has beeninvestigated and proved to be false: “We are alsoconcerned that money has been wasted on officerefurbishments and away days for senior staff” and“The findings of the staff survey released in Decembercontinued to show the SFO as an employer”—this isnow, in your period—“rife with bullying andharassment of staff and general low morale. Thesurvey results keep the SFO towards the bottom of thecivil service staff survey results table.” It looks likeyou have ignored their suggestions and not improvedmatters.David Green: I think I ought to make absolutely clearwhat I have done about the allegations contained inthat letter since I came to office—sunlight being thebest disinfectant. As soon as I heard about thecircumstances of these departures, I informed theAttorney-General’s office on 17 May. I spoke to theTreasury Solicitor, who eventually agreed to theappointment of Tim Hurdle to do a full investigation. Iarranged for Treasury Solicitors to brief senior leadingcounsel to advise me on whether I could prevent thepayments. I carried out my own inquiries by e-mailwith Mr Alderman to try to elicit the facts. I soughtan explanation from him and made full disclosure inour accounts published on 1 November. There was awritten ministerial statement on 4 December. Withgreat respect, Mr Mitchell, what else should I havedone?Chair: I am going to draw this to a close, because weare going off the end. Thank you very much indeed.We will be issuing a report shortly.

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Q122 Stephen Barclay: Just one question to theTreasury. What we have heard from the witnesses isabout payments being made without Treasury sign-offand what we heard from Sir David Nicholsonyesterday was about compromise agreements, such asthe one to Gary Walker, being made without Treasurysign-off. Sir David used the phrase “a judicialmediation process”. Could we have an urgent notefrom the Treasury to the Committee on how manypayments have been made through judicial mediationprocesses and how you are assessing bodies withinboth the NHS and the SFO in terms of payments beingmade 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 receivingthat note?

Written evidence from Richard Alderman

Introduction

I was the Director of the Serious Fraud Office from 21 April 2008 until 20 April 2012. I was the AccountingOfficer. I was responsible for decisions in the SFO on the exit arrangements for the SFO’s CEO (PhillippaWilliamson) and the Chief Capability Officer (Christian Bailes). I also agreed the payments to each of them of£15K to settle legal claims.

I have read with great concern the report of the NAO into these severances. The NAO did not ask tointerview me about these issues before publishing its conclusions.

A review was carried out by the Treasury Solicitor’s Department into these payments. I was not shown acopy of the review at the time. I have just been sent a copy although I have not had time to study it in detailbecause I needed to comply with the Committee’s deadline for submitting evidence.

I am grateful therefore to the Committee for the opportunity to appear at the hearing on 7 March in order togive oral evidence in public. I wish to give evidence on oath because of the importance of these issues. Thisnote is intended to assist the Committee in advance by explaining what I did and why.

In summary I was specifically advised by an experienced HR professional adviser at the SFO that all of thenecessary consents to the departures of Ms Williamson and Mr Bailes had been obtained. I was also advisedby my colleague that the arrangements met the standard expected by the NAO.

I was aware at the time that the Cabinet Office and the Government’s private sector lawyers were involvedin the processes leading up to the agreements. There was no question therefore of the SFO dealing with theseverances by itself.

I also acted in good faith in determining the payments of £15K to Ms Williamson and Mr Bailes. Theseamounts settled claims that they were able to bring against the Government. They were strongly supported inthese claims by their own expert lawyers (Farrer & Co).

I have been very troubled by the criticism of the NAO. Clearly if there are defects in what was done by theSFO, then I as Accounting Officer am responsible for this. An apology from me would be due to the Committeefor any such errors. My own actions were taken as I shall explain with the benefit of advice and in good faithbut ultimately the responsibility is mine.

I shall now explain the background to these severances and why I acted as I did. I shall need to deal withthe severances and the £15K payments separately because they raise different issues.

The Period Leading Up to the Severances

In June or July 2011 I had a meeting with the Treasury Solicitor and Head of the Government Legal Service(Paul Jenkins QC). This was to discuss succession planning concerning my departure from the SFO on 20April 2012.

I wanted to discuss two main issues. First, I wanted Mr Jenkins’ advice on whether I should appoint a newGeneral Counsel to replace the General Counsel who had left. Secondly I wanted to remind Mr Jenkins of thedate of my departure from the SFO and suggest that planning should begin on the process for the appointmentof a successor.

Chair: What is reasonable? Two weeks?Stephen Barclay: A week.Marius Gallaher: We will certainly provide thatinformation, if we have got it to hand, but we do notalways know about these cases if they have not cometo us.Stephen Barclay: One would hope that if, aspotentially is the case, this is a way around theTreasury’s own controls, the Treasury will be keen toinvestigate that. Also, if that is the case, there wouldbe very few such cases and therefore there would notbe too many to investigate.Chair: I would hope that there are very few. MrGreen will have to seek that £15,000—the three orfour who got it; however many got it—fromsomewhere else, outside Government. Thank you verymuch indeed.

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It was clear from the outset of the discussion that Mr Jenkins was fully aware of the date of my departureand that he had already thought about the arrangements for a new appointment and what a new Directorwould do.

Mr Jenkins told me that a new Director would want to dispense with all of the senior management in theSFO that remained after my departure and move in their own people. He expected that process to be concludedwithin a period of a few months.

Mr Jenkins and I both recalled at the meeting that I had myself changed senior management very quicklywhen I had moved into the SFO. I had been very grateful to my predecessor for his work in enabling me todo this.

Mr Jenkins was particularly concerned that I did not make any new appointments to the SFO’s seniormanagement such as a new General Counsel. Any such appointment would limit the freedom that he wantedthe new Director to have to appoint his or her own senior management. I agreed with Mr Jenkins that I wouldnot do this.

This did cause difficulties for me and for the SFO. I had lost about 50% of the key personnel in the seniormanagement of the SFO over the previous six months (including the General Counsel). They left because ofthe possibility that the SFO would be taken over and broken up by the Home Office and the CPS. The seniormanagement of the SFO was therefore much reduced. This was a matter of great concern to me because eachsenior management member was covering for departed colleagues for a considerable period of time.

I warned the Attorney General formally about the risks that were involved in working with a reducedmanagement team.

During the summer of 2011 Ms Williamson and Mr Bailes were themselves told by senior members of theAttorney General’s Office and senior members of the Treasury Solicitor’s Department that they would beallowed to stay for a month or two after my departure but that they would then be expected to clear their desksand leave. They also understood that other senior managers would be in the same position.

Ms Williamson and Mr Bailes therefore had about 8 or 9 months to find another role in the civil service orface redundancy. This was at a time when there was, and continues to be, very great pressure to reduce thesize of the Senior Civil Service. The prospects of finding another role at SCS Band 2 in those circumstanceswere remote.

