Session 2008/2009

Eighth Report

Public Accounts Committee

Report on Brangam, Bagnall & Co:
Legal Practitioner Fraud Perpetrated
Against the Health and Personal
Social Services

Together with the Minutes of Proceedings of the committee
relating to the report and the minutes of evidence

Ordered by The Public Accounts Committee to be printed 5 February 2009
Report: 26/08/09R (Public Accounts Committee)

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Membership and Powers

The Public Accounts Committee is a Standing Committee established in accordance with Standing Orders under Section 60(3) of the Northern Ireland Act 1998. It is the statutory function of the Public Accounts Committee to consider the accounts and reports of the Comptroller and Auditor General laid before the Assembly.

The Public Accounts Committee is appointed under Assembly Standing Order No. 51 of the Standing Orders for the Northern Ireland Assembly. It has the power to send for persons, papers and records and to report from time to time. Neither the Chairperson nor Deputy Chairperson of the Committee shall be a member of the same political party as the Minister of Finance and Personnel or of any junior minister appointed to the Department of Finance and Personnel.

The Committee has 11 members including a Chairperson and Deputy Chairperson and a quorum of 5.

The membership of the Committee since 9 May 2007 has been as follows:

Mr Paul Maskey*** (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Thomas Burns**
Mr Trevor Lunn
Mr Jonathan Craig
Mr Jim Wells*
Mr John Dallat
Mr Mitchel McLaughlin
Mr George Robinson****
Ms Dawn Purvis
Mr Jim Shannon*****

* Mr Mickey Brady replaced Mr Willie Clarke on 1 October 2007
* Mr Ian McCrea replaced Mr Mickey Brady on 21 January 2008
* Mr Jim Wells replaced Mr Ian McCrea on 26 May 2008
** Mr Thomas Burns replaced Mr Patsy McGlone on 4 March 2008
*** Mr Paul Maskey replaced Mr John O’Dowd on 20 May 2008
**** Mr George Robinson replaced Mr Simon Hamilton on 15 September 2008
***** Mr Jim Shannon replaced Mr David Hilditch on 15 September 2008

List of abbreviations used in the Report

List of Abbreviations
Used in the Report

The Agency Central Services Agency

BB & Co Brangam, Bagnall & Co

Causeway Trust Causeway Health and Social Services Trust

C&AG Comptroller and Auditor General

CPD Central Procurement Directorate

The Department Department of Health, Social Services & Public Safety

DFP Department of Finance & Personnel

HANI Hospitality Association of Northern Ireland

HSC Health and Social Care

HPSS Health & Personal Social Services

HSS Health & Social Services

LEDU Local Enterprise Development Unit

NIAO Northern Ireland Audit Office

Law Society The Law Society of Northern Ireland

Executive Summary

Introduction

1. Following concerns raised by Causeway Health & Social Services Trust (Causeway Trust) in August 2006, The Law Society of Northern Ireland (Law Society) investigated potential irregularities at the practice of Brangam, Bagnall & Co (BB & Co), which led to the practice being closed down on 1 September 2006. Over a period of seven years, George Brangam, solicitor and owner of the legal practice of BB & Co was found to have fraudulently extracted at least £278,000 from six of the eleven health bodies to whom his practice provided legal services. The Department of Health, Social Services & Public Safety (the Department) has subsequently taken legal action and recovered this sum in full.

2. This is one of the largest and most worrying cases of multiple frauds to have hit the Northern Ireland public service in many years. The case is particularly galling for three reasons. First, almost all of these frauds could easily have been prevented. Second, almost all of these frauds could have been detected at a much earlier stage, if some very basic checks and controls had been working effectively. Third, although George Brangam was a private sector contractor when he carried out the frauds, he previously held a senior managerial position of trust in the health service. He therefore had inside knowledge of the strengths and weaknesses of the controls system. This enabled him to target his fraudulent activity with maximum precision and minimum risk of detection.

3. This is yet another example of a senior person involved in public services abusing their position of trust. As a result of this and other cases such as the Northern Ireland Events Company and the Emerging Business Trust, the Public Accounts Committee is left with the impression that the public service in Northern Ireland has been more vulnerable to abuse by unscrupulous individuals than it should have been. This must no longer be tolerated.

Frauds perpetrated by George Brangam and why they were not picked up earlier

4. One of the key lessons from this case is that the majority of frauds carried out by Brangam could have been prevented if cheques in settlement of clinical negligence and other cases had been paid directly to claimants rather than through BB & Co. The Department has now introduced new procedures which do not permit cheques in settlement of legal cases to be channelled through solicitors, when there is no sensible business case for doing so.

5. Once the frauds had been committed, almost all of them should have been detected quickly through the application of basic checks. For example, the Comptroller & Auditor General’s (C&AG’s) report refers to a case where Brangam received payments twice to settle the same case. If the health body concerned had sought evidence of the actual settlement or obtained acknowledgement from the claimant that the payment had actually been received, this fraud would have been detected immediately.

6. The Committee wishes to send out a strong message that it is wholly unacceptable to dispense with basic payment checks when working with claims submitted by professionals. This point is particularly relevant to the health service, where historically, claims submitted by professionals, i.e. solicitors, doctors, pharmacists, opticians and dentists, seem to have been subject to a much lower level of scrutiny than claims from other contractors. This issue was examined by the Committee’s Westminster predecessor in 1999. [1] The Department has assured the Committee that this culture has changed. The Accounting Officer told the Committee that it now has stringent controls and a zero tolerance attitude. Payments to someone who is well known, is a colleague, or has been one, will now only be made if there is sufficient evidence to support them.

7. The Committee commends the junior member of staff in Causeway Trust who, alert to the possibility of fraud, raised concerns with senior management which led to Brangam being caught. It is disappointing that earlier opportunities for identifying these frauds were missed because senior management did not act decisively and promptly when concerns were raised.

8. Although the frauds were eventually picked up by health service staff they should also have been capable of detection through the Law Society’s regulatory regime. This is because Brangam repeatedly broke solicitors’ regulations when committing the frauds. However, in the event, these frauds were not detected by the Law Society. It has attributed this to the sophisticated paper trail Brangam used to cover his tracks; the sheer volume of health bodies’ transactions that went through the practice’s accounts; and the sampling approach used by its internal accountants, who carry out inspections on its behalf. The Committee welcomes the fact that the Law Society has also learnt lessons from this fraud in terms of its own oversight of client accounts and this has been shared with its accountants.

Adequacy of the Department’s investigation

9. The Committee is not satisfied that the Department’s investigative work was sufficiently timely, wide-ranging or penetrative. The Department told the Committee it was confident it had identified the full extent of the frauds and that subsequent to the initial forensic investigation and the C&AG’s report, it had carried out further work which supported this view. However, the Committee considers that in the forensic investigation, much more effort should have been made to reconstruct the incomplete record trail from third party sources, such as claimants’ solicitors and Court Service records. The Department’s investigative work should also have included formal assessments of the possibility of collusion between Brangam and public officials, and whether, and to what extent, there had been any supervisory negligence.

Concerns over the conduct and probity of George Brangam prior to setting up
Brangam Bagnall & Co

10. During the 11 years Brangam provided legal services to the health service he was effectively treated as a very low risk contractor. Payments by a number of health bodies to BB & Co were subject to a level of scrutiny which fell far below minimum acceptable standards. Yet by the time he left Central Services Agency (the Agency) to set up his own business there was already a sufficient body of concern about his behaviour, conduct and character to justify an enhanced level of scrutiny. The Committee finds it astonishing that the Agency’s concerns were not shared with its parent Department at the time. Again, the Committee would like to reiterate a point made in the Hospitality Association of Northern Ireland Report [2] that, in situations where it is in the public interest to protect standards in public life and the public purse, there should be a mechanism for information sharing. Had such a mechanism been in place those health bodies who had entered into contracts with BB & Co may have subjected their payments to this practice to a higher level of scrutiny and picked the fraud up earlier.

11. The Committee is also appalled at the way in which Brangam’s departure from the Agency was handled. For the six-month period between expressing his intention to leave and actually leaving, Brangam was involved in two conflicting roles. On one hand, he was running the in-house legal services function as the Director of Legal Services, and on the other he was establishing his own practice to provide legal services to the health sector. The attempt to manage this conflict and the leadership shown by both the Department and the Agency at this time was woefully inadequate.

Procurement of legal services

12. This is one of the worst examples of bad procurement practice that this Committee has ever seen. It is unbelievable that the Select List for legal services lasted for 12 years, preventing other firms from entering this market. However, the fact that BB & Co received 70% of the work put out to the private sector market over 10 years is astounding. The lack of clear direction has resulted in an open market not developing for legal services and doubts over whether value for money was ever achieved during this period. Furthermore, the Committee considers that the ineffective management of this procurement process helped create the favourable conditions that allowed Brangam to perpetrate these frauds against the health service. It is the Committee’s view that the Department failed to ensure that the provision of legal services to the health sector was undertaken within a properly regulated framework, for an unacceptably long period of time.

13. The Committee cannot understand why subsequent procurement exercises had to be abandoned considering the wealth of expertise and experience available. There is every possibility that the excessive duration of this Select List was also a factor in the perpetration of the frauds by Brangam. Controls in the area of procurement must be strengthened to prevent such a debacle from occurring again.

Regulatory regime for the legal profession

14. The Committee called on the Law Society to provide evidence in a supplementary session and found this to be very helpful in enhancing their understanding of its regulatory role. The Committee is surprised at the number of interventions by the Law Society in solicitor practices and the level of fraud within such a small society as Northern Ireland and notes there are similar problems in other jurisdictions. The Committee understands that the regulation of legal services in Northern Ireland is currently under consideration and would welcome a comprehensive update from DFP on progress in this area.

Summary of Recommendations

Frauds perpetrated by George Brangam and why they were not picked up earlier

1. The Committee recommends that the Department monitors the performance of other firms providing legal services to the health sector, to ensure they are complying with guidance issued since the frauds were discovered (see paragraph 9).

2. The Committee considers it wholly unacceptable to dispense with basic payment checks and rely exclusively on the honesty and integrity of professionals when dealing with public services. The Committee expects departments and their sponsored bodies to apply the same rigorous standards to ensure a payment is regular, regardless of whom they are dealing with (see paragraph 11).

3. The Department has now introduced new procedures which do not permit cheques in settlement of legal cases to be channelled through solicitors, when there is no sensible business case for doing so. The Committee recommends that the Department carries out regular checks to ensure these new procedures are strictly applied. The Committee also calls on the Department of Finance and Personnel (DFP) to ensure that similar procedures are rolled out across the entire public sector (see paragraph 13).

4. The Department must ensure that appropriate mechanisms are in place to provide assurance that financial procedures in respect of legal and other claims are being followed across the Health and Social Care sector. Accounting Officers need to satisfy themselves that internal audit service providers have built this area into their programme of work to ensure controls and compliance with them is tested periodically. Furthermore, internal audit should pay particular attention to instances where senior management override occurs to ensure that such action is legitimate (see paragraph 16).

5. The Committee recommends that training needs and leadership in the area of contract claims is reviewed within the health sector and rolled out as a matter of urgency. The Department should also consider the extent of the fraud awareness training currently delivered within the health sector (see paragraph 20).

6. The Committee wants assurance that the slipshod, unprofessional practices in this case do not apply elsewhere and recommends that internal audit, throughout the health sector, gives sufficient weight to the audit of contracts. The Committee also calls upon the C&AG to pay particular attention to such contracts as part of NIAO’s routine financial audit work (see paragraph 22).

Adequacy of the Department’s investigation

7. Procurement processes in the public sector often take many months to complete. The Committee recommends that all Departments review their contingency arrangements to ensure they have:

a) an up to date Fraud Response Plan in order to minimise the time required to think through the scope and nature of any investigation once a fraud is notified; and

b) appropriate standby measures in place to allow them to get forensic investigations up and running quickly (see paragraph 25).

8. The Committee is very concerned about the apparent inadequacy of health bodies’ records management systems if records have now appeared that were previously considered to be legitimately destroyed, and recommends that the Department provides a fuller explanation (see paragraph 31).

9. The Committee welcomes the fact that the Department is reviewing its records management guidance and recommends that the findings of this Report, and DFP’s response to the Hospitality Association in Northern Ireland Report are considered when drafting it. New guidance issued must be both understandable and comprehensive (see paragraph 32).

10. The possibility of collusion should never be ruled out prematurely and always be carefully explored in the terms of reference for any fraud investigation. When major contract fraud occurs, the Committee expects that investigations would automatically cover hospitality registers and registers of interest. The Committee requires the Department to report back on details of any gifts or hospitality offered by Brangam to health bodies receiving services, and details of any interests registered by health service staff in connection with BB & Co (see paragraph 38).

11. The Committee recommends that terms of reference for forensic investigations should be pitched sufficiently widely to identify the full extent of the fraud and the possibility of supervisory negligence. DFP should also ensure that departmental guidance on fraud investigations includes consideration of supervisory negligence as a matter of course. The Committee expects in cases of major fraud that departments should consult with NIAO to adequately scope their terms of reference (see paragraph 40).

Concerns over the conduct and probity of George Brangam prior to setting up
Brangam Bagnall & Co

12. Although the Committee welcomes the recovery of both amounts defrauded and costs of £123,000, it is not satisfied that all options for recovery were fully explored in this case. The Committee recommends that when fraud occurs Departments should use all means at their disposal to maximise the recovery of public funds (see paragraph 44).

13. The Committee reiterates a recommendation made in its Report on the Hospitality Association of Northern Ireland (HANI) that, in situations where it is in the public interest to protect standards in public life and the public purse, there should be a mechanism for information sharing (see paragraph 45).

14. This is another example of a case where the public sector has tried to manage a conflict of interest that should have been avoided. The Committee recommends that conflicts of interest must be identified at an early stage. Departments need to better assess the risks involved in trying to manage a conflict if they choose to do so and then address the conflict immediately and effectively. Once again DFP is called upon to give clearer guidance on the types of situation, where conflicts should be avoided, rather than managed (see paragraph 50).

Procurement of legal services

15. When procurement arrangements are being put in place they should always be designed in a way which provides regular opportunities for new suppliers to enter the market. In the Committee’s view, where a list of approved providers is used, departments should regularly monitor the allocation of work to firms to assess if an open market has, in fact, developed. Where the market does not grow as expected, departments should take prompt action to prevent a monopoly situation from arising, a firm becoming over stretched, or over dependency on one provider. The Committee recommends that DFP ensures appropriate guidance is issued to all departments (see paragraph 53).

16. The Committee is seeking assurances from the Department that there will be no further cases of competitions being abandoned due to its inability to assess and compare bids (see paragraph 56).

17. The Committee’s view is that evaluation criteria should be absolutely clear at the start of a procurement process. Furthermore, relevant and accurate data must be provided to tenderers to enable them to assess the services they will be required to provide, and to submit their bids. The Committee recommends that DFP consider this recommendation within the context of its existing procurement guidance (see paragraph 57).

18. The Committee is concerned that the Department has failed to fulfil assurances previously given. It expects departments to respond quickly and appropriately to address all assurances provided to the Committee through regular monitoring of progress (see paragraph 59).

19. The Committee recommends that, in cases like this, where allegations of fraud or other impropriety exist, public bodies should consider suspending financial dealings with those directly, and indirectly, involved until the main investigation has been completed (see paragraph 62).

Regulatory regime for the legal profession

20. The Committee would welcome details of what action, if any, has been taken by DFP following the recommendations of the Legal Services Review Group (see paragraph 71).

21. The Committee recommends that where legal services are provided by private sector firms, public bodies should ensure they have the right of access to inspect their own case files, as and when desired. These rights should be exercised from time to time (see paragraph 74).

Introduction

1. The Public Accounts Committee (the Committee) met on 4 December 2008 to consider the Comptroller and Auditor General’s (C&AG’s) report: Brangam, Bagnall & Co: Legal Practitioner Fraud Perpetrated against the Health & Personal Social Services (HPSS) and a supplementary memorandum on Contracting for Legal Services in the health sector (NIA 195/07-08, Session 2007-08). The witnesses were:

Dr Andrew McCormick, Accounting Officer, the Department of Health, Social Services and Public Safety (the Department);
Mrs Julie Thompson, Acting Senior Finance Director, Department of Health, Social Services and Public Safety;
Mr Dean Sullivan, Director of Planning and Performance, Department of Health, Social Services and Public Safety;
Mr Donald Eakin, Senior Vice-President, The Law Society of Northern Ireland;
Mr James Cooper, former Senior Vice-President, The Law Society of Northern Ireland;
Mr Kieran Donnelly, Deputy Comptroller and Auditor General; and
Mr David Thomson, Treasury Officer of Accounts, Department of Finance and Personnel (DFP).

