Thursday, 7 January 2016

DEFECTIVE SCOTTISH ENTERPRISE FRAUD REPORT


The narrative in the Scottish Enterprise 1993 report is reproduced below and I have added some comments as footnotes:

 

SE FINANCIAL MONITORING REPORT

 

TO               Tom Woodbridge

 

CC               John Langlands

                    Averil MacLachlan

 

DATE           20 August 1993

 

ENTERPRISE AYRSHIRE

SPECIAL INVESTIGATION ERDF RECEIPT

 

 OBJECTIVE

Following an allegation by a member of EA’s temporary staff, Tom Woodbridge requested that I visit EA to investigate the facts behind the report.  [1]  The substance of the allegation was that ERDF money had been received by EA in June 1993 but had not been recorded in the accounting records [2].

 

WORK DONE

1)         I established when the ERDF income had been received by EA by reviewing the bank statements.

2)          I reviewed the relevant accounting records to establish when and if the income had been recorded.

3)          Following the processing of the journal entry to bring the income into the July accounts [3] , I reconciled the ledger balance for the bank account to the bank statement.

 

 

FINDINGS

1)      A payment of £187,069 was made directly into EA’s main bank account on the 25 June 1993. The funds were subsequently transferred, over a period of a week, through three separate bank accounts. These accounts were all in the name of Enterprise Ayrshire [4] and are high interest call accounts managed by the Royal Bank of Scotland on EA’s behalf.

2)        The receipt of the money was recorded in the cash book on the 25 June 1993.  [5]  The following note was next to this entry:-

‘(No journal required as per G. Tracey [6]) To go through July accounts.’

3)        The income was journalised into the July ledger on the 18th August 1993 [7], the date of my visit.

4)        A review of the bank reconciliation indicated that the bank statements had been reconciled only to the cash book  [8]. As the entry had been made in the cash book for the ERDF income, no discrepancy arose.  [9]   Had the cash book balance been subsequently reconciled to the bank account in the financial ledger the difference would have been highlighted  [10]. There was no evidence that this reconciliation had been carried out  [11].

 

CONCLUSION

The receipt of ERDF money was brought into the July financial ledger on 18 August. The money was received in June 1993 and should therefore have been accounted for in this month[12].

Mandy Dickson

Financial Monitoring Team




 
 
[1]        The investigating accountant made no contact with me whatsoever in order to ensure that all the facts were obtained, and most significantly she falsely held that there was no evidence that the reconciliation to the financial ledger had been carried out.
 
That was a major blunder which rendered her investigation and report fundamentally defective.  
 
 
 
[2]       Unsurprisingly since Ms Dickson did not contact me at all this is not an accurate description of what I had alleged.
 
I alleged that I had been instructed to overlook in my account reconciliation work the deliberate omission from the accounts of a cash grant for £187,069 received on 25 June 1993 by electronic transfer from the European Regional Development Fund.
 
I alleged that the reason for doing so was to gain interest that would otherwise not be gained.
 
I also alleged that I was threatened with dismissal when I declined to comply.
 
 
 
[3]              But the cash had been received in June 1993 and ought to have been entered into the accounts in that month.  The accounts for July 1993 that had been presented to me for reconciliation still excluded the cash.
  
 
[4]          Actually, one of the accounts, as disclosures from the Scottish Government verify, was not in the name of Enterprise Ayrshire but was in the name of Mr Gary Tracey, one of my supervisors. This is the person that the evidence shows had instructed the falsifications.
 
 
[5]          This was a handwritten entry in the manual cash book which then required to be journalised into the computer financial ledger. It was this journalising of the cash in question into the computer financial ledger that was not carried out and which resulted in £187,069 of taxpayers’ cash being fraudulently claimed by Enterprise Ayrshire and Scottish Enterprise.    
    
 
[6]           Clearly, such a note supported my allegation that the omission was deliberate, not an oversight. 
As disclosures from the Scottish Government confirm, the original note here did not include the words ‘To go through July accounts’.
 
Since the £187,069 was re-deposited in a high interest bank account on 3 August 1993 while still omitted from the computer financial ledger whereas it ought to have been transferred to Scottish Enterprise in the month following receipt, there was no intention of handling this money in accordance with correct procedure until I raised my objection in writing on 17 August 1993.  
 