My successor David Green CB QC was appointed in mid-December 2011. I had a number of discussionswith him before he took up his appointment. Mr Green made it clear that he did not favour my way ofrecognising the diversity of the SFO by having senior managers from different backgrounds. The traditionalmodel involved lawyers in all of the significant management roles in the SFO and Mr Green wanted to returnto this. This was consistent with the discussion I had had with Paul Jenkins in the previous summer and themessages given to Ms Williamson, Mr Bailes and others.

Mr Green discussed his plans for more lawyer management and other changes with a number of people. Heapparently made it plain to them that the current senior management would be moved out soon after his arrival.Ms Williamson and Mr Bailes were told about these discussions by members of staff and others. Ms Williamsonand Mr Bailes reported this to me.

I strongly recommended to Mr Green on a number of occasions that he should speak to Ms Williamson andMr Bailes before he took up his appointment. He refused to do this. Accordingly the information they received(at second hand) continued to support what they had been told by the Attorney General’s Office and theTreasury Solicitors Department in the summer of 2011.

I should explain to the Committee that I had no issue with Mr Green’s right to decide upon a seniormanagement team that reflected the way that he wanted to run the SFO. The SFO had developed considerablysince the appointment of Ms Williamson and Mr Bailes and it was right that Mr Green should look at thoseroles.

I question though whether it was a sensible way of managing a difficult transition in an office so much inthe public eye as the SFO to tell senior managers that they would be expected to clear their desks and leavewithin a month or two of the arrival of the new Director. I also question the wisdom of Mr Green’s refusal tomeet Ms Williamson and Mr Bailes before his arrival.

The Committee may have guidance to give about how to manage a difficult transition of this nature. It maybe that more thought and consideration needs to be given to how to retain senior staff until such time as thenew head of the office is able to form a view on how he or she wants to move forward. Consideration wouldneed to be given to the discussions needed with the individuals and the support they might need in this. Whathappened here was very different.

The Agreements

During the last quarter of the calendar year 2011 I had difficult conversations with Ms Williamson and MrBailes about the messages they had been given during the summer and my assessment that they would not

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have a future in the SFO under a new Director. I said that I would support them if they had to leave thecivil service.

Both Ms Williamson and Mr Bailes were frustrated by the position they found themselves in and were veryunhappy that they would not be able to complete their civil service careers as expected.

I regarded what I was doing in these discussions as part of what I had agreed with Paul Jenkins. I neededto ensure that it was open to Mr Green from a very early stage to bring in his own people (as he did). Exitagreements meant that Mr Green could proceed quickly and that he did not have to be concerned aboutcompulsory redundancy.

The detailed negotiations concerning the agreements were conducted by a very experienced HR professionalat Senior Civil Service level in the SFO. He and I had a number of discussions about the agreements. I askedfor assurances that all of the necessary consents for these arrangements had been obtained. He gave me hisassurance on this.

My colleague also said that the NAO took a very keen interest in all exit agreements and that we needed tobe ready for very considerable scrutiny by the NAO. He gave me his assurance that the Civil ServiceCompensation Scheme awards met the standards that the NAO would expect. He and I both knew that theprocess for dealing with these severances would be scrutinised with great care by the NAO. We therefore hadevery incentive to get this right and to ensure that proper processes were followed at all times.

I was therefore greatly puzzled by the NAO’s criticism that these severance agreements had not been properlyauthorised. When the NAO report was published I contacted my former colleague (who had left the SFO bythen). He told me that he remained firmly of the view that the severances had been duly authorised. He hasalso told me that he was not interviewed by the NAO about these matters.

The account of what happened in the following paragraphs sets out what my former colleague has told me.

My former colleague had approached the early exit administrators (MyCSP) in the last quarter of 2011 forhelp with the potential severances. He had managed these processes many times in the past and was veryfamiliar with them. When he contacted MyCSP he was told that there was now a new process to be followedand that MyCSP could not implement any early release schemes until the Cabinet Office had approved them.

My SFO colleague made several phone calls to establish the right person to speak to at the Cabinet Office.As a result he spoke to Phil Bartlett in the Cabinet Office. Mr Bartlett was the SCS Pay Band 2 in the CabinetOffice responsible for early exits as well as other areas of work. My colleague explained to Mr Bartlett whathe was doing and asked who was the best person to speak to in the Cabinet Office about approval for the exits.

Mr Bartlett told my colleague that Paul Johnston was the appropriate person to consider this. Mr Bartlettgave my colleague Mr Johnston’s mobile number and email address. My colleague queried the email addressbecause it was a Home Office address. Mr Bartlett told my colleague that Mr Johnston was on secondment tothe Cabinet Office. My colleague learned later that Mr Johnston was a senior manager in the Cabinet Office.

My colleague contacted Mr Johnston and gave him full details of the exit proposals. He then followed upthat conversation with an email to Mr Johnston which detailed the context and the reasons for supporting theseexits. The Cabinet Office agreed to consider this.

A few days later MyCSP rang my colleague and said that they could now process the early exits by MsWilliamson and Mr Bailes. My colleague understood from this that the Cabinet Office had told MyCSP thatapproval had been given. This was a reasonable conclusion since MyCSP had earlier told my colleague thatthey could not implement the exits without Cabinet Office approval. Because MyCSP implemented the schemesfor Ms Williamson and Mr Bailes it is reasonable to conclude therefore that Cabinet Office must have givenMyCSP approval to proceed with these exits.

My former colleague is prepared to state all of this under oath.

I should add that It is not clear to me why and how MyCSP paid these exits if, as the rules apparently state,they cannot be processed without a unique scheme reference number. That number can come only from theCabinet Office. It is not a matter for the SFO.

Reference has been made to whether Treasury consent was needed for these exits. The understanding of mySFO colleague (which I accepted) was that Treasury consent was not needed. The approval that was neededwas from the Cabinet Office. He believed very reasonably that this approval had been given and I accepted this.

I should add for completeness that Ms Williamson’s departure date was a few days earlier than my departuredate from the SFO. Mr Bailes’ departure date was the end of May (ie about five weeks after my departure). Infact I understand that Mr Green decided that he did in fact want Mr Bailes to remain in the SFO beyond thatdate. Mr Bailes eventually left at the end of December 2012. This meant that Mr Green would have needed tovary the severance agreement so that it took effect on Mr Bailes’ departure in December.

I understand that Mr Green did this and that he sought and obtained retrospective authority from the CabinetOffice and the Treasury to the agreement. It is not clear to me why Mr Green decided to do this for Mr Bailes

Committee of Public Accounts: Evidence Ev 15

and not for Ms Williamson (assuming that approval had not previously been given). Both agreements wereexactly the same (apart from differences in figures because of length of service etc.).