2. In August 2006, Causeway Health & Social Services Trust (Causeway Trust) raised concerns with The Law Society of Northern Ireland (Law Society), regarding potential irregularities involving the practice of Brangam, Bagnall & Co (BB & Co). The Law Society investigated matters at the practice and froze George Brangam’s assets after identifying a number of anomalies and irregularities within the client accounts. The practice was closed down by the Law Society on 1 September 2006. In April 2007, the Department’s forensic accountants issued their report identifying the fraudulent extraction of £278,000 from six of the eleven health bodies to whom legal services were provided. Following Brangam’s death in August 2007, criminal proceedings against him could not continue. The Department has since taken successful civil action to recover this money.

3. The C&AG’s report examined the events leading to the discovery of these frauds, the extensive nature of the frauds committed and action taken since they were uncovered. The C&AG also conducted a supplementary investigation into the procurement of legal services. The resulting memorandum provided background on how and when Brangam became a provider of legal services to health bodies. The Committee also took evidence from the Law Society.

4. In taking evidence, the Committee focused on the following issues:

frauds perpetrated by George Brangam and why they were not picked up earlier;
adequacy of the Department’s investigation;
concerns over the conduct and probity of George Brangam prior to setting up Brangam, Bagnall & Co;
procurement of legal services; and
regulatory regime for the legal profession.

Frauds perpetrated by George Brangam
and why they were not picked up earlier

5. George Brangam, the principal partner in the practice of BB & Co defrauded the health sector of at least £278,000 during a seven year period. Brangam joined the Central Services Agency’s (the Agency) Legal Services Department in 1980 and seven years later was promoted to Director of Legal Services. In 1995, he left the Agency to set up his own practice when the Department decided to market test legal services. During the period, 1996 to 2006, health bodies in Northern Ireland paid BB & Co £7 million in fees for legal services.

6. The frauds perpetrated by Brangam are yet another example of a senior person involved in public services abusing their position of trust. The Committee is appalled that it took such a long time for this apparently respectable legal services practitioner to be caught. This case sends out a very clear message that public bodies must be just as rigorous in their dealings with professionals as with other contractors.

7. Brangam had been involved in fraudulent activities for at least eight years before he was caught. In the Accounting Officer’s view, the undue trust placed on Brangam led to payments being made with insufficient evidence to support them, and this was the core of what went wrong. The Accounting Officer acknowledged that a stricter application of routine procedures may have led to these fraudulent activities being picked up earlier. The Committee considers this to be a major understatement. There is no doubt in the Committee’s mind that these controls should have led to the frauds being detected earlier and there is no excuse for such basic controls not being in place.

8. Although the Accounting Officer assured the Committee there was no evidence to suggest that similar levels of trust were shown to other firms of solicitors, the Committee is concerned that there could be further exposure in this area.

Recommendation 1

9. The Committee recommends that the Department monitors the performance of other firms providing legal services to the health sector, to ensure they are complying with guidance issued since the frauds were discovered.

10. The Committee cannot think of any instance where it is acceptable to pay public money on the basis of trust. The Accounting Officer admitted, with hindsight, that Brangam had smartly and maliciously built up his reputation to secure legitimate business and to commit fraud. The Department informed the Committee that “it now operates stringent controls, has a zero-tolerance attitude to fraud and does not trust anybody”. However, the Committee is acutely aware of the long history within the health sector of turning a blind eye to white collar crime. In an earlier PAC Report on Controls to Prevent and Detect Fraud in Family Practitioner Service Payments [3] , the Committee’s Westminster predecessors commented on the completely unacceptable position that existed with regard to the levels of controls over family practitioner service expenditure. This included dentists, doctors, opticians and pharmacists. Moreover, the Westminster PAC considered there to be an element of complacency within both the Department and the Health Boards in setting up measures to counteract these deficiencies. It is disappointing that the Department did not apply lessons learnt from this Report to its dealings with other professionals. It is clear that contracts with professionals are not scrutinised to the same extent as other contracts and the Committee does not consider it appropriate or sufficient to rely on the integrity and honesty of professionals who render services to public bodies when making payments to them.

Recommendation 2

11. The Committee considers it wholly unacceptable to dispense with basic payment checks and rely exclusively on the honesty and integrity of professionals when dealing with public services. The Committee expects departments and their sponsored bodies to apply the same rigorous standards to ensure a payment is regular, regardless of whom they are dealing with.

Weaknesses in financial procedures and compliance

12. One of the reasons why Brangam was able to execute these frauds was the health bodies’ practice of paying cheques into the solicitor’s client accounts, rather than directly to claimants. The Committee expressed its surprise that this approach was considered acceptable and that normal tried and tested market practice was not followed. The Department admitted it had no defence to that point. The Committee concurs with the Law Society that this practice was inconceivable and likely to have been a further reason why these frauds were perpetrated against Health & Social Care bodies.

Recommendation 3

13. The Department has now introduced new procedures which do not permit cheques in the settlement of legal cases to be channelled through solicitors, when there is no sensible business case for doing so. The Committee recommends that the Department carries out regular checks to ensure these new procedures are strictly applied. The Committee also calls on the Department of Finance and Personnel (DFP) to ensure that similar procedures are rolled out across the entire public sector.

14. In the Committee’s view, the individual frauds were very straightforward and it should not have been difficult to spot them. The C&AG’s report provides a number of examples of the types of frauds perpetrated, which fully support this assertion. The example where Brangam was able to claim a settlement twice for the same case beggars belief, and provides very little comfort that basic controls were operating in health bodies. While it is surprising that independent evidence was not sought to corroborate the first settlement request, it is remarkable that alarm bells did not ring when the second settlement was requested. The Committee is dismayed to learn from the Department that the requirement to secure appropriate independent evidence of settlements, and pay on that basis only, was established relatively recently when revised fraud prevention rules were issued following discovery of the frauds. The Department did admit that some health sector bodies were already applying that practice, through their own wit, and the Committee is astonished that the need for supporting third party evidence was not already a key control. That said, the Committee would have expected any well run finance department in a health trust or board to have such a basic procedure in place, without needing specific direction from its department.

15. When asked how he ensured compliance with procedures issued for legal claims, the Accounting Officer informed the Committee that he relied on personal assurances from chief executives and internal audit assurances. It is clear to the Committee that, in this instance, meaningful assurances were not obtained from either of these sources. The Accounting Officer acknowledged his responsibility to answer for these weaknesses and noted that it was regrettable and unacceptable that guidance was not applied. The Committee is frustrated that assurance mechanisms within the sector did not work. Given the wide remit of this Department and its large number of sponsored bodies this is of serious concern. It is important that Departmental Accounting Officers ensure that assurances from Subsidiary Accounting Officers are underpinned by hard evidence that controls are operating in practice. Clear assurance mechanisms must be established, followed and monitored across the health sector, supplemented by a programme of regular compliance audits.

Recommendation 4

16. The Committee recommends that appropriate mechanisms be put in place to provide assurance that financial procedures in respect of legal and other claims are being followed across the Health and Social Care sector. Accounting Officers need to satisfy themselves that internal audit service providers have built this area into their programme of work to ensure controls and compliance with them is tested periodically. Furthermore, internal audit should pay particular attention to instances where senior management override occurs to ensure that such action is legitimate.

Weaknesses in supervisory controls

17. The Committee has the clear impression that controls were weaker in some health bodies than in others. In the Committee’s view, Brangam targeted the health bodies he defrauded precisely because he knew that they operated in a lax control environment, and he made a calculated judgement that he could get away with it. Clearly, management with specific responsibilities for making such payments, particularly in these health bodies, were not sufficiently alert to the possibility of fraud.

18. The Committee commends the junior member of staff at Causeway Trust who raised initial concerns about payments to BB & Co but is disappointed that these concerns were not followed up promptly. This failure to act decisively raises questions about the quality of supervision within the Trust. The Accounting Officer has attributed the inadequate follow-up to lack of continuity of staff. The Committee finds the absence of such a basic control disheartening. Supervisory negligence is explored further at paragraph 43.

19. The Committee considers it essential that staff involved in processing payments to contractors are well trained, alert to the possibility of fraud and of the need to comply with controls. The Committee endorses the Accounting Officer’s view that training and leadership of staff working in this area must be reviewed to strengthen controls and secure continuity, particularly in such a period of change within the health service.

Recommendation 5

20. The Committee recommends that training needs and leadership in the area of contract claims is reviewed within the health sector and rolled out as a matter of urgency. The Department should also consider the extent of the fraud awareness training currently delivered within the health sector.

Wider impact on other contracts within the health sector

21. In this instance the controls over contractual payments were found to be so lax that the Committee’s confidence in the capacity of the health sector to exercise effective control over payments to contractors has generally been eroded.

Recommendation 6

22. The Committee wants assurance that the slipshod, unprofessional practices in this case do not apply elsewhere and recommends that internal audit, throughout the health sector, gives sufficient weight to the audit of contracts. The Committee also calls upon the C&AG to pay particular attention to such contracts as part of NIAO’s routine financial audit work.

Adequacy of the Department’s
investigation

23. Following the initial complaint about Brangam in August 2006, the Law Society took decisive action which led to the practice being closed down less than a month later. When asked by the Committee why it had taken the Department seven months to commission its own forensic investigation, the Accounting Officer advised that this time was required to initiate the procurement process, and be clear on the scale and nature of the investigation required.

24. The Committee is not clear why the Department waited until the Law Society’s forensic investigation was completed, given that the Law Society’s Compensation Fund may have been liable and accordingly, the Law Society would have different interests in the investigation.

Recommendation 7

25. Procurement processes in the public sector often take many months to complete. The Committee recommends that all Departments review their contingency arrangements to ensure they have:

(a) an up to date Fraud Response Plan in order to minimise the time required to think through the scope and nature of any investigation once a fraud is notified; and

(b) appropriate standby measures in place to allow them to get forensic investigations up and running quickly.

26. The Committee notes the Accounting Officer’s view that this delay did not impede a thorough and effective investigation but is unconvinced that the Department provided the necessary leadership or the decisive action required. The Accounting Officer notes that he is satisfied that all health sector bodies were clear about the need to secure their records, however the Committee is concerned that if Brangam had any accomplices within the health sector, key records may have been destroyed. In any case, it is the Committee’s view that when faced with allegations of fraud, public bodies must act swiftly to ensure further loss is prevented. In this instance, the delays by the Department were wholly unacceptable. The Committee’s predecessor also made the same point about the need for vigorous and prompt investigation when reporting on the Internal Fraud in LEDU in 2002 [4] .

Scope of the investigation

27. The C&AG’s report indicated that the Department’s forensic investigation was impeded because in 71 cases, relevant files and other information could not be found at health sector bodies or at BB & Co, and therefore, no conclusion could be reached on whether irregularities had occurred. In the Committee’s view, greater efforts should have been made to locate all the missing information or attempts should have been made to reconstruct files from other sources, e.g. claimant solicitor files or Court records. At the evidence session, the Accounting Officer stated he was confident that the full amount of fraud had been uncovered as there was very little evidence of fraud in non-clinical negligence cases; the sample of cases tested was sufficient to reach a conclusion and that, as further files had subsequently been found in recent days, he was no longer concerned about insufficient information.

28. The Committee does not set much store by the Accounting Officer’s assurance that he is less concerned now that files have turned up. Far from reassuring the Committee, this gives further cause for concern over the quality of record-keeping and control maintained by health bodies, and gives the impression of a high degree of confusion. The Accounting Officer explained that one of the reasons why files were not available was because they may have been disposed of under routine and legitimate procedures. The Committee is not clear if the files now found were previously thought to have been disposed of under these procedures and would welcome a fuller explanation from the Department.

29. In the Committee’s view, this is a tacit admission that the preliminary investigation in this area was deficient and the Committee can only surmise that the unavailable information has now been discovered through last minute work completed before the evidence session.

30. The Department gave a commitment that fresh guidance would be issued for records management and expects DFP’s response to the HANI Report [5] , regarding the retention of financial records associated with any investigation for 10 years, to be taken into consideration.

Recommendation 8

31. The Committee is very concerned about the apparent inadequacy of health bodies’ records management systems if records have now appeared that were previously considered to be legitimately destroyed, and recommends that the Department provides a fuller explanation.

Recommendation 9

32. The Committee welcomes the fact that the Department is reviewing its records management guidance and recommends that the findings of this Report, and DFP’s response to the Hospitality Association of Northern Ireland Report are considered when drafting it. New guidance issued must be both understandable and comprehensive.

33. When asked why the investigation had only reviewed records from 1999, when Brangam had provided services to the health sector as a private contractor since 1995, the Accounting Officer advised that additional work had been completed in this area after the C&AG’s report was compiled. This provided the Department with confidence that no such problems existed during that period.

34. Records of work completed by Brangam before he left the Agency were not examined because the Department considered the risk of fraud to be minimal due to cost controls existing in such public service organisations. While the Committee accepts the view that the risk of similar fraud being perpetrated in the Agency was minimal, bearing in mind concerns about his conduct and probity, Brangam may well have been engaged in other types of fraudulent activity. The Committee notes that the Department judged that based on the level of risk, there was no reason to pursue this, however it considers that this should have been included in the terms of reference for this investigation.

35. The Accounting Officer also assured the Committee that, although less attention was given to the £7 million in fees because the majority was paid under a fixed fee arrangement, there was no fraud involved in these payments. The Committee finds this assurance somewhat surprising as there is a clear possibility that such invoices may also have been inaccurate.

Consideration of collusion between Brangam and health bodies

36. The Committee explored with the Department why the possibility of collusion was not considered. The Department advised there were insufficient grounds for it to investigate this, although it did admit that it could not be ruled out. Furthermore because of Brangam’s elaborate concealment methods, it could not know everything going on in the firm or the degree to which Brangam might have had accomplices. The Department argued that it would have been unlikely for there to be effective collusion in six different organisations. The Committee notes that 82% of the frauds identified were concentrated in two health sector bodies, which would either suggest that the control environment in both of them was very weak and this was known to Brangam or it may suggest collusion. In the Committee’s view, it seems unlikely that this level of fraud could have been perpetrated single handedly by one individual, and notes that the bookkeeper employed by Brangam subsequently worked for another law firm and fraudulently extracted monies there. The Committee would have expected the Department to have conducted an initial investigation before prematurely ruling out the possibility of collusion, and notes that this area was not included within the forensic accountant’s terms of reference.

37. At the very least, the Committee would have expected the investigation to look at the hospitality registers of the defrauded health bodies and talk to staff to see if there was knowledge of hospitality not included.

Recommendation 10

38. The possibility of collusion should never be ruled out prematurely and always be carefully explored in the terms of reference for any fraud investigation. When major contract fraud occurs, the Committee expects that investigations would automatically cover hospitality registers and registers of interest. The Committee requires the Department to report back on details of any gifts or hospitality offered by Brangam to health bodies receiving services, and details of any interests registered by health service staff in connection with BB & Co.

Consideration of supervisory negligence

39. When the previous Assembly’s PAC examined the fraud in the former LEDU in 2002, one of the key recommendations was that fraud investigations should address whether supervisory negligence is a contributory factor. Once again, the Committee considers the quality of supervision to have been far below what was expected. If there was no collusion, it is the Committee’s view that there was undoubtedly a very lax supervisory regime at these health bodies. Brangam clearly took full advantage of these weaknesses in control. The fact that the possibility of supervisory negligence was not investigated further by the Department, to determine whether it may have contributed to the circumstances that allowed these frauds to be perpetrated, sends out the wrong message on how inadequate stewardship of public funds should be dealt with. One way of ensuring that supervisory negligence is covered by a fraud investigation would be to include it within a Fraud Response Plan.

Recommendation 11

40. The Committee recommends that terms of reference for forensic investigations should be pitched sufficiently widely to identify the full extent of the fraud and the possibility of supervisory negligence. DFP should also ensure that departmental guidance on fraud investigations includes consideration of supervisory negligence as a matter of course. The Committee expects in cases of major fraud that departments should consult with the NIAO to adequately scope their terms of reference.

41. It is disappointing that the delay in commissioning the investigation was not effectively used to draft sufficiently wide terms of reference. The Committee is frustrated by the inadequacies of the Department’s investigation in this matter, particularly because money has been recovered in full for the fraudulent activities identified to date and more could be recouped if further evidence of fraud was found. It is worth repeating the point the Committee made when examining the fraud in Ordnance Survey of Northern Ireland [6] that any fraud of this nature imposes additional burdens on the public purse over and above the amount defrauded. The Department has estimated that the cost of the Brangam investigation, including legal and forensic accountant expenditure, to be around £123,000. It expects to recoup this in full as the Court Judgement awarded the Department costs. However, it seems from the information supplied by the Department that it has not attempted to either quantify or recoup the cost of time spent by its own staff in handling the investigation.