 
 
[7]           My specific allegations were true but were covered up and in the morning after my written objection to the financial irregularities the correction was made.
This was a very significant correction to the accounts, amounting to £187,069 of taxpayers’ money.
Scottish Enterprise’s press release stating that there had been no grounds for taking any action was a deliberate lie that the police did not challenge.
Clearly the correction to the accounts was forced by my crucial email dated 17 August 1993 to my supervisors in Enterprise Ayrshire, Mr Gary Tracey and Ms Janie Maxwell but the report makes no mention of this email which stated:
‘For the record, as I said to you both today, I am not comfortable with your instruction to exclude from Enterprise Ayrshire’s balance sheet funds received from the EC.’
‘Your comment that the management accounts do not matter so much, being produced only for internal use, seems to underplay the potentially serious consequences of circulating figures that are incorrect.’
‘I stated to you both that I know this aspect of Scottish Enterprise’s finances is under investigation by the National Audit Office therefore you must accept my concern as genuine.’
‘I have been advised that such omissions from management accounts are in breach of the Institute’s ethical guidelines.’  
There was no mention in the investigating accountant’s report that I had been questioning the omission in my reconciliation work and had objected in writing to the instruction to comply.
 
However, contrary to what had appeared in the press, the report did at least confirm my allegation that the money had been received in June 1993 and should have been entered in that month but had not been entered into the accounts until 18 August 1993.
But no plausible explanation was given in the report for this delay. One could justifiably ask why there was no reason elicited by the investigator. Why had staff who routinely made the entries for cash receipts and payments omitted to do so in this case? Documentary evidence and even the report’s confirmation that there was a note blocking the journal entry support my allegation that it was because they had been instructed to do so by one of my supervisors, Mr Gary Tracey. He had also tried to incite me to enter into a conspiracy to falsify the accounts in respect of this money.
The Scottish Enterprise report had either entirely excluded reference to important documents and witness statements or had disregarded important details contained in the available documents.
The email dated 17 August 1993 supported my version of events. Further evidence supporting my version of events included a copy of an extract from the cash book containing the written instruction ‘NO JOURNAL REQUIRED AS PER G. TRACEY’ for the £187,069 in question and copies of documents recording transfers of this cash through a succession of high interest bank accounts with bank statements including the abnormal comments ‘STRICTLY PRIVATE AND CONFIDENTIAL’ and ‘ALL ENQUIRIES TO GARY TRACEYTO ANDREW DOWNIE  NO-ONE ELSE’.
The cash came to rest in a bank account in the name of ‘GARY TRACEY C/O ENTERPRISE AYRSHIRE’, which means it was held in the name of my supervisor Mr Gary Tracey personally, at the address of Enterprise Ayrshire.
The significance of these important details was disregarded in the Scottish Enterprise report, which instead had falsely implied in its text, but did not specifically state in its conclusion, that the omission of the £187,069 may have been an oversight due to a reconciliation not having been carried out.   
 
 
[8]          The police knew that this statement was false.
 
My letter dated 19 August 1993 to Detective Superintendent Ferrie, Strathclyde Police, began as follows:
‘Dear Mr Ferrie,’
‘A set of documents is enclosed showing the omission of a receipt from the EC of £187,069 in the balance sheet of Enterprise Ayrshire.’
The investigating accountant was mistaken on this point, having apparently only sought evidence of reconciliations in the cash section at Enterprise Ayrshire, having neglected to contact me for relevant information and having disregarded the evidence that I gave to the police, possibly because I posted the evidence first class on 19 August 1993 and Ms Dickson’s report was dated 20 August 1993.
 
However, the same evidence was of course also available on the premises of Enterprise Ayrshire. My regular monthly reconciliations to the financial ledger were held in the Enterprise Ayrshire Excel files at my workstation and the reconciliation in question had been forwarded to Mr Gary Tracey by email showing the discrepancy in the first accounting month in which it had arisen, June 1993.
 
A reasonable suspicion could arise in the mind of an independent observer that the managers and finance staff involved concealed material evidence from investigators, a very serious matter in the context of a criminal investigation.
 
 
[9]         Again, the police knew that this statement was false.
 