As the Accounting Officer I regret the fact that doubt has been cast on whether these severances wereauthorised by the Cabinet Office. My SFO colleague is firmly convinced that they were. This was why he wasable to give me the assurances that he did. Others worked on the basis that approval had been given.

Ultimately it was my responsibility as Accounting Officer to be sure that the proper processes had beenfollowed. In the light of what happened at the time I believe I was justified in accepting the assurances that Iwas given. It may be though that the Committee needs to give guidance to Accounting Officers on thedocumentation they must see to check that proper processes had been followed.

In conclusion on this aspect of the agreements, I very much regret any failings on my part as AccountingOfficer for any shortcomings in process. I can state unequivocally though that I (and my SFO colleague andothers) genuinely believed that approval had been given. I believe that this was a reasonable view based onwhat I have said in this statement.

The Payments of £15K

Compromise Agreements are designed to enable a line to be drawn under the past and to dispose of alloutstanding issues between the individual and the employer concerned (the civil service in this case). Theseagreements therefore contain a provision under which the individual agrees not to pursue any grievances orlegal claims against the civil service (including individuals in the civil service) that they might have. To makethis waiver effective in law, a monetary sum has to be paid by the civil service to the individual even if thereare no issues. A nominal sum of £100 is agreed if there are no issues.

The grievances or legal claims can be those that the individual has already initiated together with those thatthe individual is able to commence. Agreement to settle these potential claims is necessary to avoid thepossibility that the individual might bring claims after leaving the civil service. Regard has to be paid thereforeto claims that can be brought within the relevant limitation periods.

I should add that the NAO have characterised these payments as “special severance payments” in excess ofthe contractual entitlement. With respect I do not accept this. Ms Williamson and Mr Bailes received what theywere entitled to receive under the Civil Service Compensation Scheme. There was no question of adding anextra sum to the award under the Scheme. The payments made were to settle legal claims by Ms Williamsonand Mr Bailes. Even if there had been no redundancy it is highly likely that those claims would have continued.The Government would have had to deal with these claims.

I shall discuss in outline what happened here. Before I left the SFO I prepared a full and detailed accountof what I did. I wrote this because I was advised that the NAO would want to look at this with considerablecare and that a full audit trail from me was needed. I therefore prepared a note in which I described the claimsin detail. I gave my assessment of the likelihood of their leading to successful action and my quantification ofthe claims.

I left the note in the SFO when I retired with instructions that it was to be shared with the NAO when theNAO looked at these payments. It will be for the Committee to decide whether to ask the NAO for the note Iprepared to be disclosed to the Committee so that it is possible for the Committee to understand the nature ofthe claims and why I acted as I did.

This issue arose for the first time during the course of the negotiations for the severance agreements. I wastold that Ms Williamson and Mr Bailes were refusing to accept the nominal payment of £100 because theyboth believed that they had claims against the civil service in respect of what I shall call Issue 1. This issue(and Issues 2 and 3 to be described later) had nothing to do with the way that the severances had been handled.

I asked if Ms Williamson and Mr Bailes were supported by their own independent lawyers in this and thiswas confirmed. They were both represented by the expert legal firm Farrer & Co.

Ms Williamson and Mr Bailes said that they were prepared to settle their claims over Issue 1 for £5K. Thiswas so even though Farrer & Co (as I understand it) were encouraging Ms Williamson and Mr Bailes to takelegal action. Ms Williamson (as I learned later) was advised by her lawyers that she could expect to receivedamages of around £72K if this case went to court.

I asked what advice I was being given on this. I was advised by my SFO colleague that this was a matterfor me as Accounting Officer. My recollection is that he said that this was the advice of the Cabinet Officealthough my colleague says that he cannot recall now mentioning the Cabinet Office in this connection.

In any event it seemed to me that the decision over this £5K was for my judgment as Accounting Officer. Ineeded to assess the prospects of Ms Williamson and Mr Bailes bringing a claim. I also had to assess who waslikely to be successful in any litigation and the damages (and the costs) if the litigation went in favour of MsWilliamson and Mr Bailes.

I asked what advice our private sector lawyers (Beechcrofts) were giving to us. I was informed that theiradvice was that we could deny liability and take the cases to litigation if we wanted. Against this I had to

Ev 16 Committee of Public Accounts: Evidence

balance the fact that very experienced lawyers for Ms Williamson and Mr Bailes were supporting them inthese claims.

The position therefore was that I had to take a view on this in my capacity as Accounting Officer. I had hadexperience of Employment Tribunal work and this type of litigation as head of the SFO and in an earlier rolewhen I had been head of General Legal Services for the Inland Revenue for some five years. One of my areasof responsibility in that role had been Employment Tribunal and employer-employee litigation work. The workwas led by a member of the SCS who reported to me. I was involved though in any difficult or sensitive casesand so I had experience of the approach of the Tribunal. I drew on that experience in deciding what to do here.

The note I have referred to sets out my reasoning in detail. I took the view that there were failures by thecivil service that could have led to a successful case by Ms Williamson and Mr Bailes. I also believed that theprospects of Ms Williamson and Mr Bailes starting a case were very high and that they would do so unless wereached agreement. It seemed to me that the figure of £5K was modest and was probably well below whatwould be awarded by a Tribunal or court (ignoring the substantial costs involved for the civil service). I havementioned above that Farrer & Co (as I learned later) had advised that a court would award damages of some£72K to Ms Williamson.

Later Issues 2 and 3 came to light. Ms Williamson and Mr Bailes said that they would want these issuesdealt with as part of the severance agreements. Again they were supported by their lawyers in this. They askedfor a further £10K each. I agreed to this because I believed that their claims had merit and were likely to besuccessful. Again I set out my reasons in my note.

I acted on the basis that these issues were for my judgment as Accounting Officer. I formed the best viewthat I was able to make about the strength of the claims and the prospects of success for Ms Williamson andMr Bailes.

My Pension Arrangements

I shall deal with this because there has been some publicity concerning the arrangements for my departurefrom the civil service. I have therefore included an Annex in which I explain what happened.

Richard AldermanFormer Director Serious Fraud Office

2 March 2013

Annex

TO EVIDENCE OF RICHARD ALDERMAN

My contract with the SFO came to an end on 20 April 2012. I was however a permanent civil servant witha retirement date on my 60th birthday on 5 August 2012. I had made additional contributions to the CivilService Pension scheme over a period of about 25 years and so I would have been entitled to a full civil servicepension following retirement on 4 August.

I had raised the various options with the Attorney General’s Office and the Treasury Solicitor. Briefly I couldhave gone on gardening leave from 21 April to 4 August or I could have taken on some other role. AlternativelyI could enter into a severance arrangement and leave the civil service on 20 April. I made it clear though thatI would be prepared to do that only if I received the pension that I would have received from 5 August. Theadditional amount needed to ensure that (because the pension would be brought forward by a few months) wasaround £44K.