Concerns over the conduct and probity of George Brangam prior to setting up
Brangam Bagnall & Co

Conduct and probity of George Brangam

42. Once Brangam’s frauds were exposed publicly, new allegations about his conduct, behaviour and probity, over three decades, including his time with the Agency, began to emerge. These included an allegation in 1987, for which no disciplinary action was taken, and a harassment allegation in the mid-nineties. The Accounting Officer acknowledged that there were concerns, but there was no evidence that the investigation in 1987 was brought to the attention of the Department and the issue was resolved to the Agency’s satisfaction. He admitted that questions were left hanging in the air, but there were no grounds for taking action as there was no substantive evidence.

43. The Committee finds it surprising that this matter was not brought to the attention of the Department. Had there been a proper mechanism for information sharing those health bodies who had entered into contracts with BB & Co may have subjected their payments to this practice to a higher level of scrutiny and picked the fraud up earlier.

Recommendation 12

44. Although the Committee welcomes the recovery of both amounts defrauded and costs of £123,000, it is not satisfied that all options for recovery were fully explored in this case. The Committee recommends that when fraud occurs departments should use all means at their disposal to maximise the recovery of public funds.

Recommendation 13

45. The Committee reiterates a recommendation made in its Report on HANI that, in situations where it is in the public interest to protect standards in public life and the public purse, there should be a mechanism for information sharing.

Circumstances surrounding Brangam’s departure from the Central Services Agency

46. In 1994, in line with Government policy at the time, the Department decided that legal services provided by the Central Services Agency should be market tested, i.e. the in-house operation would have to compete with private sector suppliers. At that time George Brangam occupied the post of Director of Legal Services and was the Chief Legal Advisor at the Agency. In September 1994, at the outset of the market testing process Brangam had made clear his intention to set up his own private sector company to provide such services. In the event he established his practice in January 1995, but remained in his public sector post until March 1995. The Committee considers that in the six months before his departure from the Agency, Brangam had a major conflict of interest. He had a vested interest in ensuring that the in-house operation which he directed was weak as this would enable him to capture a greater share of the work when it was out to tender. In the Committee’s view Brangam’s continued involvement with the Agency, at a senior management level, must have had a detrimental impact on the morale of Agency staff who wished to continue to serve in the public sector.

47. The Committee is amazed that Brangam had any involvement in the procurement process, given the fact that he had indicated his intention to resign and create a private sector company to provide legal services. The Department has accepted with hindsight that Brangam should not have been involved in interim arrangement meetings, but maintains that his exclusion from key decisions and processes was enough to satisfy public probity. The Accounting Officer informed the Committee that both Agency management and the Department deliberately designed the procurement process to be independent of him and, while recognising the conflict of interest that existed, considered it to be managed.

48. The Committee does not agree. Conflicts of interest must either be managed or avoided. This was an unmanageable conflict. It is hardly surprising that the Agency’s attempts to manage it were unsuccessful. Brangam was heading up the in-house legal team at the same time as he was setting up his private practice, which would be in direct competition with the in-house legal team. The Committee has previously expressed its view in the HANI Report that being soft on conflicts of interest is a recipe for disaster. The Westminster PAC has also noted in the 2006 LEDU Report [7] that avoiding unmanageable conflicts not only provides reassurance to the public that decisions taken in public bodies are entirely based on what is in the public interest, but protects individuals from any suspicion of bias.

49. The Committee has a very clear view as to how this unedifying situation should have been handled. At the very beginning of the market testing process the Department should have made it clear to Brangam that he would have to make a choice before the process could progress to the next stage. He could bid for work as a private sector contractor, but if he wished to do so, he would have to resign from the public sector by a specified date. Alternatively he could remain in his public sector post, but if he wished to do so, he should play absolutely no part in any private sector bids.

Recommendation 14

50. This is another example of a case where the public sector has tried to manage a conflict of interest that should have been avoided. The Committee recommends that conflicts of interest must be identified at an early stage. Departments need to better assess the risks involved in trying to manage a conflict if they choose to do so and then address the conflict immediately and effectively. Once again DFP is called upon to give clearer guidance on the types of situation where conflicts should be avoided, rather than managed.

Procurement of legal services

Development of an open market

51. Until 2006-07, BB & Co received 70% of the payments made to legal service providers (other than the Agency) despite 23 other firms being on the Select List. Of the £30 million spent on legal services over the period 1996 to 2006, £11 million was paid to the private sector and £7 million of this was paid to Brangam, Bagnall & Co who effectively became a private sector monopoly supplier.

52. The Accounting Officer has admitted that the philosophy at the time of maximising the scope for competition did not work effectively and that Department procedures should have been tighter. The Committee is concerned at how easily Brangam was able to use his inside knowledge of the health sector to gain the lion’s share of the market, and the impact on other firms unable to get a slice of this business. In the Committee’s view, the Department should have monitored this situation and acted promptly when it was clear that an effective open market never developed for legal services, particularly when concerns were raised by elected representatives in the Assembly and elsewhere as far back as 2000 about the disproportionate amount of business given to BB & Co.

Recommendation 15

53. When procurement arrangements are being put in place they should always be designed in a way which provides regular opportunities for new suppliers to enter the market. In the Committee’s view, where a list of approved providers is used, departments should regularly monitor the allocation of work to firms to assess if an open market has, in fact, developed. Where the market does not grow as expected, departments should take prompt action to prevent a monopoly situation from arising, a firm becoming over stretched, or over dependency on one provider. The Committee recommends that DFP ensures appropriate guidance to this effect is issued to all departments.

Duration of the Select List

54. The Select List was established in April 1996, with a shelf life of three years and an option to extend for a further three years. It is surprising that the option to extend, for such an important and sensitive service, was availed of for the maximum three year period allowed. However, for the list to have then been extended by an additional six years is frankly unbelievable. One of the reasons why the Select List had to be extended so many times was that two attempts to run a fresh competition had to be abandoned. In the first instance, the bids could not be ranked against each other. The Accounting Officer informed the Committee that he had no strong grounds for defending what happened during the process and that there were unacceptable delays, resulting in a protracted process that failed to produce any proper outcomes.

Lessons arising from the collapsed procurement exercise

55. The Committee is astonished that despite Central Procurement Directorate (CPD) involvement, in what should have been a relatively straightforward procurement exercise, the competition was designed in a way which did not enable the bids to be compared. This indicates an insufficient level of competency on the part of those involved in designing this process. The Treasury Officer of Accounts (ToA) advised the Committee that CPD assumed that certain information would be available for the evaluation when the tenders came in and one of the reasons why the exercise collapsed was because it was not. Another reason suggested by the ToA was the fact that a single competition had been run for 21 health bodies with different requirements. The Committee agrees with the ToA that, in such situations, strong leadership and direction is needed to get agreement among all the bodies. It is the Committee’s view that the basic application of common sense should have suggested fairly early on in the process that this exercise was doomed to failure and, on this basis, it is not surprised that it collapsed.

Recommendation 16

56. The Committee is seeking assurance from the Department that there will be no further cases of competitions being abandoned due to its inability to assess and compare bids.

Recommendation 17

57. The Committee’s view is that evaluation criteria should be absolutely clear at the start of a procurement process. Furthermore, relevant and accurate data must be provided to tenderers to enable them to assess the services they will be required to provide and to submit their bids. The Committee recommends that DFP consider this recommendation within the context of its existing procurement guidance.

58. The Committee is also dismayed to learn that the Department has failed to honour commitments made to the previous Public Accounts Committee in 2002 [8] to put in place a new legal services contract which secured value for money by April 2004. Earlier implementation of a new legal services contract may have reduced Brangam’s opportunities for carrying out fraud.

Recommendation 18

59. The Committee is concerned that the Department has failed to fulfil assurances previously given. It expects departments to respond quickly and appropriately to address all assurances provided to the Committee through regular monitoring of progress.

The Transfer of cases following discovery of the frauds

60. Following the closure of BB & Co by the Law Society, Gary Daly, who previously worked in BB & Co, set up a new legal practice, MSC Daly Solicitors. He then approached the Department regarding the provision of legal services to health bodies. Having obtained legal advice, the Accounting Officer advised health bodies, that while he was not endorsing the firm, there was no impediment in law or procurement practice which would preclude the use of MSC Daly Solicitors. Gary Daly is not, nor has been, under any investigation for fraudulent activity.

61. The Committee asked the Department why it said to health sector bodies that they could use MSC Daly, when it did not start its own investigation until February 2007 and therefore could not be sure in September 2006, if there was any collusion within the practice. The Department advised that its decision regarding the use of MSC Daly was based on a quick and immediate investigation into the frauds which did not flag up any concerns about anyone other than Brangam, and that this was a difficult judgement call between balancing the risk that something may emerge later against the risk that the case may not be handled well. The Department also noted that advice had been sought from their legal and procurement advisors before taking this action. Although the intention was that MSC Daly would provide continuity of service, the Department acknowledged that new cases had also been transferred to them. The Committee considers that it would have been prudent to suspend dealings with any members of BB & Co following the closure of the practice, until all investigations had been completed. Furthermore, this firm had not been subject to any form of tendering exercise and comprised staff, previously employed by BB & Co.

Recommendation 19

62. The Committee recommends that, in cases like this, where allegations of fraud or other impropriety exist, public bodies should consider suspending financial dealings with those directly, and indirectly, involved until the main investigation has been completed.

63. The Law Society told the Committee that Mr Daly’s position and accountability as a partner in BB & Co is subject to ongoing, potentially disciplinary, activity by the Law Society. Although insurers were satisfied that Mr Daly was an innocent party and therefore not party to the frauds, the Law Society had to consider whether he, as a partner, should have been in a position to ensure accounts were not falsified. Mr Daly has registered his position on this in a letter to the Committee (see Appendix 3).

Regulatory regime for the
legal profession

64. The Law Society acts as the regulatory authority governing the education, accounts, discipline and professional conduct of solicitors and has strict rules regarding how client funds are accounted for and banked. These accounts are inspected by accountants employed by the Law Society.

Frauds not detected through regulatory inspections

65. As stated in paragraph 18, most of Brangam’s frauds should have been detected by health bodies through application of basic controls, but they could potentially have been detected by the Law Society. All solicitors are required to submit an annual accountant’s report to the Law Society to show that they have handled clients’ money properly and regular inspections are also carried out by internal accountants employed by the Law Society. The Committee asked the Law Society why none of Brangam’s frauds were detected. The Law Society responded that, based on the work of its forensic accountants, this was because these frauds were well concealed with a paper trail covering all money leaving the client accounts, making the internal accountants’ scrutiny role very difficult. The Law Society also made the point that the sheer volume of transactions going through BB & Co’s clients’ accounts, from 11 different health bodies which provided lump sum payments to the practice, made it difficult for internal accountants to spot these frauds. Moreover the internal accountants’ approach relied on sampling and unless the frauds were picked up as part of the sampling they would not be detected.

66. The Committee is disappointed that the Law Society’s regular inspections of BB & Co identified no problems other than a minor issue in 2001 and notes the Law Society’s belief that adequate precautions were not taken when examining the various sums paid into the client accounts of the health bodies. The Committee finds it surprising to learn that as late as 2004, the practice of Brangam Bagnall & Co received a Quality Award from the Law Society. The Committee welcomes the fact that the Law Society, as a result of this unfortunate case, has learned specific lessons in terms of its own oversight of client accounts. This has led to advice being drawn up by the forensic accountants involved in the investigation and this has been shared with accountants who report annually on solicitors’ practices.

Complaints raised and disciplinary issues arising in Brangam, Bagnall & Co

67. The Law Society informed the Committee that two complaints had been made to them against Brangam or his practice, during the period in which he practised. One in 2001 which led to an investigation carried out on the Law Society’s behalf concerned funds placed in the firm’s office account rather than its clients’ account. This was considered to be an accounting issue which was regularised. The other related to the 2006 frauds. However an additional allegation relating to an event that had occurred over 20 years previously did not come to the Law Society’s attention until after Brangam’s fraudulent activities were publicly exposed. Given the concerns and rumours that surrounded Brangam’s conduct and probity over the years, the Committee shares the Law Society’s disappointment that public concerns were not conveyed to them earlier. The Committee was surprised to learn that the Law Society does not operate a whistleblowing policy. It is difficult for the Committee to understand how any regulatory body can do its job effectively without having a fully functioning whistleblowing policy in place.

Extent of abuse in the profession

68. Since 1998, the Law Society has intervened in solicitors’ practices 63 times, with some firms being investigated more than once. The Law Society made the point that intervention often results in a satisfactory conclusion, though twenty firms had been closed down. The Committee is astonished at the number of interventions, including cases of fraud, within such a small society as Northern Ireland and notes that there are similar problems within other jurisdictions.

Publication of professional misconduct findings

69. The Committee notes the Law Society’s view that it would not be appropriate to make key findings and reports available to public bodies, until the independent solicitor’s disciplinary tribunal makes its decision, and welcomes its suggestion that the onus be placed on any firm or individual tendering for a legal services contract to disclose details of any professional conduct investigations and findings. The Law Society said that a list is available and published. The Committee was unable to pick this up easily from the Law Society’s website and recommends that such a link is considered.

Review of current regulatory regime

70. The Committee notes that the Government established a Legal Services Review Group in 2005 to recommend to the Minister of Finance and Personnel how legal services should be regulated in Northern Ireland. Following a consultation process, the Group published a Report on Legal Services in Northern Ireland focusing on complaints, regulation and competition detailing 42 recommendations which should improve the provision of legal services. The Committee understands that the report is currently under consideration by the Minister of Finance and Personnel. The Group’s recommendation on regulation of the profession, whereby the profession would continue to discharge its own regulatory responsibilities, subject to enhanced oversight arrangements, is of particular interest to the Committee.

Recommendation 20

71. The Committee would welcome details of what action, if any, has been taken by DFP following the recommendations of the Legal Services Review Group.

Points for the Law Society to consider

72. The Committee welcomes the proactive approach adopted by the Law Society in terms of lessons learnt and has written to the Law Society recommending that:

it should consider introducing a whistleblowing policy, which clearly sets out the protection afforded to a whistleblower and be easily accessible through the Law Society’s website;
it informs the Committee of the outcome of its ongoing inquiries relating to the Brangam case;
it consults with its members to ensure there is no knowledge in the profession of other wrong-doing concerning Brangam; and
findings of the Solicitor’s Disciplinary Tribunal are more readily available on the Law Society’s website and widely published.

73. The Committee also welcomes the Law Society’s suggestion that contracts with solicitors should allow public bodies to regularly review relevant case files held by them and encourages the Agency to bear this in mind if they decide to sub-contract any of their work.

Recommendation 21

74. The Committee recommends that where legal services are provided by private sector firms, public bodies should ensure they have the right of access to inspect their own case files, as and when desired. These rights should be exercised from time to time.

[ 1 ] Controls to Prevent and Detect Fraud in Family Practitioner Service Payments, Session 1998/99, Eleventh Report, 6 May 1999 (HC 123)

[ 2 ] Hospitality Association of Northern Ireland: A Case Study in financial management and the public appointments process, Session 2007/2008, Fifteenth Report, 12 June 2008, (36/07/08R)

[ 3 ] Controls to Prevent and Detect Fraud in Family Practitioner Service Payments, Session 1998/99, Eleventh Report, 6 May 1999 (HC 123)

[ 4 ] Internal fraud in the Local Enterprise Development Unit, Session 2001/2002, Eleventh Report, 26 June 2002 (11/01/R)

[ 5 ] Hospitality Association of Northern Ireland: A Case Study in financial management and the public appointments process, Session 2007/2008, Fifteenth Report, 12 June 2008, (36/07/08R)

[ 6 ] Tackling Public Sector Fraud, Session 2007/2008, Fifth Report, 13 December 2007, (13/07/08R)

[ 7 ] Governance Issues in the DETI’s former LEDU, Session 2005/2006, Forty-Sixth Report, 18 May 2006 (HC 918)

[ 8 ] On 19 September 2002, the Assembly’s Public Accounts Committee considered the NIAO Report on Compensation Payments for Clinical Negligence, 5 July 2002, NIA 112/01

Appendix 1

Minutes of Proceedings
of the Committee Relating
to the Report

Thursday, 4 December 2008
Senate Chamber, Parliament Buildings

Present: Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Thomas Burns
Mr Jonathan Craig
Mr John Dallat
Mr Trevor Lunn
Mr Mitchel McLaughlin
Ms Dawn Purvis
Mr George Robinson
Mr Jim Shannon

In Attendance: Mr Damien Martin (Clerk Assistant)
Ms Alison Ross (Assembly Clerk)
Mrs Gillian Lewis (Assistant Assembly Clerk)
Mr John Lunny (Clerical Supervisor)
Mr Darren Weir (Clerical Officer)

Apologies: Mr Jim Wells

The meeting opened at 1.30pm in public session.

The Deputy Chairperson welcomed Mr Kieran Donnelly, Deputy Comptroller and Auditor General, and Mr David Thomson, Treasury Officer of Accounts (TOA) to the Committee meeting.