My letter dated 19 August 1993 to Detective Superintendent Ferrie, Strathclyde Police, began as follows:
‘Dear Mr Ferrie,
A set of documents is enclosed showing the omission of a receipt from the EC of £187,069 in the balance sheet of Enterprise Ayrshire.’
A discrepancy of £187,069 had indeed arisen and had been questioned by me in respect of accounting months June (verbally) and July 1993 (verbally and by email).
 
 
 
[10]        Again, the police knew that this statement was false.
 
My letter dated 19 August 1993 to Detective Superintendent Ferrie, Strathclyde Police, began as follows:
‘Dear Mr Ferrie,
A set of documents is enclosed showing the omission of a receipt from the EC of £187,069 in the balance sheet of Enterprise Ayrshire.’
 
 
[11]        Again, the police knew that this statement was false.
 
There was indeed evidence that this reconciliation had been carried out.
My letter dated 19 August 1993 to Detective Superintendent Ferrie, Strathclyde Police, began as follows:
‘Dear Mr Ferrie,
A set of documents is enclosed showing the omission of a receipt from the EC of £187,069 in the balance sheet of Enterprise Ayrshire.’
I had of course taken copies of relevant documents to protect my position since I had encountered manifest criminality in Enterprise Ayrshire and had been threatened with dismissal for objecting to the malpractice.
 
 
[12]        This conclusion justifies my concern about the Enterprise Ayrshire accounts as they stood when I wrote my email on 17 August 1993.
 
Attached to the 1993 report were several documents one of which was a press release in the following terms:
 
 
‘STATEMENT GIVEN TO KIRSTY SCOTT, THE HERALD regarding allegations of mis-accounting at Enterprise Ayrshire’
‘Scottish Enterprise National took these allegations seriously, and investigated them thoroughly on the day that they were made. There is no substance to any of the allegations made regarding the receipt of European funds by Enterprise Ayrshire. Our enquiries are complete and there are no grounds for taking any action.’
 
 
‘Issued by the Press Office of Scottish Enterprise’
‘September 1, 1993’
 
 
 
Since the accounts had been corrected by £187,069 and the public funds that were required reduced accordingly within hours of my written objections, plainly the press release was false.
 
 
 
 
 
 
 

Wednesday, 6 January 2016

AUDIT SCOTLAND STATES SCOTTISH ENTERPRISE RESPONSE IN FRAUD CASE DISINGENUOUS


Documents disclosed to me by Audit Scotland in May 2009 included the following statements in a document headed Notes from review of papers submitted by E Cairns, prepared by Audit Scotland’s Mr Jim Martin, dated 20 August 2004 and reproduced here in italics for convenience:

 

Mr Cairns is correct in his view that the ERDF monies should have been included in the EA June Management Accounts and it looks as though they might have been omitted from the July accounts but for his actions ....................... Speculation on why the monies were not disclosed in the management accounts is academic at this stage but it does seem odd that he was allegedly instructed to exclude them from the July accounts.

Responses to Mr Cairns (sic) complaints from Scottish Enterprise and the Scottish Office Ministers dismiss the omission of the receipts as a technical accounting matter. That is disingenuous. Mr Cairns (sic) issue is about the deliberate misstatement of management accounts; there are governance issues here ................ The Board of EA were receiving these management accounts as was Scottish Enterprise, the principal funders. I see no reason why the ERDF monies should not have been shown in the first management accounts after their receipt. Scottish Enterprise should have been concerned that Mr Cairns was allegedly instructed to exclude them.

 

.............. If Mr Cairns is seeking recompense for his dismissal we should not get drawn in.

 

The last sentence ends the quotation.

 

This was an important case that ought to have been adequately investigated by Audit Scotland. The figures in the monthly management accounts at Enterprise Ayrshire were the basis for obtaining public money. Evidence available to Audit Scotland confirmed that I had been instructed to commit a criminal act in Enterprise Ayrshire, treated with open hostility by the other members of staff who had already agreed to enter into the conspiracy, summarily dismissed before any investigation by Scottish Enterprise had taken place, stonewalled thereafter and unjustifiably publicly disparaged, rendering me unemployable in my profession.