This caused great difficulty. The SFO Board (and in particular the non-executives) dealt with this issue andquite properly did not involve me. Their view was that what happened from 21 April was not the responsibilityof the SFO and that they would not be justified in using SFO money to pay the £44K. As I understand it theAttorney General’s Office was not able to assist either whether by way of paying the £44K or offering mesome alternative work until 4 August.

It was therefore quite unclear until a very late stage what the position would be. There was a real prospectthat no-one would pay me from 21 April until 4 August and that I would receive a reduced pension on 5 August.

It was then discovered that if I left on 20 April I would be entitled to a payment from the pension providers(MyCSP) of about £112K. This was not something that I or others had been aware of. I said therefore that thesolution was for £44K to be applied to make up my pension contributions so that I could receive a full pensionfrom 21 April. I said that I would not take the balance of £68K. The reason for this was that it did not feelright to me to take such a large payment over and above my requirement of the pension I would have receivedhad I worked for about another three months.

My understanding is that no-one in the SFO or the Attorney General’s Office was prepared to sign off thispackage. It was necessary therefore for an approach to be made to Sir Bob Kerslake for approval. A full notewith all of the details was sent to him. He agreed that this was the appropriate way to proceed.

Committee of Public Accounts: Evidence Ev 17

As a result therefore I received the full monthly pension I would have received had I retired on 4 Augusttogether with a lump sum (subject to deduction of tax of about £100K).

Written evidence from PCS

1. The Public and Commercial Services Union (PCS) is one of the largest trade unions in the UK, with over260,000 members. We are organised throughout the civil service and government agencies and also organisewidely in the private sector, usually in areas that have been privatised.

2. PCS is the largest union in the Serious Fraud Office (SFO) with around 55 members and have previouslyexpressed concern about the financial practices, both of the previous and current SFO management and thelack of transparency.

3. The SFO accounts for 2011–12 were qualified by the National Audit Office and the Public AccountsCommittee has rightly raised concerns about the irregular payments made to the former Chief Executive.

4. We have serious concerns about payments made to senior officials regarding bonuses and compromiseagreements as well as other governance matters. PCS raised concerns about these payments with the newDirector back in April 2012 to which a response was never received.

5. We are concerned that the payments to senior officials—including the former Chief Executive—whichwere yet to be made—were highlighted by us to the incoming Director and a suggestion made to him thatthese payments were deferred pending a review. The Director did not respond or explain why he chose toignore this opportunity to stop the payments.

6. PCS believe that since the new Director came in, there was a severance payment made in the region of£50,000 made to a senior official who had been hired on a two year fixed contract at a time when the SFOwas publicly being reviewed by the coalition government with one of the options being closure.

7. PCS are concerned that the internal HR function that would have overseen the payments which theNational Audit Office have said were irregular is not fit for purpose. The former Director is reported in the pressas having had the payments confirmed by HR, the head of which remains in post and should be accountable.

8. We are also concerned that money has been wasted on office refurbishments and away days for seniorstaff and that proposed savings will not be achieved as the new premises are unsuitable. We are also concernedthat there may be at least one member of senior civil servant benefitting from home to work travel expensessimilar to the arrangement Phillip Williamson.

9. PCS believes that there is a disproportionately high ratio of senior civil servant grade staff in theorganisation, approximately one to every 22 members of staff.

10. The findings of the staff survey released in December continued to show the SFO as an employer rifewith bullying and harassment of staff and general low morale. The survey results keep the SFO towards thebottom of the civil service staff survey results table.

Suggested Questions

PCS have put a number of suggested questions together which may be helpful for members of the committee.

Staffing Issues

What steps are being taken to address low staff morale?

How many staff are employed by the Serious Fraud Office and what proportion of these are senior civilservants?

What is the number of permanent ie non contractor investigators at the Serious Fraud Office and the numberof other staff including Senior Managers who are not investigators?

What is the total number of personal assistants allocated to the senior civil servant grade staff?

Accommodation Issues

How much has been spent on the office refurbishment for the Serious Fraud Office premises at CockspurStreet, London and what are the plans for expanding to meet the extra space that is needed to houseinvestigations such as Libor ?

What will be the total real savings if additional premises are needed and how will you function if additionalpremises are not funded?

How much has been spent on building and kitting out senior civil servant offices in the new Cockspur Streetpremises? Why does each senior civil servant need their own office whilst the rest of the staff hot desk at aratio of one desk per eight staff? How much floor pace does the senior civil servants’ offices take up from theoverall staff working area not including the document storage floor?

Ev 18 Committee of Public Accounts: Evidence

Away Days

How much was spent on the away days for Serious Fraud Office senior civil servants held between 17 and19 October 2012 and why could existing facilities not have been used at nil cost?

Why did some senior civil servants need to take taxis to this event when it was next to a railway station?

Payments Made to Senior Officials

How much was spent on severance payments made to outgoing Serious Fraud Office staff, including fixedterm contract staff, by grade for each of the last four quarters?

How many staff on fixed term contracts that left or had their contracts terminated and received a paymentin the last four quarters?

Could you give details of all bonus payments or ex gratia payments made to all senior civil servants includingfixed term contract staff for each of the last four quarters?

Why was senior civil servant Ian McCall hired on a two year fixed contract at a time when the SFO waspublicly being reviewed by the coalition government with one of the options being closure or merger? Whydid Ian McCall get an ex gratia payment, what was it and who authorised it? were the terms of Ian McCall’scontract regarding notice period?

Was the severance payment and ex gratia payment made to the former Chief Executive made after thecurrent Director commenced office?

Can you give details of the advice given by the SFO Human Resources department to the former Directorin respect of the payments made to the former Chief Executive, and who was responsible for advising him?Has any disciplinary action been taken against anyone in Humane Resources or anyone else in the SFO overthese matters?

Did the current Director promote the Head of HR and if so, what were the reasons for this decision? Detailsof any taxpayer financed gift(s) provided to the outgoing Director Richard Alderman?

4 March 2013

Written evidence from the Cabinet Office

I am writing in connection with the Public Accounts Committee (PAC) hearing on 7 March 2013 on thequalification of accounts for the Serious Fraud Office (SFO). I am the Deputy Director in charge of the teamwith policy responsibility for the Civil Service Compensation Scheme (CSCS), including the process by whichexits under the scheme are approved under the Cabinet Office Spending Controls process. I hope it is helpfulto the Committee to receive some further information on this process, and Cabinet Office involvement in anumber of senior exits from the SFO that I understand are of interest to the Committee.