1. Apologies.

The apologies are listed above.

2. Evidence on the NIAO Report ‘Brangam Bagnall & Co – Legal Practitioner Fraud Perpetrated against the Health & Personal Social Services’.

(a) The Committee took oral evidence on the NIAO report ‘Brangam Bagnall & Co – Legal Practitioner Fraud Perpetrated against the Health & Personal Social Services’ from Dr Andrew McCormick, Accounting Officer, Department Department of Health, Social Services and Public Safety (DHSSPS), Mrs Julie Thompson, Director of Finance, DHSSPS, and Mr Dean Sullivan, Director of Planning and Performance, DHSSPS, and answered a number of questions put by the Committee.

2.03pm Ms Purvis joined the meeting.

2.07pm Mr Burns left the meeting.

2.20pm Mr Burns rejoined the meeting.

3.12pm Mr Dallat left the meeting.

3.12pm Mr Beggs left the meeting.

3.15pm Mr Dallat rejoined the meeting.

3.20pm Mr Shannon left the meeting.

3.25pm Mr Shannon rejoined the meeting.

Members requested that the witnesses should provide additional information to the Clerk on some issues raised as a result of the evidence session.

3.45 pm Mr Burns left the meeting.

3.45pm The evidence session finished and the meeting was suspended.

4.00pm The meeting resumed in public session.

(b) The Committee took oral evidence on the NIAO report ‘Brangam Bagnall & Co – Legal Practitioner Fraud Perpetrated against the Health & Personal Social Services’ from Mr Donald Eakin, Senior Vice President, The Law Society, and Mr James Cooper, past Senior Vice President, The Law Society, who answered a number of questions put by the Committee.

4.43pm Mr Dallat left the meeting.

4.47 Mr Robinson left the meeting.

5.03pm Mr McLaughlin left the meeting.

Members requested that the witnesses should provide additional information to the Clerk on some issues raised as a result of the evidence session.

5.05pm The evidence session finished and the witnesses left the meeting.

[EXTRACT]

Thursday, 5 February 2009
Room 144, Parliament Buildings

Present: Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Thomas Burns
Mr John Dallat
Mr Trevor Lunn
Ms Dawn Purvis
Mr George Robinson
Mr Jim Shannon
Mr Jim Wells

In Attendance: Ms Alison Ross (Assembly Clerk)
Mrs Roisin Donnelly (Assistant Assembly Clerk)
Mr John Lunny (Clerical Supervisor)
Mr Darren Weir (Clerical Officer)

Apologies: Mitchel McLaughlin

The meeting opened at 2.01pm in public session.

2.05pm Mr Burns joined the meeting.

2.07pm Ms Purvis joined the meeting.

2.11pm The meeting went into closed session.

2.20pm Mr Wells joined the meeting.

2.53pm Mr Wells left the meeting.

5. Consideration of the Committee’s Draft Report on ‘Brangam Bagnall & Co: Legal Practitioner Fraud Perpetrated Against the Health & Personal Social Services’.

Members considered the draft report paragraph by paragraph.

The Committee considered the main body of the report.

Paragraphs 1 – 9 read and agreed.

Paragraph 10 read, amended and agreed.

Paragraphs 11 – 15 read and agreed.

Paragraph 16 read, amended and agreed.

3.04pm Mr Wells rejoined the meeting.

Paragraphs 17 – 26 read and agreed.

Paragraph 27 read, amended and agreed.

Paragraph 28 read and agreed.

Paragraph 29 read, amended and agreed.

Paragraphs 30 – 38 read and agreed.

Paragraphs 39, 40 and 41 read, amended and agreed.

Paragraphs 42 – 43 read and agreed.

Insert new paragraph 44.

Paragraphs 45 – 49 read and agreed.

Paragraph 50 read, amended and agreed.

Paragraphs 51 – 53 read and agreed.

Paragraph 54 read, amended and agreed.

Paragraphs 55 – 64 read and agreed.

3.29pm Mr Burns left the meeting.

Paragraphs 65 and 66 read, amended and agreed.

3.33pm Mr Lunn left the meeting.

Paragraph 67 deleted.

3.34pm Mr Lunn rejoined the meeting.

Paragraph 68 read and agreed.

Paragraph 69 read, amended and agreed.

Paragraphs 70 – 75 read and agreed.

3.37pm Ms Purvis left the meeting.

The Committee considered the Executive Summary.

Paragraphs 1 – 2 read and agreed.

Paragraph 3 read, amended and agreed.

Paragraphs 4 – 14 read and agreed.

Agreed: Members ordered the report to be printed.

Agreed: Members agreed that the Chairperson’s letters to the Accounting Officer, Department of Health, Social Services and Public Safety and to The Law Society of Northern Ireland be included in the Committee’s Report, together with the response letters from the Accounting Officer, Department Health, Social Services and Public Safety, and the Law Society of Northern Ireland. Correspondence received from Mr Gary Daly will also be included in the Committee’s report.

Agreed: Members agreed the report would be embargoed until 00.01am on Thursday, 26 February 2009, when the report would be published.

Agreed: Members agreed that the Clerk seek advice from the Press Office regarding publicity for the launch of the report.

[EXTRACT]

Appendix 2

Minutes of Evidence

4 December 2008

Members present for all or part of the proceedings:
Mr Paul Maskey (Chairperson)
Mr Roy Beggs (Deputy Chairperson)
Mr Thomas Burns
Mr Jonathan Craig
Mr John Dallat
Mr Trevor Lunn
Mr Mitchel McLaughlin
Ms Dawn Purvis
Mr George Robinson
Mr Jim Shannon

Witnesses:

Dr Andrew McCormick Mrs Julie Thompson Mr Dean Sullivan		Department of Health, Social Services and Public Safety
Mr James Cooper Mr Donald Eakin		The Law Society of Northern Ireland

Also in attendance:

Mr Kieran Donnelly		Deputy Comptroller and Auditor General
Mr David Thomson		Treasury Officer of Accounts

1. The Chairperson (Mr P Maskey): We will now consider the Comptroller and Auditor General’s report on ‘Brangam Bagnall and Co: Legal Practitioner Fraud Perpetrated against the Health and Personal Social Services’. We will also consider the Audit Office’s memorandum on contracting for legal services in the health and social care sector.

2. It is unusual for the Committee to consider a report and a memorandum in one session, but as the memorandum supplements the report, it has been decided to do so on this occasion.

3. Two sets of witnesses will provide evidence, and we will hear that evidence in two separate sessions. First, we will hear from the Department of Health, Social Services and Public Safety, and following a short break, we will reconvene to hear from the Law Society. After the Law Society finishes, approximately 10 minutes will be available for departmental officials to make any closing remarks if they wish.

4. I welcome the following witnesses from the Department: Dr Andrew McCormick, who is the Department’s accounting officer; Mrs Julie Thompson, director of finance; and Mr Dean Sullivan, the director of planning and performance.

5. Today’s session is very full; however, given the concern about the report, there will be a number of questions from me and other Committee members. I ask you to keep your answers brief and not to labour your points so that members are allowed time to ask their questions.

6. Dr McCormick, perhaps you will introduce your colleagues and outline their responsibilities.

7. Dr Andrew McCormick (Department of Health, Social Services and Public Safety): Thank you. My colleagues are Mrs Julie Thompson, who is acting as the senior finance director in the Department, and Mr Dean Sullivan, who is director of planning and performance and has the responsibility for procurement.

8. The Chairperson: Thank you, Dr McCormick. As far as the Committee is aware, the fraud in question is one of the largest committed over the longest period of time. The Department must feel extremely uncomfortable at having to respond to this report, and you cannot be happy with the amount of time that it has taken for the fraud to be uncovered.

9. Dr McCormick: I assure the Committee that we feel very uncomfortable about what has happened, and I will emphasise all that we have done to prevent a recurrence and how we have dealt with the consequences of this unacceptable breach of trust, guidelines and procedures.

10. We assure the Committee that the Department has a zero-tolerance attitude to fraud. We have undertaken a range of detailed work, especially since 2004, to make sure that the procedures that apply throughout the health and social care system are sound, based on good practice and ongoing evidence, and are kept under review so that we retain accountability from all the bodies in order that those responsibilities can be fulfilled.

11. I should point out that the full amount from this fraud was recovered. The public purse was reimbursed with what I am confident was the full amount. We have looked hard for additional evidence — even subsequent to the report — and based on that, I am strongly confident that the full amount was discovered and that no individual other than George Brangam, who was the primary perpetrator, was involved.

12. We have stringent controls and a zero-tolerance attitude, and we do not trust anybody. Even if someone is well known, or is a colleague, or a former colleague, we ensure that any payments made are based on evidence.

13. Insufficient evidence is at the core of what went wrong in this case; payments were made without sufficient evidence. We have taken steps to prevent that from occurring again.

14. The Chairperson: I am thankful that you have a zero-tolerance attitude to fraud. You said that the full amount has been recovered, and I appreciate that. However, paragraph 1.2.7 of the report states that the extent of the fraud could be much higher than £278,000. Are you confident that the correct figure is £278,000, or could it be much higher, as the report states?

15. Dr McCormick: There are several grounds for confidence in the analysis that has been done. First, the detailed analysis by the forensic accountants, ASM Howarth, showed that all the fraud came from cases that were handled by George Brangam himself. The evidence shows that the vast majority of fraud was in clinical negligence, which is where he found an opportunity and used a system of working fraudulently. Therefore, the Department has, reasonably, focused on pursuing that category of cases.

16. We have continued to pursue cases from which evidence was not available at the time of the report’s compilation, and further evidence from ASM Howarth confirms that there are strong grounds for believing that the full extent of the fraud has been identified. We cannot rule out the possibility that some relatively small cases are outstanding, because as the report says, not all the records are available. However, having investigated strongly, we are confident about that figure.

17. The Chairperson: Paragraph 3.1.1 of the report says that only 20% of other types of litigation were tested, and as you also said, all clinical negligence cases were tested. Given that only 20% of other types of litigation were tested, how can you be confident that the figure of £278,000 is accurate? Therefore, how can the Department be satisfied by that amount being retrieved?

18. Dr McCormick: Twenty per cent of cases from other types of litigation were tested, and the extent of fraud in those cases was minimal.

19. Mrs Julie Thompson (Department of Health, Social Services and Public Safety): Only one case of fraud was found in that testing.

20. Dr McCormick: That one case was a peculiar case. The vast majority of the fraud was found in clinical negligence cases. The Department instructed the forensic accountants to follow the evidence wherever they needed to go. Had they found any trend of fraud in those categories of litigation, we would have investigated the result further. Under the law of diminishing returns we established that there was no — or hardly any — evidence of fraud in that category of case, so we decided that that was a sufficient sample and a sound enough basis on which to reach a conclusion.

21. A pattern did exist on clinical negligence, hence the 100% check and the decision to extend the period of time that we were investigating. We started by investigating the period from 1999 onwards, and having found one indication of fraud, we went further back to ensure that we had covered the ground and investigated fully. Therefore, there are strong grounds for confidence.

22. The Chairperson: Why were the records reviewed only from 1999, given that Brangam Bagnall and Co had provided services to the health sector since 1995?

23. Dr McCormick: The initial terms of reference were based on the primary investigation, which was carried out by Goldblatt McGuigan on behalf of the Law Society. That investigation showed that the majority of fraud had taken place after 1999. When the Department followed through with the investigation that it commissioned from ASM Howarth, those terms of reference were in place. However, we made it clear that, if evidence existed that went further back than 1999, ASM Howarth should pursue it and investigate it. We did go back further to ensure that we covered the full ground.

24. Mrs J Thompson: When ASM Howarth investigated back to 1995, it discovered 12 extra cases between 1995 and 1999. All those checked out with no problem. Therefore, we are confident that the forensic accountants found nothing between 1995 and 1999, and they went right back to the start.

25. The Chairperson: By the start, do you mean when Brangam Bagnall and Co started?

26. Mrs J Thompson: The investigation went back to 1995.

27. Dr McCormick: Brangam Bagnall and Co was set up in 1995.

28. The Chairperson: Was the Central Services Agency (CSA) asked to review records of work that was completed by George Brangam during the period that he was employed by it?

29. Dr McCormick: The risk of fraud in that period was minimal. Cost controls exist in a public-service organisation such as the CSA, including separation of payment functions from approval functions. All the standard controls were in place in the CSA. The nature of the fraud that Brangam Bagnall and Co carried out was to transfer money from client funds accounts into office accounts. In the CSA context, there was no opportunity for such a mechanism to exist, so there was no ground for believing that there was a risk of fraud.

30. The Chairperson: You said that the risk was minimal — what do you understand minimal to mean? That is the point that we are trying to establish.

31. Dr McCormick: It meant that there was no basis or reason to pursue a further investigation.

32. The Chairperson: There was none whatever?

33. Dr McCormick: You can never say that there was none whatever; there are always things that we do not know. However, we considered it according to the degree of risk and made a judgement that there was no reason to pursue it.

34. The Chairperson: I may want to come back to some of those points later, but hopefully your answers to other members’ questions will tease out some issues. I will invite members to ask questions; please keep your answers concise but to the point — we need to get as much information as possible.

35. Mr McLaughlin: I will pick up on the point that you have been discussing. This is another example of the Committee investigating a matter and finding that record keeping seems to be a difficulty — we encountered that problem when scrutinising the reports on the upgrade to the Belfast to Bangor railway line and in another investigation into the Hospitality Association. When it came to investigating key decisions, we found that there was an absence of records. In this instance, the management of records is such that we cannot determine with certainty or confidence the total extent of the actual fraud that was committed.

36. Paragraph 1.2.7 of the report says that files were destroyed “under routine and legitimate procedures.” I am interested in two points arising from the first answer that you gave to the Chairperson. When the individual in question left the CSA to set up his own practice, the initial investigation considered records dating from 1999 to 2006, and it then extended backwards. What is the timeline between the two? Is there any possibility that records were lost in the intervening period, or can you say with certainty that they were not?

37. Dr McCormick: I am confident that no records were disposed of between the discovery of the fraud in August 2006 and the investigative procedure.

38. Mr McLaughlin: What about the records going back to the formulation of the company?

39. Dr McCormick: Going back to the establishment of the company, the truth is that some of the health and social care service records may well have been disposed of according to our policies for records management. That would have been legitimate and routine. There are several different circulars that mention that, as the report brings out. In fact, paragraph 5.3.5 of the report states that there was an obligation to hold legal records for “a very substantial period”. However, how long that should be is a matter of judgement.

40. Our guidance document from 2004 entitled ‘Good Management, Good Records’ made further specifications and gave five years as the normal period for which records should be kept. That circular was the substantive guidance that applied to the system from 2004 onwards, so people have been working within that. It is a matter of fact that there is a likelihood that some files are missing.

41. Mr McLaughlin: From 2006, what would have been the time frame within which, under prudent and legitimate procedures, records would have been destroyed? Will you give an assurance that in the event of an investigation — which clearly happened — those guidelines are set aside and any evidence that would be germane to the investigation would be preserved? What are the routine and legitimate time frames for the destruction of records?

42. Dr McCormick: As at summer 2006, the default would have been to apply a five-year guideline. However, there are other specific provisions for records to be held until a certain time after a case has been closed. That is the other important stipulation. I am confident that, following the discovery of the fraud, one of the things that we would have done immediately would have been to secure the relevant records. It became very important to do that so that the investigation was not inhibited in any way.

43. The fact remains that some files will have been destroyed. What we do have — in all the cases — are the primary ledger cards in the firm’s accounts. The forensic accountants were able to establish a pattern that gave a primary indication that there was a clear correlation between information on those cards and instances of fraud. That gives further ground for our confidence that we have picked up the vast majority of fraudulent payments.

44. Mr McLaughlin: If the guidance at the time was to keep records for five years, what is it today?

45. Dr McCormick: That guidance still stands.

46. Mr McLaughlin: You said there was more specific guidance.

47. Dr McCormick: Yes. The stipulation of five years is the broad principle, but the circular is more detailed and deals with different categories of record. We are also reviewing that guidance in light of what has happened, and we will issue fresh guidance, just to make absolutely sure that due attention is paid to the records, specifically in cases such as this.

48. Mr McLaughlin: I have to say, I am not clear: I do not understand what is more specific about that. With respect, it seems less specific to me.

49. Dr McCormick: Where there might be reason to keep something for more than five years, we need to make sure that that is considered and that officials do not follow too simplistic a guidance. Our guidance needs to be smart and well informed, and it needs to deal with different categories of record in different ways. I have generalised by saying that the normal retention period is five years, but we need to review that carefully. We must make sure that the fresh guidance that is given to the service deals with any specific loopholes that may exist and that we are clear about that.