SCOTTISH ENTERPRISE FRAUD CASE


   
The 1993 report that was sent to the Scottish Government and others by the police was prepared by Ms Mandy Dickson, a Scottish Enterprise accountant, instead of by the police.
According to Scottish Enterprise their investigation was thorough and was carried out on 18 August 1993 with the report being dated 20 August 1993.
I wrote to the police on 19 August 1993 and enclosed very important evidence which was falsely stated in the Scottish Enterprise report not to exist.
On 7 September 1993 I was briefly interviewed by Detective Sergeant William Watters of Strathclyde Police Fraud Squad in a disgraceful manner.
DS Watters entered the interview room where I was sitting at a table, violently slammed his files down on the surface and said angrily ‘Have you got some kind of grudge against this company? You’re stirring up a hornets’ nest here!’
I asserted that I had been advised that this was a matter for the police. After a few more terse exchanges DS Watters grabbed the paper I was taking some notes on and said he was going to take a photocopy. 
DS Watters appeared to be trying to intimidate me.
The interview ended shortly thereafter.
On 18 October 1993 when newspapers trumpeted that my allegations of fraud had been thoroughly investigated by both Scottish Enterprise and Strathclyde Police and had been found to have ‘no substance’, I telephoned DS Watters for an explanation. He chirped ‘The day they sacked you they put the money where it should be so we’re happy with that.’
I protested ‘But that’s not what it says in the newspapers’.
 ‘Well, you are free to raise a civil action’ he responded. ‘We are not going to do anything’.
Indeed the police did not do anything and they seem not to have done anything up to that point other than insult me during a so-called interview. There is no evidence that the police even went to Enterprise Ayrshire or Scottish Enterprise. And there is no mention anywhere of any witnesses having been interviewed by the police.  
Therefore it appears that the police carried out no independent investigation but simply utilised Scottish Enterprise’s report which was wrong in several respects as detailed further on below.
The police knew that the Scottish Enterprise report that they relied upon contained no input from me and no input from the police. Material evidence was concealed.
Clearly, the police had an unreasonable reluctance to investigate this case from the beginning. Their adoption and promulgation of the Scottish Enterprise report on the investigation that had been carried out on 18 August 1993, the same day that I had been removed from the company, indicates that the police had no part in that report’s content. They would not even have received my letter and documentary evidence by 18 August 1993.     
And of course any statements I made to the police on 7 September 1993 could not have been included in a report dated 20 August 1993.
Since there is no evidence of an independent police investigation having been carried out, a reasonable suspicion could arise in the circumstances that the defective Scottish Enterprise report was submitted to the Procurator Fiscal by the police.
 
Alternatively, no report was submitted to the Procurator Fiscal by the police. 
 
Evidence suggests that the Procurator Fiscal only became involved in 1999 and therefore had not seen any report in 1993.
 
The report prepared by Ms Mandy Dickson of Scottish Enterprise was submitted to the Scottish Government with a compliments slip stating ‘With the Compliments of the Chief Constable of Strathclyde Police’.
 
The compliments slip was signed ‘W Watters D/S Fraud Squad’.
 
If the government had wanted a copy of the Scottish Enterprise report they would have requested and obtained it from Scottish Enterprise, not from the police.
Therefore this also points to the Scottish Enterprise report being adopted and utilised by the police instead of the police carrying out an independent investigation and producing their own report.
Further evidence of this fact is contained in a memorandum from Ms Mariot Leslie, the Scottish Office, to Mr Stewart, Minister for Industry and Local Government, dated 14 June 1994 which included the following statements:
‘...... after Mr Cairns’ dismissal an investigating accountant from SE examined the records of EA and presented a report of the investigation to SE on 20 August. This found that the £187,069 was paid into EA’s main bank account on 25 June 1993 ........’
‘The report found however that the money had not been entered into the LEC’s July management accounts until 18 August and concluded that that they should have done so in time for the June accounts.’
‘The report and evidence were also examined by Strathclyde Police ......’
Significantly, there is no mention here of any independent investigation having been carried out by Strathclyde Police. They seem to have just accepted Scottish Enterprise’s version of events and dismissed my version despite the available evidence indicating the opposite to be correct. 
Disclosures from Audit Scotland in 2009 show that Audit Scotland recognised years ago that official responses from Scottish Enterprise and the Scottish Office had been ‘disingenuous’.