Process for Approvals from the CSCS

The CSCS sets rules on how payments to staff in respect of voluntary exit, voluntary redundancy andcompulsory redundancy should be calculated. The CSCS was reformed in December 2010 which resulted inlower overall costs to the taxpayer from paid staff exits compared with the previous scheme. Cabinet Officehas established a number of Spending Controls across central Government bodies, one of which relates toRedundancy and Compensation. Guidance on these controls, and the corresponding processes to follow, hasbeen issued to bodies that the controls relate to, through both Departmental Single Points of Contact, as wellas via individual Employer Pension Notices (“EPNs”) and an overarching Employers Pension Guide1.Separate guidance has been issued to MyCSP as the scheme payment administrator. As a central Governmentbody that is an employer member of the Civil Service pension and compensation arrangements, the guidancerelates and applies to the SFO.

In brief, the process set out for employers to follow requires them to submit a business case template to asingle Cabinet Office e-mail address administered solely by my team, copied to the relevant HM TreasurySpending Team, for each exit or redundancy scheme that they wish to run. A scheme can relate to single ormultiple individuals. My team scrutinises these business cases to check employers are using the CSCS for itsintended purpose and that they are not proposing to make payments beyond the parameters set out in thescheme rules. Upon approval, my team supply the employer with a Unique Scheme Identifier, that they thenproduce to the scheme payment administrator, MyCSP Ltd, as proof that their scheme has Cabinet Office1 See for instance:

https://www.gov.uk/government/publications/cabinet-office-controls-guidance-version-3–1http://www.civilservice.gov.uk/pensions/guidance-for-employers/employers-pension-guidehttp://resources.civilservice.gov.uk/wp-content/uploads/2011/09/EPN-291_tcm6–38089.pdfhttp://resources.civilservice.gov.uk/wp-content/uploads/2011/09/EPN-298-Civil-Service-Compesation-Scheme_tcm6–38642.pdfhttp://resources.civilservice.gov.uk/wp-content/uploads/2011/08/EPN315.pdf

Committee of Public Accounts: Evidence Ev 19

approval. No-one else in Cabinet Office outside my chain of command would have been authorised to approveexit or redundancy schemes on behalf of Cabinet Office in respect of these SFO cases.

Cabinet Office Involvement in SFO senior exits

My team first became involved in Board-level exits within the SFO through an application made in respectof the former Director, Richard Alderman. In March 2012 we had correspondence and conversations with theSFO that resulted in us sending through the approvals guidance and templates to Ian McCall, Head ofTechnology and Specialist Services. The Chief Executive of the SFO, Phillippa Williamson, then made a formalapplication in respect of Mr Alderman through an incorrect channel, sending a letter to Sir Bob Kerslake asHead of the Civil Service. Once the letter had been redirected to my team, we advised SFO again on theprocess to follow. There was further correspondence with SFO on the terms of Mr Alderman’s exit. Once wehad received the necessary information my team were content that the exit was appropriate as regards use ofthe CSCS and in late April we approved the one-person scheme for him.

My team were not involved or approached by SFO in respect of further Board-level exits, until we heardsome months later that payments had been made or agreed. No mention was made of these further Board-levelexits during discussions and correspondence on Mr Alderman’s exit that took place with Ian McCall andPhillippa Williamson. A further fresh application was made by SFO in respect of Christian Bailes in November2012, which my team scrutinised and approved.

I understand claims have been made that conversations took place between the SFO and MyCSP. It may behelpful for the Committee to have some background on the changes taking place to the scheme administrator,MyCSP, at the time that I understand the unauthorised payments were made, and its relationship with theCabinet Office. MyCSP underwent a commercial transformation last year that resulted in it vesting as a mutualjoint venture in May 2012. Since May, Cabinet Office has acted as the contract manager for the pension andcompensation scheme administration services provided to employer members of the scheme by MyCSP Ltd.Prior to vesting, whilst still in Government, the relevant parts of the organisation were centralised into a singleentity reporting directly to the Cabinet Office, to facilitate the business transformation and creation of themutual. At the time in question, Phil Bartlett was the head of MyCSP, both before and after vesting, and PaulJohnson similarly worked wholly within MyCSP. They were not Cabinet Office members of staff at the timethat I understand the unauthorised SFO exit payments were administered.

Neither I nor my team were party to any conversations Phil Bartlett or Paul Johnson may have had with theSFO. However, any such conversations would have been irrelevant for the purposes of the Cabinet Officeauthorisation required in the Spending Controls guidance as only my team could have authorised the payments.Since we became aware of the unauthorised payments we have raised the issue with both the former andcurrent Chief Executive of MyCSP Ltd and while I am not aware of any other departments raising authorisationprocesses with MyCSP we have reconfirmed the process through meeting the exit processing team in MyCSP,so as to further strengthen the exits approval process.

I hope this clarification is of use to the Committee.

Adrian DottridgeDeputy Director, Civil Service Pensions

5 March 2013

Written evidence from the Serious Fraud Office

1. Introduction

1.1 David Green CB QC took up post as Director of the Serious Fraud Office (SFO) on 23 April 2012. Hehad met the previous Director, Richard Alderman, on five occasions between 28 October 2011 and 11 April2012 to discuss SFO staffing, casework and governance.

1.2 David Green first heard that Phillippa Williamson had left the SFO on Tuesday 17 April, and read in theFinancial Times on 18 April that she had “stepped down unexpectedly”. He understood that she had resigned.

1.3 The chair of the SFO’s Audit and Risk Committee was told by email (8:58 on 17 April). An hour later,he told the non-Executive Directors and the Audit and Risk Committee met. The minutes record that theCommittee also believed she had resigned. It should be noted that an email dated 16 April (18:42), fromRichard Alderman to Phillippa Williamson, says “In the note to Alan [chair of the Audit and Risk Committee],if it goes, please do not mention the severance agreement. […] Not concerned about AGO handling. This willlook after itself.” The Attorney General, his office, David Green, Treasury Solicitor’s Department, HMT andCabinet Office were not told.

1.4 On 17 May, following a chance comment by a junior member of staff, David Green discovered thatPhillippa Williamson had received a significant payment on departure. He asked to speak with Ian McCallimmediately. He then discussed the matter with Ian McCall, and so learnt of the true nature of PhillippaWilliamson’s exit, and that there was also a similar agreement in place with Christian Bailes.

Ev 20 Committee of Public Accounts: Evidence

1.5 It was also explained to David Green that, in his last week in office, Richard Alderman asked ChristianBailes and Ian McCall to go on ‘gardening leave’ until the exit dates named in their respective exit agreements.Both refused.

1.6 Following the meeting with Ian McCall, David Green contacted the Attorney General’s Office and theChair of the SFO’s Audit and Risk Committee, neither had been aware of the redundancy or compromiseagreement. He contacted the Treasury Solicitor and in due course commissioned Tim Hurdle (Finance Directorat the Treasury Solicitor’s Department) to carry out a review of the agreements. He also arranged for Counselto be instructed to advise.

2. The Legal Advice and HM Treasury Approval

2.1 David Green commissioned advice from a senior Queen’s Counsel. He met with that QC on 26 June2012, and received a formal note of the advice on 29 July 2012.