50. The Chairperson: David may be able to clarify some of those points.

51. Mr David Thomson (Treasury Officer of Accounts): I remind the Committee that in its report on the Hospitality Association, it recommended that records should be retained. The Department of Finance and Personnel (DFP) response stated that all financial records that are associated with any investigation should be kept for 10 years. That is now the policy.

52. Dr McCormick: Obviously, we will follow those guidelines.

53. Mr McLaughlin: Were you unaware of that response?

54. Dr McCormick: I was until now.

55. The Chairperson: If there are some examples of that specific guidance, it may be useful to inform the Committee of that in order to tease out the answer to Mitchel’s question.

56. Dr McCormick: We will do that.

57. Mr McLaughlin: That would help. Finally, I have a particular concern about the background circumstances, which I believe should have been flagging up problems. We have seen media reports that indicate concerns over George Brangam’s conduct and probity as the director of legal services while he was with the CSA. Do you agree with that assessment? There was an investigation in 1987 and another seven years later. He left the CSA and set up his own company in 1995, while an investigation was ongoing, yet his services were retained. Do you agree that there were concerns at that time?

58. Dr McCormick: Yes, there were concerns, but it is important to emphasise that there is no evidence that the 1987 episode ever came to the attention of the Department. It was also resolved to the satisfaction of the management of the CSA at the time, and the file was closed on that issue. Questions were left hanging in the air, but there were no grounds for taking action at that time. The investigation in the mid-1990s concerned conduct and issues of harassment, not probity as such.

59. It does not follow that someone who is found to have been harassing staff is engaged in fraud. That is not the issue. There was no ground in the period in 1995 for having any hesitation about the procurement that took place at that stage or for thinking that it may have been improper. There may have been rumour and concern about it, but there was no substantive evidence. I know that the CSA management at the time and the Department were rigorous in ensuring a proper procurement process in the mid-1990s because they were concerned to protect public funds.

60. Mr McLaughlin: Two questions then arise. An investigation was ongoing at the time that George Brangam left the CSA as director of legal services to set up his own company. Was he dealt with as an ordinary, bona fide bidder for contract work, or was there any consideration that he may have been a high-risk contractor?

61. Dr McCormick: It does not follow that an investigation that revealed some concerns about harassment constitutes a risk in a procurement context. That would not stand up to test in procurement law: we had to work within a framework of procurement law and regulations in order to ensure a fair process. To have ruled out George Brangam on the ground that there had been some issue of a behavioural nature would have been unnecessary and inappropriate. We are satisfied that the 1995 procurement process was sound.

62. Mr McLaughlin: George Brangam left the CSA in 1995. How long had he been director of legal services? Was he responsible for awarding contracts during that period? If so, have those contracts been revisited and investigated as part of the current allegation?

63. Dr McCormick: There were no contracts for legal services in that period. The procurement in which Brangam participated was the first market testing of legal services. He became director of legal services in 1987.

64. Mr McLaughlin: Does that take us back to the first investigation? That does not seem to have hindered his career.

65. Dr McCormick: In 1987 the complaint was withdrawn; the CSA management found no grounds to pursue it.

66. Mr McLaughlin: I understand that. The other solicitor was very forthright in the statement that he issued. However, I do not know that it would amount to “no grounds”: it was no grounds for a prosecution perhaps, but it did not seem to be a hindrance to promotion and advancement.

67. Dr McCormick: What is a public servant to do in that circumstance? If there is no evidence, there are no grounds for not appointing someone. That is not a basis for making such a decision. It would be subject to challenge by the individual. We have a difficult line to walk in such cases.

68. Mr McLaughlin: Is there no imperative for the Department to revisit Brangam’s conduct or his interaction with claimants in his role as director of legal services?

69. Dr McCormick: Many questions could be asked, for example, at the point of decision, at the point when he was appointed director, and at the point of procurement. Those are the points when a valid, evidence-based complaint against Brangam could — and should — have been considered. For current procurements, appropriate checks would be made, and we would seek a declaration that there would be no outstanding complaint or point of investigation. That sort of test would be applied in a present-day procurement. We have to be very careful about those things, but we have also to proceed strictly on the basis of evidence. That is the nature of how we proceed.

70. Mr G Robinson: My questions and points are addressed specifically to Dr McCormick, and they are about the Causeway Trust and the Northern Health and Social Services Board.

71. Why did the Causeway Trust miss earlier opportunities to uncover the fraudulent activities of George Brangam, as noted in case study 1, paragraph 2.1.1 of the report and also in case study 4, paragraph 6.1.2?

72. Dr McCormick: It is fair to say that opportunities were missed. We have to express regret and apology about that. It is possible that his activities would have been detected earlier if there had been a stricter application of routine procedures. The essence of the issue is that undue trust was placed in an individual, which is never the right thing to do. On one level, it should be recognised that that can happen, but I am quite clear that our message to all concerned, throughout the health and social care system, is not to make payments on the basis of trust.

73. The fraud depended on the presentation of invoices in relation to settlements that were printed on the firm’s letterhead — they appeared to be genuine requests for payment from Brangam Bagnall and Co. Most, or all, of those would have been picked up if the organisation had secured third-party, independent evidence of the payments. We recognise that the fraud should have been picked up earlier and that some opportunities were missed.

74. The Chairperson: Somebody has a mobile phone on. I remind members and visitors in the gallery that mobile phones should be switched off because they interfere with the sound system. The jobs of Hansard staff are difficult enough, without having to deal with phone interference, so people should check their phones and switch them off if they are on.

75. Mr G Robinson: Dr McCormick, I have a more pertinent and searching question in relation to paragraph 3.1.4 of the report. Why do you think that the Causeway Trust and the Northern Board were the main victims of George Brangam’s fraudulent activity? Can you give a specific reason for that, or why you think that they were targeted?

76. Dr McCormick: The targeting must have depended on the knowledge of the perpetrator. It was dependent on his familiarity with systems and the way in which things operated. There could have been an element of trial and error on his part. He, evidently, found a weakness in that organisation — that is what the record shows. He was able to get away with it too often. I cannot give any particular reason as to why that weakness was there, but we need to consider the training and leadership of staff in that context. In order to secure continuity, we must ensure that those people are well trained and are experts in what they do.

77. It is true to say that there was some discontinuity in the staff who dealt with those issues in that period, because some changes occurred. Perhaps there was a specific weakness, but that is not good enough. We must ensure that there is proper coverage, which should be helped by the fact that we have undergone a reorganisation. Instead of having 18 organisations — each of which had its own team for investigating such matters — there are now five trusts that cover all of the main clinical-negligence issues. Therefore, the degree of risk is reduced.

78. Mr G Robinson: Do you accept that controls in that area were inadequate, which, consequently, George Brangam took advantage of?

79. Dr McCormick: Clearly, some controls were not applied strongly and regularly enough. That is how it happened. Some other checks should have been applied. We must recognise that and apologise for that. In the leadership that we give now, and in the procedures that are put in place, we must make sure that everything possible is done to prevent that kind of fraud. That is a very determined attitude that we now have.

80. Mr G Robinson: Was the possibility of collusion explored in the forensic investigation? If not, why not?

81. Dr McCormick: It is important to identify that six different organisations were the victims of fraud in that scenario. It is doubtful that there would have been effective collusion in six different organisations. From our understanding of what happened, it does not seem that collusion would have been necessary. Most of the techniques that he used — which are explained fully in the report — depended on the presentation of invoices for settlements that appeared to be legitimate. The basic weakness was the willingness of organisations to pay on the basis of that evidence and not seek independent, third-party evidence of settlements. That was the primary weakness, and it was exploited opportunistically on a relatively small proportion of the total number of payments — some 27 out of the 5,000 payments of that nature. Therefore, he was picking and choosing his opportunities.

82. That process, to me, would not seem to require collusion. It is not possible to rule it out, but there were no grounds for the Department to investigate that possibility, because there was no thread of evidence to suggest it. The Department examined the evidence carefully, and our understanding of what was going on suggests that that was the story as we see it.

83. Mr G Robinson: According to the report the Causeway Trust had the highest level of fraud.

84. Dr McCormick: I recognise that.

85. Mr G Robinson: Have you checked the appropriate hospitality registers to see if there were any recorded patterns of George Brangam’s offering gifts or hospitality to Health Service staff? That would seem to be a very pertinent question.

86. Dr McCormick: I cannot say that I have checked that fully. However, my understanding — particularly in relation to the Causeway Trust — is that there was no significant hospitality offered or given.

87. Mr G Robinson: Are you OK with that? Do you believe it?

88. Dr McCormick: I do not have the full details. However, I have no reason to believe that that is a major issue.

89. The Chairperson: We do not have full details today. Perhaps that is other information that could be passed on for further investigation.

90. Dr McCormick: I would certainly be willing to pursue that.

91. Mr Shannon: Dr McCormick, you are the man in the hot seat, in every sense. I will begin my questions by asking you specifically about paragraph 3.1.1 of the report. Given the speed with which the trust and the Law Society acted, can you explain the Department’s delay in commissioning the forensic investigation? Why did it take so long?

92. Dr McCormick: It was a — [Inaudible due to mobile phone interference]

93. The Chairperson: Sorry, before you answer that question Dr McCormick, someone’s mobile phone is ringing. That happened in one of our previous meetings and, as a result, the recording of that meeting was of a very poor quality. Indeed, I have raised the issue of the use of mobile phones on a number of occasions today. Again, will everyone please check their mobile phones and ensure that they are switched off as it causes problems with the recording system. I have left mine in my office so it is definitely not me.

94. Mr Shannon: Someone should perhaps collect all of the mobile phones. Then you would know for sure whose phone it was.

95. The Chairperson: Sorry for that interruption.

96. Mr Shannon: Would you like me to repeat the question?

97. Dr McCormick: No, it is OK. The sequence of events was that the fraud was discovered in the summer of 2006 and the matter was initially referred to the Law Society. The Law Society undertook its primary investigation through Goldblatt McGuigan, and it established the first evidence in relation to the extent of the fraud undertaken.

98. In order to secure the services of forensic accountants, it was necessary for the Department to undertake a procurement process, and it took until February 2007 to initiate that process and to be clear on the scale and nature of the investigation required. It is important to say that the Department went through proper process to secure that. I am not sure if my colleague has something to add.

99. Mr Shannon: I would like to come back to that later, if I may.

100. I mean no disrespect to anyone, but the Law Society and the Department would have different reasons for their respective investigations — the Law Society acting for the Law Society and the Department acting for the Department and the trust. Therefore, their reason and focus would be slightly different. Even though you have stated that you were waiting for the Law Society’s report, it seems that it would be unrealistic to use the same forensic firm, for example.

101. There was certainly a delay in the investigation. Is it possible — and this is the crux of the matter — that in the seven months or thereabouts that it took the Department to act there could have been destruction or hiding of information and detail? That is my, and the Committee’s, concern.

102. Dr McCormick: If that were the case, it was not done very well, because evidence still existed of the frauds, amounting to £278,000. The Department is satisfied that, once the alarm was raised in the summer of 2006, all the health and social care bodies were clear about the need to secure their records. Those records were available when ASM Howarth went in.

103. Figure 2 in paragraph 3.1.2 of the report refers to “insufficient information” or case files not being available, but further files have subsequently been found in recent days; therefore, the Department is not concerned about that point. We feel that we have got to the bottom of it. The fundamental information exists and has been used to learn the lessons and, importantly, to ensure recovery of the funds.

104. Mr Shannon: That may have answered my follow-on question, Dr McCormick, but for the sake of clarity; when the investigation was conducted, in your opinion, were there any other cases in which information that was needed was missing?

105. Dr McCormick: I have no grounds or evidence for believing that that was the case. I am confident that the relevant information was, and is, available.

106. Mr Shannon: Are you saying that, in your opinion, the delays did not inhibit that investigation?

107. Dr McCormick: They did not impede a thorough and effective investigation.

108. Mr Shannon: My second question relates to paragraph 2.1.3 of the report. The report summarises some of the action that was taken, particularly by the Causeway Trust. When informed of those irregularities on 27 July 2006, what guidance did the Department provide to the trust and what further action was taken? For instance, were other health bodies that used the provider advised of the Department’s concerns? Furthermore, was any decision taken to extend the review to other health bodies? Those are follow-on and follow-through questions.

109. Dr McCormick: The Department undertook a clear sequence of steps at that stage. As soon as the chief executive of Causeway Trust alerted the Department to the irregularities, there were primary discussions to establish the nature of that concern. Those discussions involved the Department and the trust, with all the relevant experts in the team playing their part. My colleague will explain the full sequence of events, but we alerted all the clients of Brangam Bagnall and Co immediately about our concern, and moved quickly to close down any risk.

110. Mrs J Thompson: The procedure that took place at the time involved the Department alerting clients to check that their payments to Brangam Bagnall and Co were in order. That was at the very start, as the Law Society became involved. The Department could not say, at that point, whether anything fraudulent had necessarily taken place, but the Department wanted those clients to know that they should go back and check their records.

111. Within a couple of weeks, it became increasingly clear that there were problems. Therefore, more letters were sent advising health bodies about the ongoing work and asking them to put in place contacts for the Department. We have continued to work with them throughout as ASM Howarth was appointed and the legal case was taken. That is the pattern.

112. Mr Shannon: Given the background, the Committee is concerned — and I suspect that the public shares its concern — that perhaps the Department did not provide the full leadership and support role that was required by the trust, particularly in relation to the timescale. Julie mentioned a “couple of weeks” in her comments; will you clarify what the Department was doing about providing leadership and giving the support that was needed? The trust appears concerned about the lack of support during the time that elapsed, and the apparent failure to deliver that support. What is the answer to that?

113. Dr McCormick: I was in touch with the chief executive and other members of the team in the Causeway Trust, and I was also in touch with other trusts. I am satisfied that we responded properly and effectively. At no stage in the process was there any hint of a concern coming to me from anyone in the health and social care system that we were not supporting them or providing the advice, clarity, guidance or leadership that they expected. By definition, leadership does not depend on that — that would be too much like following. I think that we stepped up to the plate and gave clear signals that we were determined to resolve the issue. I am satisfied that my team took strong, effective steps in that period, and the result is that we secured the return of the money. We completed a thorough investigation, and we should command the confidence of the wider health and social care team in that regard.

114. Mr Shannon: You said a couple of times that the money was returned, and that is good news. However, the purpose of today’s questions is to establish the weakness in the system that allowed for the money to be given inappropriately. Therefore, it is good news that the money has been returned, but we must ensure that it never happens again.

115. Paragraph 1.2.2 of the report focuses on client funds, and paragraph 1.2.2 of the memorandum talks about £7 million of fees that were paid to Brangam Bagnall and Co. I asked the following question last week in preparation for today’s Committee, and I will ask it again: were the fees examined as part of the forensic investigation? If not, why not?

116. Dr McCormick: The fees were examined. The terms of reference of ASM Howarth included all payments to Brangam Bagnall and Co. Less attention was given to the £7 million in fees because the vast majority of the money was paid under block contracts based on monthly payments which covered the nature of what the service provided. Therefore, the firm received a block payment regardless of the number of hours that the solicitors may have worked. It was clear from the initial work of the forensic accountants that the scope and opportunity for fraud in that context was minimal. Therefore, there were no grounds for pursuing that. However, the £7 million was covered by the terms of reference of ASM Howarth, and we are satisfied that the full possible extent of fraud has been established and does not include that. That is our confidence in that issue.

117. Mr Shannon: Do you have information relating to the checking of the £7 million in fees? I know that you have said that you have checked it, but the Committee needs to know that it has been checked. The question really boils down to whether we have seen the total extent of the fraud, or whether something else is waiting to bite us on the heels? If an investigation has taken place — and I think that you said that it has — the Committee would like to see it.

118. Mrs J Thompson: ASM Howarth investigated more than 5,000 payments. It carried out an initial investigation between the ledger cards of Bragnam Bagnall and Co and the trusts’ financial records of all 5,000 payments, which included the block contract. The company was satisfied with the vast majority of those records, which led it to channel into the clinical negligence cases. However, all 5,000 payments were covered on a match between the records of one party and the other.

119. Mr Shannon: Can you assure us that there was no fraud involved in the £7 million in fees?

120. Dr McCormick: Yes.

121. Mr Craig: I would like Dr McCormick to clear up an issue in respect of an answer that he gave to Mr Robinson. You talked about 5,000 claims. Is that for all of Northern Ireland, or is that for one individual trust?

122. Dr McCormick: That is 5,000 payments from all the trusts that had business with Bragnam Bagnall and Co. It covers all such organisations.

123. Mr Craig: So, that is across 11 trusts?

124. Mrs J Thompson: Yes.

125. Dr McCormick: It includes the Northern Board.

126. Mr Craig: I am trying to understand the scale of the situation. Were there approximately 400 to 500 cases in each trust?

