Richard Bacon MP, of the Committee of Public Accounts, today said:
“The reputation of the Serious Fraud Office has been undermined by a catalogue of errors and poor judgement and the morale of its staff has suffered as a result.
“The former director Richard Alderman’s decisions showed a disregard for the proper use of taxpayers’ money and a woefully inadequate grasp of the importance of ‘Managing Public Money’, HM Treasury’s guidance document on the role of an Accounting Officer. By deciding the size of severance packages, and not seeking alternative placements for staff, he failed to follow due process.
“Mr Alderman provided the SFO’s Chief Executive Officer Phillippa Williamson with a contract specifying that her place of work was her home address in the Lake District. She worked there two days a week. When Ms Williamson worked at the SFO’s London offices three days a week, taxpayers paid for her travel and hotel costs to London, at a cost of nearly £100,000 between 2008 and 2012. For the CEO of an important public body such as the Serious Fraud Office to be granted such arrangements is quite astounding.
“Furthermore, a payment of over £400,000 was made to enhance her pension, even though the necessary approval from Cabinet Office to do so was not in place. The Cabinet Office and MyCSP should explain how this payment was allowed to go ahead without being approved.
“Mr Alderman also signed off ‘special severance payments’ of £15,000 to the former Chief Executive Officer and the former Chief Operating Officer with the aim of avoiding grievance action, even though legal advice suggested this was not necessary. Despite the fact such payments require Treasury approval, this was not sought.
“We welcome the new director’s work to strengthen SFO governance and Board-level decision making, which aims to prevent a director from independently taking such actions in future. The new Director should also explore all possibilities to minimise the cost to the taxpayer, including requesting that the recipients of special severance payments repay the money.”
Richard Bacon was speaking as the Committee published its 10th Report of this Session which, on the basis of evidence from current and former Directors of the SFO, examined how the former Director had discharged his responsibilities as an Accounting Officer.
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. 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.
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.