2.2 Counsel advised on whether or not there was any viable basis in law to avoid the contracts. In summary,Counsel considered two specific points:

— whether there were grounds for a civil claim that the payments made were outside the power orauthority of the former Director (ultra vires); and

— whether a mistake of fact or law had been made by the SFO.

2.3 For the first point, Counsel advised that the payments were made within vires, that is, within the powersand authority of the former Director. For the second, Counsel advised that the chances of a successful claim—without being able to show that the recipient parties knew that a mistake had been made—were “vanishinglysmall”.

2.4 The advice also confirmed that the absence of clear reasons for entering into the agreements does notitself affect the existence of the contractual obligations contained within those agreements.

2.5 Having received Tim Hurdle’s report and the legal advice, David Green decided not to seek retrospectiveapproval for the payments from HMT. Because he considered the payments unjustified, he was unwilling toseek approval for them. He did this knowing that it would mean that the first set of accounts would probablybe qualified.

3. The Payments

3.1 The tables on the following pages show what was paid in respect of these severance agreements, whenthe payments were made and details of the authorisation.

Continued overleaf.

Committee of Public Accounts: Evidence Ev 21

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Committee of Public Accounts: Evidence Ev 23

3.2 The £15,000 ex gratia payment to Christian Bailes has not been. The legal advice to David Green is thatthe contract is enforceable. However, HMT has declined approval for the payments as they are ‘novel andcontentious’. Should it be paid, the 2012–13 accounts risk qualification.

4. Actions to Prevent Repetition

4.1 David Green has appointed a Chief Finance Officer from the senior civil service, who sits on themanagement board.

4.2 David Green has stopped all payments in respect of home to work travel.

4.3 The SFO now follows the guidance in respect of all redundancies. An example is the current small scalevoluntary exit scheme.

4.4 Inherited corporate management records have proved unreliable and inadequate. This is in the processbeing corrected.

4.5 A culture of secrecy which characterised the decision making and execution of these agreements hasbeen ended. Internal communication of management decisions is frequent and direct. The senior managementteam has an open and collegiate style. All senior managers, together with the non-Executive Directors, aremembers of a single management board.

4.6 David Green has introduced a completely new organisational structure and there is now a newmanagement team in place.

6 March 2013

Supplementary written evidence from Richard Alderman

You will not be surprised to hear that I have been giving a great deal of thought to the hearing that tookplace last Thursday and to the very serious criticisms that the Committee made of me.

I have been reflecting on this and have come to the view that the Committee were justified in making thosecriticisms. What I did on the key points singled out by the Committee fell short of what the Committee areentitled to expect from an Accounting Officer.

The purpose of this letter is to give you and the other Committee members my deep and unreserved apologyfor the way that I handled these exits agreements. My failure to ensure personally that all of the relevantconsents in these important issues had been given and documented fell well short of the standard that theCommittee are entitled to expect from an Accounting Officer.

I also apologise for the fact that I did not recognise this until after the hearing. I gave my evidence honestlyand in good faith. It was clear though that the Committee expected more from an Accounting Officer than Ihad done.

It was as a result of those strong comments from the Committee at the hearing that I reflected at length onwhat I had done. I came to the conclusion that the Committee were right. I am sorry that I did not recognisethis earlier and give you my apology at the hearing last Thursday.

I hope that the Committee will accept my apology even though it has come at such a late stage.

11 March 2013

Further supplementary written evidence from Richard Alderman

I have a qualification to make to the answer I gave to Q87 concerning hospitality from PA Consulting. Iremembered after Thursday morning that I attended an awards ceremony as the guest of PA Consulting. Thatfirm was nominated for an award for its work concerning the change programme in the SFO. The awardsceremony was at a dinner in the Dorchester Hotel. As I recall Ms Williamson and our then head of IT werealso there as guests of PA.

11 March 2013

Ev 24 Committee of Public Accounts: Evidence

Written evidence from HM Treasury

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

Treasury Response

Guidance on special severance payments (ie payments outside contractual entitlements) when staff leavepublic service employment is contained in Managing Public Money Annex.4.13. The MPM website alsocontains a template outlining the information required for Treasury to consider such payments.

MPM A.4.13.9 confirms that special severance payments are novel, contentious and potentially repercussiveand always require Treasury approval in advance.

When the Treasury approves a severance payment in this way, it does not approve the compromise orconfidentiality agreement, if there is one. The Treasury simply makes an assessment of whether thedepartment’s business case represents value for public funds.

In any case MPM A.4.13.12 makes clear that any undertakings about confidentiality should leave severancetransactions open to adequate public scrutiny, including by the NAO and the PAC.

Judicial Mediation

In the past the Treasury has not insisted on approving special severance concluded through JudicialMediation. This was on the understanding that Judicial Mediation was of comparable weight to an award by aTribunal. It has now come to light that Judicial Mediation is simply another form of mediation procedure, andthat any payments so agreed remain non-contractual. So in future they will require Treasury approval

As Treasury approval was not previously required for cases settled by Judicial Mediation, so the Treasuryhas no records of such cases.

Other Payments not Approved by the Treasury

The Treasury has no records of cases where, for some reason, departments have not sought Treasury approvalfor special severance cases.

However, there are cases where the reason for not seeking Treasury approval is simple administrativeoversight. In many such cases, the department concerned will either realise its error at a later date, or the NAOwill uncover such cases during its annual audits. In both cases, the body concerned normally seeks retrospectiveTreasury approval. Such approval is not automatic; Treasury can only provide retrospective approval if it wouldhave done so had it been asked at the correct time. So the Treasury considers the request in the normal mannerand therefore requires the body concerned to submit its business case in the manner it should have done inadvance, including relevant evidence and legal analysis.

13 March 2013

Supplementary written evidence from the Serious Fraud Office

Following last week’s hearing there are a few matters that I wish to clarify. I am writing to the NationalAudit Office separately with the information requested by the Committee and I have sent minor corrections tothe Clerk to the Committee.

I would like to bring to the Committee’s attention that Ian McCall, who was “Head of Technology andSpecialist Services”, was referred to throughout the hearing as an “HR colleague” by Mr Alderman. There isa more junior member of staff who deals with HR matters still at the SFO who was not involved at any stage.

Questions 23, 25 and 32: the Committee asked for information about Phillippa Williamson’s benefits in kindwhich I did not have to hand during the hearing. I have set this out in an enclosure, together with informationabout the total cost of such travel arrangements to the SFO when I was appointed.