127. Mrs J Thompson: There were 5,000 payments made.

128. Mr Craig: If you take it out of 5,000 rather than 300 or 400, it is less of an issue. Section 4 outlines the examples of fraud that the Audit Office has examined. The Comptroller and Auditor General conducted six case studies, four of which state that evidence of the actual interim settlement and its value should have been sought. Furthermore, four of the six case studies concluded that acknowledgement of payments should have been obtained from the plaintiffs. Basic bookkeeping practices were not applied. Do you agree that health bodies have a huge problem with documentation? Is that problem due to negligence, collusion or sheer incompetence?

129. Dr McCormick: I would describe it as being due to an inappropriate degree of trust that was placed in a solicitor. What I can say is that that is in the past. As soon as the situation became clear, the Department revised its fraud prevention guidance to establish a requirement whereby health and social care bodies must secure appropriate independent evidence of settlements and pay on that basis only.

130. Some health and social care organisations were already applying that practice through their own wit. Others had, perhaps, placed excessive trust in, and undue reliance on, George Brangam, who was a former colleague. It is possible to present a scenario in which Mr Brangam was considered a respected solicitor and was, therefore, paid. Although there is a natural tendency to do that, we have made it clear that that is unacceptable practice.

131. However, he had previously worked in the public service and was well known to the chief executives of the trusts. It is possible to envisage the scenario in which people were overly willing to pay him on the basis of the evidence that he presented. That was plausible, and it was seen as reasonable. However, as you say, basic checks would have revealed some discrepancies. The Department recognises that fact, and we apologise; we are not hiding from the fact that the buck stops with us. It should not have happened, and our responsibility is to learn the lessons thoroughly and effectively.

132. Mr Craig: Although you do not believe that there was any collusion, you do believe that there was an over-acceptance of the old boys’ network. Is that correct?

133. Dr McCormick: That is your phrase, not mine. There was too ready a degree of trust. That should not have happened, and we have corrected it.

134. Mr Craig: Did the Department actively monitor the trusts’ compliance with departmental guidance? The case studies show that trusts were not following that guidance. Did the Department monitor that situation?

135. Dr McCormick: Some so-called guidance is, in many cases, especially in this context and category, instructions and directions to organisations. The Department relies on two main sources to obtain assurance of compliance with directions, and I use that assurance to give sound assurance regularly to the Committee. I seek personal assurances from the chief executives that, as accountable officers, they take their responsibilities seriously and apply them regularly. I have regular accountability meetings with the chief executives.

136. The second dimension is the reliance on the internal audit service, which each of the four boards provide for the different trusts in their area. An effective analysis of risk, and a clear and regular checking of systems, should ensure that elements of risk are drawn to the chief executive’s attention.

137. The Department has access to the reports and studies that the internal audit service produces throughout health and social care. Those are the primary mechanisms on which we rely. There can never be 100% coverage, but we aim to have sound assurance that people are applying our systems and following our guidance. It is regrettable and unacceptable that guidance was not applied in some cases, and it is my responsibility to answer for those weaknesses.

138. Mr Craig: My worry about the entire scenario is that guidance existed but was not implemented. The Department has provided further, and, I have to say, very good, guidance since the facts of the case were uncovered. Are you confident that your guidance will be implemented any better now? Could this situation reoccur? I am not convinced that it could not happen again.

139. Dr McCormick: What I have to do continuously is to maintain the leadership message that states that the entire health and social care system is accountable to us in fulfilling our directions and instructions. That can be done through regular engagement with the chief executives. We will expect there to be a regular programme of internal audit studies that will test the main controls. I have to operate in a way that makes it very clear to the chief executives that I will hold them to account in the same way that the Committee holds me to account.

140. A few weeks ago, we had a seminar on governance across health and social care and the nature and assurance of controls. There was a very good attendance of 70 people, almost all of whom were executive or non-executive members of the boards of health and social care organisations. In the seminar, we conveyed the need for clearer assurance mechanisms and the need for responsible and effective governance of organisations. We must ensure that we fulfil what is a very big responsibility.

141. The Chairperson: I take it that there is an internal audit office in the trusts, so why was the problem not picked up?

142. Dr McCormick: There is an internal audit service for all the organisations. Because that is a scarce and expert resource, it is organised in four units. Those cover the boards and are responsible to the chief executives. Each chief executive has to be sure that there is enough coverage from internal audit to provide a primary level of assurance. We hold them to account on that responsibility.

143. The Chairperson: So, it was missed.

144. Dr McCormick: It is true that the problem was missed. There is no escaping that reality, and it is unacceptable and embarrassing for me. I assure you that I will convey to the chief executives the unease that I feel sitting in front of the Committee today.

145. Mr Dallat: Paragraph 5.3.1 of the report indicates that £278,000 has been recovered. You have been very clear in dismissing the notion that that £278,000 is merely the tip of the iceberg, but how sure are you of that?

146. Dr McCormick: I am very confident that that is not only the tip of the iceberg. I am also very confident that we have got to the bottom of the issue. We have detected the main methodology that George Brangam used, and the extent of his opportunity. I cannot be categorical about it, because we do not have 100% of the information. However, we have looked carefully at all the evidence that we have, and I am confident that we have got to the bottom of the matter.

147. Mr Dallat: What additional costs were incurred in the mopping up of the mess? What is the Department’s additional assessment of legal costs on these cases? Were they all recovered?

148. Dr McCormick: I do not have a quantification of the costs of the investigation. It has been a distraction, and the fact that the process had to be undertaken was damaging. The investigation took time away from other things that might have been done. However, it was vital that the investigation be undertaken. There are some specific bills for the work carried out by ASM Howarth, but the considerable activity that was undertaken by my team is more difficult to quantify.

149. Mrs Thompson: The agreement with the courts was that the costs would be recovered.

150. Dr McCormick: That is correct.

151. Mr Dallat: You have dismissed any notion that there was negligence of epic proportions and collusion, so we will not dwell on that. However, are you aware of the allegation that a son of the chief executive of the former Causeway Health and Social Services Trust worked in the office of Brangam, Bagnall and Co?

152. Dr McCormick: I have heard that allegation, but I do not have any supporting evidence.

153. Mr Dallat: Concerns about this issue go back a long time. I have a letter dated 29 March 1996 from Catherine Daly in the policy and accounting unit to Mr Hunter, expressing serious concerns about the influence carried by Brangam, Bagnall and Co, who, at that stage, were swanning around Northern Ireland and giving private presentations of the wonderful services that they could perform. I am sure that it will come as no surprise to you that a Mr Gouck of Carson and McDowell was irate about that. If you had any sense of the feeling that existed in the legal profession about what was going on 12 years ago, action should have been taken. If something had been done at that time, these horrendous mistakes would not have been made.

154. Dr McCormick: In 1996, there was no evidence on which to act. There were rumours and concerns, but, as I have sought to explain in earlier answers, we can act only when there is an evidence base that stands up to scrutiny. We are subject to scrutiny in a number of ways. There were rumours, but nothing substantive enough to allow us to act.

155. Mr Dallat: The Assembly is only 10 years old; eight years ago, I submitted a question for written answer on this subject in which I asked for a list of the trusts, health boards and other arm’s-length bodies that were under the control of this fraudster. However, that did not seem to prompt any kind of concern. After a long time, I got an answer, and it was clear to see that this thief, who was stealing from the most vulnerable people in society, had a disproportionate influence.

156. I do not want to get too emotional about the issue, but it is only when one spends a few days in the Royal Victoria Hospital and sees surgeons, doctors and nurses fighting to save the lives of people that one begins to realise the consequences of the subject that we are discussing. Even £278,000 would make a contribution to those people in the health profession who do not go home for three days, in some instances. They watch and stand over patients who are in crisis. That money would also make a difference to the lives of old people who cannot get a care package in the community. This is serious stuff, and it was in your domain for at least 10 years — even 20 years.

157. Dr McCormick: There was no evidence to suggest that George Brangam was a fraudster until the summer of 2006, when it came to light. Before that time, there were rumours, but there was not an evidence base on which to act.

158. Mr Dallat: Dr McCormick, even after the bubble burst and George Brangam — the thief — was uncovered, four solicitors wrote to you to ask whether they could take over the work. One of them was described on Brangam, Bagnall and Co’s letterheads as a partner in the disgraced business. Nevertheless, you wrote a letter, dated 7 September 2006, to that new company, MSC Daly, in which — although you did not endorse the company — you made it clear that you had no grounds whatsoever to question its right to assume that business without any procurement process. On 7 September, you also issued a letter to all the relevant trusts giving the green light to continue using those solicitors. What is the explanation for that?

159. Dr McCormick: It is important to address that matter very carefully and thoughtfully. With respect, I want you to recognise that it was not the firm that was disgraced, but an individual. There is no evidence of fraud against any other member —

160. Mr Dallat: At least one of them was described as a partner on the letterhead.

161. Dr McCormick: Yes, but there is no hint of risk of fraud on part of that individual.

162. Mr Dallat: That is agreed.

163. Dr McCormick: My point is that in writing to the trusts we did not endorse the new firm, MSC Daly, as you said. We simply said that there was no impediment to the trusts’ continuing to use those solicitors who had been working on their cases, if they judged that to be the right thing to do in the public interest. MSC Daly assumed nothing and got nothing as of right.

164. We were very, very careful about that, because we recognised that there might have been concerns. The easier thing to do would have been to prevent that. However, we said that if it was in the public interest to continue to use those solicitors, it was OK for the trusts to do so. That was not an endorsement.

165. Mr Dallat: I can bring you up to date. Recently, the Minister of Health, Social Services and Public Safety has returned all future caseloads from that particular firm of solicitors and others to the director of legal services at the Central Services Agency. I assume that you were involved in that.

166. Dr McCormick: That is correct.

167. Mr Dallat: Do you back the Minister’s decision?

168. Dr McCormick: It is the Minister’s decision. Our job now is to implement that, to ensure that we secure a value-for-money outcome and to ensure proper processes are followed in that new way of working. That is our challenge. That is part of what we will do. I am confident that the CSA will deliver a high-quality legal service and that we will secure good value for money from that service.

169. Mr Dallat: According to paragraph 1.2.9 of the report, you said that these frauds were unlikely to be discovered. How can you argue that? The types of fraud described in the report look pretty straightforward to me. Before you answer that question, I shall lift the myth that it was someone in a high position in the Causeway Trust who discovered the fraud. That is not true. The fraud was discovered by a relatively junior bookkeeper. You said earlier that the false invoices were on professional letterheads. The one that really blew this out of the water was not; it looked like something that a child might have composed on a computer in nursery school. How sophisticated was that?

170. Dr McCormick: I do not disagree at all. There were some things that could have been detected earlier. I commend the individual that you mentioned for having raised questions. That was a good thing to have done. However, it should have been picked up on earlier to ensure that we were not settling the same case twice. Those sorts of things should have been picked up.

171. I can only infer that excessive trust was being placed in the solicitor — here is a solicitor’s bill, he is our solicitor, let us just move on. It is unacceptable. The Audit Office report says clearly that:

“it is not unreasonable to expect services to be rendered with integrity and honesty by professionals.”

172. People can expect that, but we agree entirely with the Audit Office that it is not right to rely on that. Our new guidance of 2006 requires people to secure the basic checks and third-party information. I do not disagree with the thrust of your argument.

173. Mr Dallat: Do you agree that such fraud is just about the most despicable sort that could take place in Government circles, given that it is thieving from the most vulnerable people in society, who are either fighting for their lives in hospitals or struggling to survive in the community?

174. Dr McCormick: I agree.

175. Mr Lunn: My questions concern the periods when Brangam Bagnall and Co and when MSC Daly was set up. I cannot resist saying that the Department seems to have a role in business start-ups, because it gave both companies a considerable boost at the start of their careers.

176. I would have thought that, when Brangam Bagnall and Co was closed down, it would have been prudent to suspend dealings with any member of that firm until all investigations had been completed. I realise that you have answered some of these questions already. The new practice, MSC Daly was set up in September 2006, and the Department’s proper investigation into the activities of Brangam Bagnall and Co did not really begin until January 2007. Why did you give work to MSC Daly in those circumstances?

177. Dr McCormick: There was a period between the initial discovery of irregularities, at the end of July 2006, and September 2006. In that initial period, there was some quick and immediate investigation into what was going on. That did not flag up any concerns about any solicitor in Brangam Bagnall and Co, other than George Brangam himself. That gave us the confidence to act as we did.

178. I understand the point that you have made. We had a difficult judgement call to make; we had to balance the risk that something else would emerge later against the risk that a case would not be handled well. The latter risk was important too. We left the judgement about the degree of work to give to the new firm with the trusts, because they were much closer to, and more deeply involved in, the individual cases and, therefore, were better placed to judge what degree of continuity was necessary.

179. We had a primary degree of confidence that there was no suspicion or concern about any solicitor in the firm, other than George Brangam.

180. Mr Lunn: At that time, there were a number of other firms on the select list that you could have employed. They had been properly vetted, had undergone some form of evaluation and would have been ready to take on that sort of work. MSC Daly had not undergone any form of evaluation. To highlight one point, did you examine MSC Daly to find out whether it was a sole trader or a partnership?

181. Dr McCormick: On your first point, we were clear that it would no longer have been legitimate of us to use the previous select list — that had expired. Therefore, to have used it would not have been in line with our procurement advice. We took specific expert advice on all the issues before writing the letter in September 2006, and we thought about it very carefully. As you say, it would have been advantageous to have gone back to the previous select list, and, had it been in order to do so, that is what we would have done. However, the advice was that that list was no longer live, so we could not do that.

182. Mr Lunn: Were no other solicitors doing that sort of work at that time, apart from Brangam Bagnall and Co and the CSA?

183. Dr McCormick: Yes, where a trust had entered into a contract previously. While the select list was current, some trusts entered into contracts, and some of those contracts were still valid as of September 2006. My point is that we had no sound basis in either law or procurement regulation to make a new contract with anybody. We could not use the framework contract to do that. The trusts were able to use the services of MSC Daly where it provided a continuity of service. That was the only ground that we highlighted. It was the only basis on which we did not give a red light. I do not think that we gave a strong signal that the trusts should use that service; we simply said that if they thought that it was necessary, they could. I do not know the precise governance arrangements that were involved.

184. Mr Lunn: Did the Department establish whether MSC Daly was a partnership, or whether Mr Daly operated on his own?

185. Dr McCormick: There were several solicitors —

186. Mr Lunn: I am not asking whether there were several solicitors in the practice, I am asking whether he was the only partner.

187. Dr McCormick: I do not know whether he was the sole partner. However, the Department checked the initial business plan, the financial viability, the capacity of the organisation and its certification and accreditation. Those aspects were checked thoroughly before matters proceeded.

188. Mr Lunn: I ask that question because, in the end, the Department had to rely on the professional indemnity cover provided by the Law Society to recover the money from George Brangam. As I understand it, in the case of dishonesty, the Law Society’s professional indemnity cover applies only where there is more than one partner and only one of them is dishonest. In other words, a sole trader in the legal profession does not have professional indemnity cover for dishonesty — and I think that that is still the case. That is why I asked the question. If you want to respond at a later date, please feel free.

189. Dr McCormick: I will have to get back to you on that.

190. Mr Lunn: Even in a crisis situation whereby one wants to ensure continuity of service, that seems like a very basic level of evaluation. The Department should have at least ensured that that brand new practice was properly set up.

191. Dr McCormick: I am not saying that it was not —

192. Mr Lunn: Neither am I.

193. Dr McCormick: All I am saying is that I do not know the answer right now.

194. Mr Lunn: Did MSC Daly receive any new business or new cases from the Department?

195. Dr McCormick: It received new business from some trusts. In the autumn of 2006 and the early part of 2007, there had been a loss of a major supplier, and the CSA had limited capacity. In that context, some trusts made the judgement that they needed continuity of advice and chose to give some new cases to MSC Daly. So, yes, that happened.

196. Mr Lunn: I want to know more about payments to Brangam Bagnall and Co. Normal practice would be that claims would be settled and a cheque, payable to the claimant, would be issued by the defendant — in this case, the trusts. That is normal legal practice, so how did Mr Brangam manage to lodge cheques like that into his client account?

197. Dr McCormick: The practice that was applied, which we have now stopped applying, was that payments were made to claimants through their solicitors. I do not think that that practice was unique to health and social care organisations, but it is not acceptable practice now. The Department’s 2006 guidance told trusts to stop doing it. It would be acceptable to make a payment through that mechanism if it was also supported by all the appropriate evidence that the payment was valid, but it is better to proceed as you suggest, which is what we are now doing.

198. Mr Lunn: For clarity: big cheques were issued by the Department to Brangam Bagnall and Co?

199. Dr McCormick: By the trusts, yes.

200. Mr Lunn: I now turn to George Brangam’s departure from the CSA. I wonder whether you can confirm an impression that I picked up from the report. As far as I can tell, the CSA was handling legal business reasonably happily under Mr Brangam’s tutelage. Then he decided, on his own initiative, to privatise some of it. Was there not scope for him to use his position within the CSA to gain an unfair advantage over his competitors?

