The extent of recent mismanagement at the UK’s Serious Fraud Office was laid bare during a bruising parliamentary hearing where the former SFO director was accused of “outrageous” behaviour in approving nearly £1m in exit payments for an “old friend” and senior staff without receiving proper authorisation.
Richard Alderman, the ex-director, appeared in front of the Public Accounts Committee on Thursday to give his first testimony during a packed hearing whose audience included Robert Tchenguiz, a former SFO suspect now suing the agency for £100m.
One chair stood between Mr Alderman and his successor, David Green, who commissioned a Whitehall investigation into payments when he found out about them in May, and who has been keen to recalibrate the SFO away from Mr Alderman’s tenure.
Mr Alderman maintained that in a summer 2011 meeting, the Treasury solicitor, Sir Paul Jenkins, suggested that a new director would make Mr Alderman’s senior team redundant.
Mr Green said the investigation had found no evidence of that happening, while Mr Alderman countered that he could “categorically affirm” that he was telling the truth.
A spokeswoman for Sir Paul said that Mr Alderman’s description was not Sir Paul’s “recollection of the meeting”.
The payments, which included redundancy and £15,000 to settle potential legal claims stemming from two whistleblowing incidents, were made to the ex-chief executive, Phillippa Williamson – who previously attracted headlines for claiming £27,600 in travel expenses – and the ex-chief capability officer, Chris Bailes. This resulted in a qualification to the SFO’s accounts last year.
The agency’s budget has meanwhile shrunk from £52m in 2008 to £32m in 2012.
The Treasury has also refused to approve Mr Bailes’ £15,000 settlement, which he did not receive on his December departure.
“I’m now in the position … having had legal advice saying that the contract is enforceable. Am I actually to say to Mr Bailes: ‘You can’t have it; sue me’?” Mr Green told the committee.
“You could get the money out of Mr Alderman,” said Margaret Hodge, committee chairwoman.
Mr Alderman said he had approved the payments following advice of “an HR colleague”. Reports released before Thursday’s hearing reveal that to be Ian McCall, the former head of IT at the SFO, who also received a pay-off of nearly £50,000 when he left in May. This was approved by the Treasury, a lawyer for Mr McCall said.
Mr Alderman told the Financial Times that he had followed the advice of Mr McCall. Mr McCall’s lawyer said he had never approved an SFO exit payment.
Mr Alderman maintained to the committee that Cabinet Office approval was obtained, otherwise civil-service pensions would not have been paid out.
Ms Williamson, Mr Bailes and Mr McCall were all involved to an extent in a whistleblowing claim in February 2012 that alleged that the handling of digital forensic evidence could be putting convictions at risk. An internal investigation found no completed cases were at risk and that no one acted in bad faith. Lawyers for Mr McCall said he was not head of the unit at the time.
Farrer & Co, solicitors advising Ms Williamson and Mr Bailes, did not immediately respond to requests to comment.
“The SFO squandered money,” said Emily Thornberry, Labour’s shadow attorney-general. “Everything we have heard today confirms there was a collapse in corporate governance at the SFO towards the end of Richard Alderman’s tenure as director.”
Separately, the SFO’s estimate for its budget has risen by £6m, according to paperwork filed by the Justice Committee. Its legal costs from the Tchenguiz brothers’ judicial review and ringfenced funding for the Libor investigation increased its cash requirement to £38m from £32m for the 2012-13 financial year.