Questions 1, 3, 5, 28 and 38: Mr Alderman made a number of references to records and notes that may beavailable at the SFO. On my return from the hearing, I asked that the papers be reviewed again. We are unableto find the emails and references in the notebooks to which he referred. We have contacted the TreasurySolicitor’s Department and the Attorney General’s Office; neither has any recollection of the meetings ordiscussions referred to by Mr Alderman. The Management Board minutes at the SFO do not record the

Committee of Public Accounts: Evidence Ev 25

discussions Mr Alderman said had taken place. The SFO’s non-executive directors have confirmed that therewere not such discussions with them in the summer of 2011.

Question 50: the cost of DAC Beachcroft’s advice to the SFO relating to Ms Williamson’s and Mr Bailes’departures was £11,113.20 (including VAT).

Questions 91, 93 and 95: as is clear from Sir Alex Allan’s report, a number of relatives of staff have beenemployed as temporary staff at the SFO. We redacted some information from the report in order to protecttheir identities.

Most such individuals were employed very briefly, although one individual was engaged as a temporaryagency worker and then a fixed term contractor for a total of more than two years.

I was puzzled by Mr Mitchell’s reference to compromise agreements in question 121. I have asked the PCSto provide the memo to which Mr Mitchell referred and they have not done so. Shortly after I took-up post asDirector, I invited the three unions that represent SFO staff (PCS, FDA and Prospect) to meet with me. Thatmeeting took place on 14 May 2012 and considered wide-ranging issues including the results of the civil servicestaff survey and the SFO Bonus Scheme. No issues about compromise agreements or severance payments werediscussed at that meeting.

The former senior management team’s records at the SFO are inconsistent, incomplete, or poorly kept sothat it is extremely challenging to find information. This is in contrast to casework records, and those kept bythe current HR team. The new senior management team ensures that proper records are kept.

Finally, I am grateful for the Committee’s suggestion to try and obtain the £15,000 required for the ex gratiapayment to Christian Bailes from outside Government. Unfortunately, we have not been able to identify anysuitable mechanisms for doing so. An Accounting Officer’s authority means that it cannot be sought from MrAlderman. I am continuing to discuss the matter with HMT and NAO, but the legal advice I have receivedfrom very senior counsel is that the contractual obligation with Mr Bailes means that I may be obliged to makethe payment without HMT’s approval and that I am not able to recover this sum from Mr Alderman.

I hope this information is helpful. I am happy to discuss these matters further, if that would be of assistance.

David Green CB QCDirector

15 March 2013

Further written evidence from the Serious Fraud Office

Enclosure: Benefits in Kind and Excess Fares

Phillippa Williamson’s initial permanent contract specified that her place of work was her home address,and that attendance at the SFO’s offices was required as necessary. The contract also sets out that she wouldbe entitled to reimbursement of travel and other expenses properly and reasonably incurred in the performanceof her duties, subject to their being agreed in advance.

HMRC queried the provision for her place of work being her home address and assessed travel andaccommodation expenses as benefits in kind (BIK) and therefore taxable. The SFO agreed to pay the tax andnational insurance contributions due on the BIK. The payment of the tax and national insurance contributionsis itself a BIK, in turn, and so also subject to tax and national insurance.

On 30 September 2010, Ms Williamson’s contract was varied so that her travel to work costs were paidthrough payroll with a ceiling of £199.52 per week, plus associated car parking at £5 per day. This arrangementwas referred to as ‘excess fares’. This was paid through payroll and taxed in the normal way but did not takeeffect until January 2011. Any hotel costs, meals, and taxis to and from the hotel continued to be treatedas BIKs.

The table below shows the relevant costs between Ms Williamson’s permanent appointment in January 2010and her departure in April 2012.

Phillippa Williamson: excess fares and benefits in kindTax and NICs arising

Excess fares (£) BIKs (£) (£) Total (£)

2009–10 8,118 7,144 15,2622010–11 2,529* 27,616 24,302§ 54,4472011–12 7,922* 10,221 7,686¥ 25,8292012–13 1,297 1,205 906¥ 3,408

* The 2010–11 excess fares were paid in 2011–12.§23,467 paid to PW with her April 2012 salary. There may have been an overpayment which we arecurrently investigating.

Ev 26 Committee of Public Accounts: Evidence

¥Estimate—not yet settled with HMRC.

Ms Williamson was one of a number of staff with home to work travel arrangements which received adversepublicity in February 2012 following a Parliamentary Question.

The total cost of all such arrangements at the SFO between 2008 and the current date is set out in the tablebelow. All such home to work travel arrangements have now ended.

All SFO: excess fares and benefits in kindTax and NICs

Excess Fairs (£) BIKs (£) arising (£) Total (£)

2008–09 5,026 0 0 02009–10 16,547 8,118 7,144 15,2622010–11 41,173 64,628 52,041 157,8422011–12 38,959 23,847 16,770* 79,5762012–13 to date 20,642 3,285 2,293** 26,220

*estimate as 2 individuals have yet to submit a claim for their tax.**estimate.

Further written evidence from the Serious Fraud Office

At the Committee’s hearing on 7 March, I was asked to provide information, via the National Audit Office,about senior civil servants (SCS) who had left the Serious Fraud Office during my predecessor’s period asDirector, specifically between his appointment in April 2008 and March 2010.

I can confirm that 11 SCS left the SFO during this period.

The Committee asked for the names of the SCS who departed, the basis for their departure, and the costincluding any enhancements to pensions and other payments. However, as I have highlighted to the Committee,the previous management team did not keep full or accurate records. We have searched for this information;there are four main sources available to us:

— the SFO’s 2008–09 resource accounts;

— records kept by the central HR team, including more recent payroll records;

— records kept by the central finance team; and

— unorganised email records.

Some of the exits pre-date the current payroll system and historical information is not retrievable. Some ofthem were arranged by Ian McCall who did not always involve the central teams in the work.

I have set out below the information that we have been able to gather from these sources. I should be gratefulif you would pass this on to the Committee. Please note that the information includes personal data and, infairness to those concerned, I ask that the NAO and the Committee take appropriate steps to protect thatpersonal data.

The 2008–09 Resource Accounts

The 2008–09 Resource Accounts set out, on page 12, information about compensation payable to formersenior managers, with the caveat that the information remained subject to audit. During that financial year, sixSCS had left under compulsory early retirement terms. They received immediate payment of their pension, acompensation payment, and in most cases a lump sum payment related to their pension. The SFO also paidfor enhanced pensions in some cases. The details given are as follows:

Cost to the SFO ofCompensation enhanced pension

Former payment and accrued lumpName position Leaving date (£000s) sum (£000s)

Robert Wardle Director 20 April 2008 80–85 20–25 lump sumJames Kellock Deputy Director 31 August 2008 140–145 NilStephen Low Head of 31 March 2009 60–65 85–90, plus lump sum

Accountancy of 5–10Vicki O’Keefe Head of Policy 30 June 2008 70–75 NilHelen Garlick Assistant Director 31 July 2008 85–90 60–65, plus lump sum

of 0–5Graham More Assistant Director 31 March 2009 60–65 90–95, plus lump sum

of 5–10

Committee of Public Accounts: Evidence Ev 27

In addition to these, the accounts explain that one further SCS, Philip Blakebrough (a former AssistantDirector) left the SFO on 30 May 2008 under compulsory early severance terms with compensation of£265,000–270,000. The accounts also explain that James Kellock, Vicki O’Keefe and Helen Garlick enteredinto compromise agreements.