201. Dr McCormick: That risk was both identified and addressed at the time. The context for that was the Conservative Administration’s policy of competing for quality. It was not, by any means, only Brangam’s initiative: rather, the market-testing of public services was becoming increasingly significant across a range of Government Departments. It was an established, clear, Government policy to proceed in that way, so as to secure competition for such services and — in that political philosophy — to secure better value for money. That was the context. Undoubtedly, George Brangam saw the opportunity and pressed the idea, but it was in a context where the Government was saying that that should be done.

202. Mr Lunn: What was the extent of his involvement in the procurement process?

203. Dr McCormick: He sought to produce some ideas, but the CSA management and the Department deliberately designed the process to be independent of him. He held some discussions with trusts, and ideas were put forward, but the record shows clearly that the management teams in the CSA and the Department acted independently of George Brangam and recognised the conflict of interest that existed. The DFP guidelines that then applied to market-testing provided for in-house bids. There was, in this case, both a bid for work from the CSA’s remaining solicitors, and a bid from the group of solicitors who were leaving CSA. Both bids were considered within the framework of guidance that DFP had issued. That was permissible, and the management team at the time fulfilled those guidelines and carefully prevented the conflict of interest from affecting the process.

204. Mr Dean Sullivan (Department of Health, Social Services and Public Safety): The Department was considering the market-testing of legal services 18 months before the events to which you refer — and 24 months before the establishment of Brangam Bagnall and Co. There is a clear audit trail that demonstrates that this was on the agenda of both the Department and the Minister at the time, well before there was any indication that George Brangam was thinking of establishing a private firm.

205. Mr Lunn: Had I been a solicitor looking at the situation and hoping to tender successfully for that very lucrative work, I would have seen that Mr Brangam was still there. Whether he was excluded from the process or the management team was keeping him on the sidelines, he was still there. He knew everyone, and he had been there for a long time. He knew the ropes better than anyone. His brand new company secured 11 contracts out of 23; the CSA held onto most of the rest; and a very small number went out to other private firms. Brangam had indicated his intention to leave; was it right for him to have any involvement at all over those months?

206. Dr McCormick: He had no involvement in the substantive decision-making process: he was kept out of that. He had produced some ideas, but they were not used. The decision-making process was separate from him. He did well in the process, partly because he was an expert in defence of clinical negligence. It was a new area of work, as the Audit Office report says. A change in regulations in 1990 made the Health Service organisations the defendant in clinical negligence cases for the first time.

207. The other important point is that the trusts were newly created. In that Conservative direct rule period, the trusts were established separately and in competition with each other. They wanted to be strong, independent organisations that were sensitive to their corporate reputations. They knew and trusted George Brangam; that is undoubtedly the case. A root cause of this affair was the excessive degree of trust placed in George Brangam. He had smartly and maliciously sought to build up his reputation in order to both secure legitimate business and commit the fraud. What he was doing can be seen, but I am satisfied that the process undertaken by the Department in the mid-1990s was within DFP guidelines and followed proper procedure, and that he was excluded from the design of that process.

208. Mr Lunn: I hear what you say about the excess of trust, and that was clearly a factor; however, we have again returned to a clear conflict of interest that was not properly addressed — something the Committee encounters frequently and, I am sure, will again. No matter how hard we try to establish proper protocols and rules, conflicts of interest keep arising, and I think that this is another one.

209. Dr McCormick: I do not agree that the conflict of interest was not managed. I believe that it was managed in this case, because George Brangam was excluded from the decision-making process on the conduct of market-testing.

210. Mr Beggs: You said that you had a high level of confidence in the staff, and that that was down to the fact that there were no prosecutions other than of one individual. Do you accept that the fact that there have been no further prosecutions simply means that a sufficient level of evidence was not uncovered to warrant further prosecutions, but that doubt may remain? I recall previous sessions during which doubt has been raised in my mind in relation to individuals, but not at the level required for prosecution. Do you accept that to have allowed the business to effectively transfer to MSC Daly was foolhardy?

211. Dr McCormick: No, I am satisfied that sufficient immediate checks were done to provide the Department with some confidence, and that was confirmed as the detailed work unfolded.

212. Mr Beggs: Do you accept that that if there was double-invoicing and invoicing for cases that were incomplete, that at least some other person — an administrator at Brangam Bagnall and Co — must have been aware of strange movements of cash and strange invoicing?

213. Dr McCormick: The report shows the extent to which George Brangam had covered his tracks in the company’s accounts. That is referred to in paragraph 6.2.2 of the report. The analysis suggests there was suspicion about an individual, Jennifer Kearney. In relation to the other solicitors, the key point is that all of the cases in which there was evidence of fraud involved George Brangam and none of the other solicitors.

214. In relation to the Department’s use of MSC Daly to undertake work, no undue risk was taken; the right thing was being done. The Department cannot know everything that was going on in the firm and the degree to which George Brangam might have had accomplices, but the concealment was elaborate. The key element was the transfer of funds from the client account to the office account, which became quite traceable. In essence, the discovery and the investigation succeeded through following that clear trail of evidence.

215. The Chairperson: It should be put on record that MSC Daly has been removed from all litigation.

216. Mr Beggs: I refer to paragraphs 2.3.1 to 2.3.8 of the memorandum. Surely the way in which George Brangam’s departure from the CSA was handled was at odds with best practice. Should the Department have been more decisive in its dealings with him? He was involved in the proposal from an early stage; yet even though he had made clear indications that he wanted to move into the private sector, he continued to be involved in sensitive discussions that would have given him an advantage.

217. Dr McCormick: I am satisfied that the Department handled a complex matter carefully. Mr Brangam was the director of the service, which gave him a certain standing. However, both the report and paragraph 2.3.4 of the memorandum state that the Department took steps to limit and exclude Mr Brangam from key decisions and processes because it was determined to satisfy public probity. That was its clear responsibility. I am satisfied that it was fulfilled at that time.

218. Mr Beggs: Paragraph 2.3.1 shows that as early as December 2004, which was some time before the proposal was made, there were meetings between the trusts, CSA’s chief executive and George Brangam, even though there was a clear indication that he would move into the private sector. Surely, that was potentially dangerous.

219. Dr McCormick: I accept that such potential existed. However, at that time, Mr Brangam was still a member of staff; and for him to have meetings with other organisations was not, in itself, a risk or threat to the conduct of affairs. The memorandum makes it clear that Mr Brangam was not party to decisions on the form of procurement or criteria that would be applied; he did not play a role in that.

220. Mr Sullivan: With hindsight, Mr Brangam should not have been involved in the meeting to which you refer on the handling of interim arrangements between CSA’s being responsible for legal services and the establishment of market testing. The group with which Mr Brangam was involved made proposals for interim arrangements, which were rejected outright by the Department for those precise reasons. Arrangements were put in place that would not result in any inappropriate benefit being gained by Mr Brangam or the organisation that he proposed to set up.

221. Mr Beggs: Thank you for your response. Appendix 1 of the memorandum gives an interesting insight into the extent of business that Brangam Bagnall and Co obtained from the health sector: more than £300,000 in 1996-97; more than £700,000 per year between 1999 and 2002; and more than £900,000 in 2005-06 — the year before he was caught. Paragraph 2.4.9 of the memorandum states that the market was, in effect, split between the Central Services Agency and Brangam Bagnall and Co. Did the close working relationship between George Brangam and the health bodies help him to become the monopoly private-sector supplier of legal services?

222. Dr McCormick: Undoubtedly, he made the most of his expertise in the area and his knowledge of how the health-and-social-care systems work; and he had working relationships with the organisations. Those are matters of fact. It is not surprising that those organisations secured most of the business. They came top in the assessment process and best met the criteria that were set up during the procurement process; they were then able to secure business. However, that was legitimate.

223. Whether more could have been done to create a market is debatable. To create a market is not easy; its nature means that there is a barrier to entry. It is difficult to get expertise without experience; that is a classic dilemma. Therefore, I do not find that situation surprising. It is difficult to determine whether the Department could have done more.

224. Mr Beggs: You make an interesting point that it is hard to break into the market. As accounting officer, were you not concerned that until 2006-07 the practice had received 70% of the legal-service payments made to providers outside the Central Services Agency, despite 23 other firms being on the list? Do you not accept that having 23 firms on the list meant that it was difficult for anyone, apart from the two principals, to reach critical mass? With hindsight, was it wise to have 23 firms on the list? Most would get scraps, which would make it difficult for them to build up the critical mass necessary to compete effectively in that area.

225. Dr McCormick: That was how the procurement worked out. It is not possible to say in advance the outcome that one wants from a procurement process; it is a matter of setting criteria and inviting proposals. Sometimes there are many bids; sometimes there are not. As accounting officer, I would be more concerned if a trust were to give business to a firm without the necessary expertise, which did not meet the criteria, or which did not satisfy the value-for-money aspect. Those would be a bigger concern than the duopoly to which you referred. It looks very bad, given what we now know about the fraud. However, in itself, it is not a big cause for concern. I understand your point that having too large a list raises false expectations. However, we should have put those issues right in subsequent engagements.

226. Mr Beggs: In your early criteria setting and decision making, did you decide not to have fewer specialists in that area rather than have firms that were, in effect, on the list in name only?

227. Dr McCormick: In the 1990s, the idea was to create an opportunity for a market to grow. That was consistent with the political direction being given at the time, which was that opening up those services would, over time, lead to stronger competition and a fully effective market. With hindsight, that did not mature.

228. Mr Sullivan: Clear criteria were used at the time to place firms on the select list: local representation, capacity, experience, an organisation’s standards, and price. From the moment that the Central Services Agency and Brangam Bagnall and Co scored either first or second in nine out of the 11 lists on the overall select list, and with the guidance that followed from the Department that required health and social care organisations either to continue to use the Central Services Agency or to appoint firms from the relevant bit of the select list in the order that they were ranked, or to do a secondary competition but use the same criteria, it was logical that we would get what we got. Brangam Bagnall and Co and the Central Services Agency were always going to do well either by being first or second, or, if there was a secondary competition, it was reasonable to assume that that secondary competition would reach the same conclusion as the overall competition that the select list had reached.

229. Mr Beggs: How well informed would the two applicants have been of the likely selection criteria? I presume that, internally, the CSA would have had a fair idea of what was important; given his background, George Brangam would also have had a fair idea of the criteria. Do you accept that it would have been difficult for anyone outside that remit to have been fully aware of the situation and to compete?

230. Mr Sullivan: You are making slightly different points. All the 32 firms that tendered would have been aware of the criteria, as they were included in the tender documentation. However, there is a difference between being aware and being able to do something about it. To come back to Dr McCormick’s point, if a company does not have the experience, it does not have the experience; if it does not have the local representation, it cannot be created overnight. It was always a challenge for new players to break into the sector.

231. Mr Beggs: Was it wise to add another company to the list? Was having such a long list not a lazy approach?

232. Dr McCormick: I would not use those terms. The philosophy at the time was to maximise the scope for competition, although that did not work effectively. However, it was regarded as good to give people the opportunity and, over time, to build up experience.

233. Although that was a matter of judgement, our procedures could have been tighter. I do not wish to go further than that.

234. Ms Purvis: The select list of providers — with a shelf life of three years and an option to extend — was established in April 1996 and, in the end, extended for ten years. Paragraph 2.5.1 of the memorandum sets out what the second procurement exercise was designed to achieve and you have explained to us the aim of the review and the exercise; however, it was something of a disaster and it failed to deliver. Given that the original list was intended to be valid for a maximum of six years, how could that have been allowed to happen?

235. Moreover, an inordinate amount of resources must have been wasted by the Health Service organisations that were involved in the procurement exercise.

236. Dr McCormick: I have no strong grounds for defending what happened during that process; there were unacceptable delays, resulting in a protracted process that failed to produce any proper outcomes. We should have organised matters better, and our failure to ensure that the process was followed has left us open to the comments and criticisms in the report and from the Committee. We should have made much smoother and more effective progress.

237. Although some administrative resources were expended during the process, I would not describe them as excessive. Undoubtedly, some resources were taken up by the routine activities of preparing and implementing the procurement process, but it was not on too large a scale. Nevertheless, I must apologise and acknowledge that we did not conduct the process well — we should have ensured that it happened correctly.

238. Ms Purvis: Paragraph 2.5.9 of the memorandum states that at the debriefing with the Central Procurement Directorate — which concluded that the procurement exercise had failed — the Central Services Agency expressed concerns about whether one of its competitors had been getting inside information. Was that allegation ever investigated?

239. Dr McCormick: I am afraid that we have no substantive evidence that would either confirm or contradict that allegation.

240. Ms Purvis: Is there a link between the extent of the fraud and the length of time that the select list was in place? In other words, if a procurement exercise had caused the list to be changed sooner, would the comfort cycle, if you like, of extorting public funds have been broken?

241. Dr McCormick: Most of the fraud was perpetrated between 2001 and 2003, largely during the second three-year period following the initial procurement procedure. Therefore, I am not sure whether changing the list sooner would necessarily have resulted in significantly different outcomes. However, if we had acted more decisively, that might have helped.

242. Mr Sullivan: Achieving different outcomes would have depended on whether the procurement process had resulted in a smaller market share for Brangam and Bagnall and Co, which might have reduced the number of opportunities for fraud, although it is hard to tell.

243. Ms Purvis: Can wider procurement lessons be learned from this example of how not to run a tendering process?

244. Mr D Thomson: I would like to make a couple of points. First, a single competition was run for 18 trusts and four health boards, all of which had different requirements.

245. It was difficult to get a common understanding of what everyone wanted from that. The Audit Office has drawn several lessons; it talks about having a proper board and proper governance. When such a raft of bodies is involved in a competition and a procurement process, strong leadership and direction is needed; otherwise it is difficult get agreement among all the bodies. That was one of the problems.

246. In addition, some assumptions were made that were not borne out by the evaluation. The Central Procurement Directorate assumed that certain management information would be available so that when the tenders came in it could assess that information.

247. Ms Purvis: Are you referring to information on the price?

248. Mr D Thomson: No. One way in which prices came in was that a single figure was given as a lump sum. For example, a tender might say that it would provide legal services for £1 million; the other basis on which prices came in was that tenders said that they would provide legal services at a weighted average of £10 an hour. A great deal of data is needed to decide which is the better way. The Central Procurement Directorate assumed that that information would be available for the evaluation. It was not, and that is one of the reasons that the whole thing collapsed.

249. It is difficult and complex to contract for such legal services, so much so that it is outside normal EU procurement rules. One must be careful about arguing from the particular to the general. When procuring legal advice, some issues cannot be read across to general procurement.

250. Ms Purvis: After the failed procurement exercise, it took another three years to get clear direction from the Department on where legal services would be placed out to public tender. Paragraph 2.6.4 of the memorandum says that the Minister decided to retain legal services in the CSA. Was that a value-for-money judgement, or did it have more to do with the publicity around the fraud and the memorandum on legal services?

251. Dr McCormick: In response to a question for written answer from John Dallat on 21 November, the Minister made clear the reasons for his decision. He said that he recognised the experience and expertise of the CSA and:

“its capacity to handle large numbers of referrals economically and with no potential conflicts of interest, its ability to provide consistency and continuity of advice, and the opportunity it would provide to streamline existing administrative and accountability arrangements for Boards and Trusts.”

252. Ms Purvis: It remains to be seen whether that decision will offer value for money.

253. Dr McCormick: The Department’s responsibility is to ensure that it does offer value for money. That will involve a different approach, and a market can be managed in such a way as to provide value for money. Competition is a strong element of that, but it is equally possible to secure the best value for money through an in-house service that requires us to ensure that the appropriate performance indicators, benchmarking and cost controls apply. I assure the Committee that, on the basis of the Minister’s decision, it is the Department’s responsibility to deliver a value-for-money service.

254. Ms Purvis: I appreciate that. Brangam Bagnall and Co got more than 70% of the services that went out to tender and the CSA retained some services; therefore, the CSA must have been downsized. Given that the CSA will now carry out the work in-house, extra solicitors could be required.

255. Is there a mechanism for checking the background of solicitors who are engaged, their record of professional conduct, or any investigations that might have been carried out?

256. Dr McCormick: Yes; it is a routine requirement of recruitment that checks be undertaken and references secured. The applicant must present a practice certificate that is clear of anything suspicious or irregular. We apply careful checks, and, as you say, the CSA is recruiting additional staff.

257. Mr Burns: This is a very sad case of fraud. In law, are all partners not equal in the firm? I am amazed that the contract was issued to a partner in Brangam Bagnall and Co. Did you not think it necessary, considering the fraud, to look for a complete outsider to begin again?