Other SCS Leavers

From other records, we have been able to identify that four further SCS left the SFO between Mr Alderman’sappointment and March 2010. They were:

— Ruth Curry, who left on 19 April 2009 and transferred to another Government Department. Shereceived no exit benefits.

— Robert Evans, who left on 31 December 2009 under approved early retirement terms. The SFOwill pay his pension until he reaches 60, as explained below. The terms of the exit also providedfor up to £5,000 of outplacement support to be reimbursed on receipt of an invoice. We havenot been able to identify a record of this being claimed.

— Roddy Gillanders, who left on 31 December 2009 under compulsory early retirement terms.Again the SFO will pay his pension until he reaches 60, and the terms included provision forup to £5,000 of outplacement support to be reimbursed on receipt of an invoice. We have notbeen able to identify a record of this being claimed.

— Philip Lewis, who left on 5 April 2009. Mr Lewis’ employment was terminated and he received£22,500 compensation for this. Payments of £5,250 and £1,500 were made into his pensionschemes to reflect the backdated salary increase.

Ongoing Pension Liabilities

The information above alone does not give the full picture of the cost to the SFO of these exits. The termsof the Civil Service Compensation Scheme under which many of these individuals left mean that the SFO hasa continuing liability to pay their pensions until they reach age 60. This is in addition to the costs of theirseverance that were incurred in the reporting period when the exit took effect. The table below sets out theestimated total cost of this liability from the period each individual left to the time they reach 60. All of theliabilities have already been fully provided for in the SFO’s accounts, with the exception of any inflationaryadjustments arising before expiration of the liabilities, which are met on an annual basis.

Total estimated cost toSFO of pension payments

Name until age 60 (£000s) Liability ends

Robert Evans 300–305 2015–16Helen Garlick 125–130 Ended in 2011–12Roddy Gillanders 175–180 2014–15James Kellock 320–325 2016–17Stephen Low 145–150 2016–17Graham More 140–145 2016–17Vicky O’Keefe 35–40 2016–17Robert Wardle 230–235 2016–17

Compromise Agreements

The Committee asked specifically about compromise agreements. The 2008–09 accounts showed that threeindividuals had entered into compromise agreements: James Kellock, Vicki O’Keefe and Helen Garlick. Otherrecords show that Graham More, whose exit is described in those accounts, also entered into a compromiseagreement. In addition, of the leavers not listed in the accounts, we have records that show that RoddyGillanders and Philip Lewis entered into compromise agreements.

It has not been possible in all cases to identify which elements of the compromise agreements are reportedin the resource accounts. However, the table below sets out the principal elements in each case.

Name Details of any exit benefits set out in the compromise agreement

James Kellock 6 months’ salary as a compensation payment, and outplacement support from PennaConsultancy Services to be paid on receipt of an invoice (no limit specified). TheSFO has no records of whether these were paid.These payments were in addition to his receipt of Compulsory Early Retirementterms under the pre-2010 Civil Service Compensation Scheme. He also had reservedrights to the pre-1987 terms.

Ev 28 Committee of Public Accounts: Evidence

Name Details of any exit benefits set out in the compromise agreement

Vicki O’Keefe 6 months’ salary as a compensation payment, and outplacement support from PennaConsultancy Services to be paid on receipt of an invoice (no limit specified). TheSFO has no records of whether these were paid.These payments were in addition to her receipt of Compulsory Early Retirementterms under the pre-2010 Civil Service Compensation Scheme.

Helen Garlick 6 months’ salary as a compensation payment, and outplacement support from PennaConsultancy Services to be paid on receipt of an invoice (no limit specified). TheSFO has no records of whether these were paid.These payments were in addition to her receipt of Compulsory Early Retirementterms under the pre-2010 Civil Service Compensation Scheme. She also had reservedrights to the pre-1987 terms.

Roddy Gillanders The compromise agreement specified only Compulsory Early Retirement Terms.These were under the pre-2010 Civil Service Compensation Scheme.No outplacement support.

Philip Lewis Severance payment of £22,500; plus payment of £5,250 in to his pension plan inrespect of backdated salary increases to 1 April 2008; and a payment into the CivilService Pension scheme (not less than £1,500) to reflect what his contributionswould have been had he received a salary increase on 1 April 2008.

Graham More Severance payment of £17,500 plus outplacement support from Penna ConsultancyServices to be paid on receipt of an invoice (no limit specified). The SFO has norecords of whether these were paid.This payment was in addition to his receipt of Compulsory Early Retirement termsunder the pre-2010 Civil Service Compensation Scheme.

The SFO continues to have liability in relation to some of the exits described above, all of which occurredbefore April 2010. We estimate that the remaining liability at 31 December 2012 was £518,000. The totalremaining liability for all such exits (that is, including those below SCS level) was estimated to be £714,000.An accounting provision is in place for the balance of these liabilities.

I regret that I cannot provide a full answer to the Committee’s questions from the records available at theSFO. I can try to contact those people affected and involved in arranging the exits for more information, if theCommittee would find this helpful.

I would like to reassure you that I am well aware of the historical deficiencies in the SFO’s managementrecord-keeping. It is a barrier to effective accountability, and I have taken steps to ensure that in future properrecords are kept. These steps include:

— appointing a qualified Chief Financial Officer at board level from the SCS;

— having a large and open Board attended by all senior officials and non-Executive Directors, toensure that these sorts of arrangements cannot be made by one person without others’knowledge;

— asking my senior team to review record-keeping and make improvements where needed; and

— learning from the difficulties we have been having in providing briefing in response toParliament’s scrutiny.

Some new management systems will also be introduced from the 1 April this year, such as a new systemfor recording information about contracts.

Finally, some of the more recent SCS exits from the SFO are covered in Tim Hurdle’s report. As set out inthe Attorney General’s Written Ministerial Statement on 4 December last year, Mr Alderman also received apayment on his exit to top up his pension fund. That payment was for £44,179.59. On 20 April 2012, RichardAlderman’s last day in office, Ian McCall obtained approval from the Cabinet Office for a payment of £112,000,but this was later revised again to return to the lower amount.

David Green CB QCDirector

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HC 360

House of Commons

Committee of Public Accounts

Serious Fraud Office– redundancy and severance arrangements

Tenth Report of Session 2013–14

28705_HC360_COVER.indd 1 28/06/2013 03:04