258. Dr McCormick: The intention was to begin again. In the summer of 2006, when the firm was closed, we intended to run a fresh procurement process and have a new basis for contracting in place by 2007. That was not done, and I must acknowledge that that should have been pursued more assiduously; we apologise for not having done so. However, at the time the decision was made it was expected that there would be a new arrangement in place, and a fresh start would be made.

259. The only reason for allowing — in exceptional circumstances — the possible use of MSC Daly was that there were circumstances in which that would provide continuity of service. Some cases were to go to court quite soon, and to have changed the solicitor at that time would have been unhelpful and inappropriate. We stand over that basic judgement, although it probably went on a bit longer than expected; however, that was mainly because we were unacceptably slow at creating a fresh start and a new procurement process. It is not an acceptable outcome, but that is the best explanation that I can give.

260. Mr Burns: A fresh start would have given us all much more confidence in the system. I am dismayed to see from paragraph 4.1.3 of the memorandum that assurances given to the Public Accounts Committee at the 2002 hearing on compensation payments for clinical negligence have not been addressed.

261. Dr McCormick: We could not achieve the original target date for having all the new arrangements in place. We are continuing to take the necessary steps to ensure that the full information base and procedures for handling clinical negligence are dealt with thoroughly; we are securing consistent and effective database arrangements in the new structures. Those new structures help because there are fewer organisations and it is possible to have clearer and more straightforward consistency of information. However, there is still work to be done, and we are pursuing that as strongly as possible.

262. Mr Sullivan: The single biggest failure to honour the commitments that were made to the Public Accounts Committee was the failure to put in place a new legal services contract. A commitment was made to the Public Accounts Committee that that would be in place by April 2004; however, that was not achieved.

263. Mr Burns: That does not inspire us with any great confidence, as the Department is not delivering on the recommendations made in reports. It is a tremendous disappointment to me that you are coming up with more excuses, but no action is being taken to ensure that it does not happen again.

264. Dr McCormick: The best way of tackling clinical negligence is to prevent it from happening. In recent years, we have been increasing our emphasis on providing high-quality, safe services and on ensuring good risk management. We are making sure that the leadership and organisation of services minimises the risk of mistakes in the first place.

265. Picking up on the passion of Mr Dallat’s comments, we are trying to provide services to people at their time of greatest need — whether they are ill or face some other affliction — so we need to do that as safely and properly as possible. The best thing to do is to promote quality and safety, thereby minimising the risk of things going wrong and cases of negligence arising in the first place. That requires strong regulation of the professions, as well as strong assistance and processes so that we have as few systems failures as possible. All those things matter, and we have paid a great deal of attention to that in several high-profile cases of which you may be aware.

266. In fact, the number of clinical-negligence cases has remained pretty steady despite a tendency to more litigation. We have been taking the fundamental issue very seriously and are seeking to limit the growth of clinical negligence. However, we are also seeking to ensure that the basic systems that we need to complete the tasks that we have committed to are in place and to ensure that there is effective management of information and proper handling of all cases. I acknowledge that we have not done all that we could and should, but we are determined to make sure that the important things are done.

267. Mr Sullivan: The number of clinical negligence cases has come down over the past six years from 470 in 2002-03 to 385 in 2007-08. Trusts now have databases to monitor clinical negligence cases, and since 2004 that information has been collected centrally by the Department in a regional database. Furthermore, as Dr McCormick said, with new guidance being issued to the service later this month, arrangements are in place that will further expand on the type of information that is collected and ensure that that information is consistent.

268. In general, the clinical negligence commitments that were made to the PAC have been met and all the NIAO report recommendations have been implemented in full. The difficulties with the commitments that were made to the PAC were more in relation to the tendering of legal services and ensuring value for money from legal services than to clinical negligence per se.

269. Mr McLaughlin: As you can tell from members’ questions, we are concerned that we do not have the full picture. It would appear that, at some stage, having set up his own practice, this individual suddenly began to engage in fraudulent activity. However, he had a very long association with the Health Service in providing directorate-level services from 1987 up to the point at which he set up in private practice.

270. My concerns relate to how that practice, with its partners and its other members, operated. I make no allegations. However, if a series of frauds was perpetrated, the first of which was detected in 1998 — three years after the company was set up — how was money taken out of the practice? How was money transferred from client accounts into the practice’s office account?

271. How did that escape the detection of the audit process that was applied to the practice? Frankly, how did it escape the attention both of the bookkeepers in the company and the other partners? Those are very serious questions.

272. Dr McCormick: I understand that, and I agree. The Audit Office addresses that issue in paragraph 6.2.2 of the report, where evidence from the Law Society about the complexity of the frauds that were perpetrated is highlighted.

273. He went to great lengths to conceal, and there was always some false, but plausible, documentation to support the transfer of money from client funds accounts to the office account. Only when those transfers were investigated were the flaws established. That concealment of funds, of course, depended on him having misled trust staff successfully.

274. Mr McLaughlin: I accept that the individual was clever. However, how was he able to cope with the fact that bank statements show money going into and coming out of accounts? After all, he could not reach into the banks and falsify the statements that were being issued to the company.

275. Dr McCormick: Once that money had been transferred into the office account, it was then under his and his partners’ personal control. Those funds then became his money

276. Mr McLaughlin: Yes. However, surely the audit process would have considered all the active accounts.

277. Dr McCormick: Yes.

278. Mrs J Thompson: When the matter was being examined — both by the original investigation under the Law Society and by ASM Howarth — it seems that false invoices were created and a false trail was left through the records as he moved the money. Some of those means of concealment were more sophisticated than others. For example, the report describes the occurrence of a process of teeming and lading. Through that process, some money was being moved between accounts and false records were created to cover the audit trail where things did not quite match.

279. The Chairperson: You are not getting the answer that you want, are you Mitchel?

280. Mr McLaughlin: No, I am not. However, I will leave it for the moment.

281. Mr Dallat: Perhaps if the witnesses do not have the answers to my questions, they may be able to supply them at a later stage. During the period 1994-98, was Andrew Hamilton — the former deputy secretary at the Department — employed by the Northern Health and Social Services Board? Did he have responsibility at any time for the finances of that board?

282. Dr McCormick: He was, indeed, the finance director of that board. I am not sure of the precise dates, but I believe that he came to the Department from that post in 2002 or 2003.

283. Mr Dallat: Was he involved, at any stage, in the process of allocating legal contracts following the outsourcing of that service from the Central Services Agency, which eventually awarded its contract to Brangam Bagnall and Co?

284. Dr McCormick: The Northern Board, as one of the Health Service bodies that was covered by the procurement contract, contracted with Brangam Bagnall and Co in 1995 when the market testing applied. I do not know whether Andrew was on the board at that time; I am not sure when he joined the board.

285. Mr Dallat: Could you perhaps find that out?

286. Dr McCormick: I can check that.

287. Mr Dallat: Since arriving at the Department, has Mr Hamilton been involved in any way with the processing of a new round of tendering for legal contracts?

288. Dr McCormick: He played a role in the consideration of the issues around 2002. He joined the Department around that time and was the finance director for a number of years — [Inaudible due to mobile phone interference.]

289. He would have been a board member in 2006 when the Department decided to go to further procurement. He was a member of the departmental board at that point.

290. Mr Dallat: I suppose that that tells me — and I mean no personal offence to Mr Hamilton — that it is amazing that the deceit was able to continue for so long before it was discovered. Furthermore, it is amazing that it was discovered only when the culprit who had thieved the money died.

291. Dr McCormick: The matter came to light when a junior member of staff asked the correct, straightforward questions, but it should have come to light before then. Had we applied the procedures that we now know to apply, it would not have happened at all. We are confident of our procedures now. Nevertheless, it is a matter of deep regret to us, and it is unacceptable that it happened at all and that it lasted for the period that it did. We have to accept entirely your criticisms on that.

292. Mr Dallat: Are you entirely satisfied that Mr Brangam was not in the position where he was exerting undue pressures, influence, blackmail — call it what you will — on very senior people in trusts and boards?

293. Dr McCormick: I have no evidence in that regard. The story can be explained by the evidence that is available regarding how he went about things. I have no evidence that there were additional factors at play; that is a matter of speculation.

294. Mr Dallat: It seems to me that even with really bad records, bad housekeeping and bad financial arrangements, someone in the camp must have known about it. For the life of me, I cannot see how it could have gone on for so long without people in key positions being part of the plot.

295. Dr McCormick: Again, I have no evidence to confirm or deny that. The basic mistake, which seems to have applied in several organisations, was to accept that an invoice from the firm was sufficient evidence to make a payment. That fundamental weakness was corrected only in 2006. However, other organisations, as a matter of routine, applied more careful, protective mechanisms. I cannot say whether there is a more sinister connection.

296. Mr Dallat: On the same note, was Brangam screened before he was appointed director of legal services of the Central Services Agency? There are stories going around that his financial fraud began much earlier in his life when, unfortunately, he got himself seated in a key position in a Government service.

297. Dr McCormick: I am aware of allegations of that nature, but I am also aware that there is no evidence to support those allegations at this stage. There is nothing on the record that would have been available to the CSA at the time. Mr Brangam joined the CSA in 1980, and he advanced through the organisation and became director of legal services. I am not aware of anything that could have put a formal question mark against him at that time. Rumour is rumour, but we can act only on hard evidence.

298. The Chairperson: Please keep your answers succinct and to the point, because we are trying to bring this part of the session to a close.

299. Mr Lunn: I am still curious about the issue of payments to the practice by bank transfers. I assume that the payment of the claim and the invoice for legal services would have been paid separately in all cases, or is it possible that Mr Brangam received cheques for a mixture of both services?

300. Dr McCormick: No. There was a clear separation in the trusts’ payments to the firm. The payment of fees was predominantly through block contracts by a monthly payment for a fixed amount based on an agreed projection of the hours worked. The other payments into the client funds accounts would have been payments for settlements of — [Inaudible due to mobile phone interference]. Those payments would have been entirely separate, but the trick that he was working was to raise false invoices in the firm’s accounts and to use that as a mechanism to transfer.

301. Mrs J Thompson: Payments for counsel fees would have been coming through, alongside the settlement amounts, and there is evidence in the report that some of those fees were being picked up and put through fraudulently.

302. Mr Lunn: Did the Department never issue any cheques for the benefit of a claimant that were not completely separate from payment of anybody else’s fees? They were never amalgamated. I wonder how he was able to get those cheques into his own client account. Cheques for claimants were made payable to the claimant, sent to Mr Brangam, and he had to seek final acceptance from the third party’s solicitor to release the money. Is that correct?

303. Dr McCormick: The trusts were making the settlement cheques payable to the Brangam Bagnall and Co client funds account. The cheques were inflated or duplicated, and, therefore, Mr Brangam obtained more money than he needed in order to settle the legitimate claims. The plaintiffs received the correct amounts, but Mr Brangam received more money from the trusts than he should have and was, therefore, able to siphon it off by raising false invoices in his own accounts and so on. It was an elaborate plan, different elements of which were conducted with differing degrees of sophistication, but it should not have worked for so long. That is the basic point.

304. Mrs J Thompson: Most of the cheques were made payable to Brangam Bagnall and Co rather than to the plaintiff. That policy was changed by departmental guidance that was issued in October 2006.

305. Mr Lunn: Given that normal market practice, even at that time, was not to do that, why did the Department do it differently? What is wrong with normal, tried-and-tested market practice?

306. Dr McCormick: We have no defence to that point. It should not have been done in that way.

307. Mr Craig: You referred to the trusts’ “undue trust” in Mr Brangam. As Mr Dallat said, everybody trusted the firm and made cheques payable to it. I described that as an “old boys’ network”, in which you do not question your old mate. Is there any evidence that that same level of trust was shown to any other solicitor’s firm at the same time?

308. Mr Lunn referred to the practice whereby cheques were written to the firm when they should have been written to a third party. Is there any evidence that the level of trust that was shown to this firm was not being shown to any other firm while this was going on? That could have implications.

309. Dr McCormick: There is no evidence to suggest that that was the case.

310. Mr Craig: Was that ever checked?

311. Dr McCormick: There was no suspicion about other firms, and, therefore, the degree of forensic analysis that was applied was not necessary. Furthermore, firms other than Brangam Bagnall and Co were not involved in clinical negligence to the same extent, because Mr Brangam was usually the successful tenderer for the contracts. There are no grounds for anxiety about other firms.

312. Mrs J Thompson: The October 2006 circular compels all solicitors’ practices to comply with the requirements therein.

313. Mr Craig: Is that a new circular?

314. Mrs J Thompson: Yes.

315. Mr Craig: Given that no one has examined other companies, it would be worth doing so.

316. Dr McCormick: I take your point, and I will write back to the Committee about that.

317. The Chairperson: Several of today’s questions require a response because you have not brought the necessary information or because some members may feel that they did not get the answers that they required. We might put some of those questions in writing.

318. You will be glad to hear that there are no further questions, bar a final one from me. The Committee wants assurances that slipshod, shoddy or unprofessional practices — call them what you want — do not transfer into the Department’s dealings with other contracts in the health and social care sector.

319. I hope that you can give us some sort of assurance today. The implementation of the review of public administration is not far away, so this is probably a good time for all other contracts to be investigated in depth by the Department to ensure that similar practices are not taking place and that it cannot occur again in the future. That is an assurance that we, as a Committee, seek from you.

320. Dr McCormick: I assure the Committee that we have a strong general approach to the prevention and detection of fraud. It is clear that the nature of our contractual arrangements across other services is based on sound good practice and that the degrees of risk and opportunity are less. The feature of the fraud was the opportunity that was taken to cream off from settlements of third parties. That feature does not exist if consultancy services are procured. The risks are much less, and those who are procuring have a responsibility to make sure that they get what they pay for. That is a vital part of what we do, and that is made very clear in our guidance, scrutiny and oversight of the system.

321. The Chairperson: At this stage, I reiterate that the Committee thanks you for attending today. From the evidence that was presented, it is very clear that for a very lengthy period, the Department failed to ensure that the provision of legal services to the health sector here was undertaken within a properly regulated framework.

322. The Department must ensure that it provides quality, value-for-money legal services that are at the heart of a regularly tested system. It also seems that there must be some connection between the failure of putting proper procurement arrangements in place for legal services and the opportunities that are thereby presented to allow fraud to take place.

323. Furthermore, the Department of Finance and Personnel should consider closely the lessons learned and should put in place proper procurement arrangements for legal services. That Department should also consider closely the lessons to be learned from those reviews, not only in relation to the health sector, but the wider public sector, which uses legal services extensively. Some additional questions may have been posed already that the Committee will put in writing to you.

324. Thank you very much for your attendance. We will take an adjournment for 10 minutes. The clock is seven minutes slow; it is now 3.45 pm. We will reconvene at 3.55 pm, which will allow us to carry on. I remind everyone that they must turn their mobile phones off when they are in the room — it seems that someone has a lot of missed calls to respond to.

325. The Chairperson: I welcome the witnesses from the Law Society, Mr Donald Eakin and Mr James Cooper. Mr Eakin is the current senior vice-president, and Mr Cooper is a former senior vice-president.

326. Mr Eakin, you have contributed to the review of the case, and the Committee members welcome the opportunity to hear your views and to seek clarification on any matters arising from the earlier part of the session. Perhaps you will introduce your colleague and outline the responsibilities that you both have.

327. Mr Donald Eakin (Law Society of Northern Ireland): Thank you for your welcome, Chairman. I am Donald Eakin, and, up until last week, I was president of the law society. I am now the senior vice-president. With me is Mr James Cooper, my immediate predecessor as president of the society. We are practising solicitors and members of the Law Society council, the governing body of the society.

328. With your agreement, Chairman, I would like to read a statement which I think will set our views in context and help the members of the Committee.

329. Under the Solicitors (Northern Ireland) Order 1976 the Law Society of Northern Ireland has statutory powers to discipline, educate and control the solicitors’ profession in Northern Ireland. We regulate 2,478 practising solicitors. The society is mainly funded by annual practising certificate fees, and a solicitor must have a practising certificate to enable him to practise.

330. The society welcomes the opportunity to come to the Committee and discuss the important issues arising from the Audit Office report. The society expects services rendered by its members to be provided with honesty and integrity. If that does not happen, the society acts swiftly when information comes to its attention. The society deplores the conduct of the solicitor in this case. He was the subject of a disciplinary tribunal prosecution, which would, almost inevitably, have led to his being struck off the roll of solicitors, but his death prevented that.

331. Issues surrounding Brangam Bagnall and Co were raised with the society on 3 August 2006. The following steps were taken immediately: at a special council meeting the next day, 4 August 2006, the society resolved to take control of the firm’s client bank account and other documentation on the grounds that clients’ moneys were in jeopardy. One week later, on 11 August 2006, it was resolved by special council meeting that George Brangam had acted dishonestly, and his practising certificate was suspended. On 16 August 2006, the society applied for, and obtained, an order of the High Court making it the attorney of the firm. That permitted the closure and disposal of the practice. The power of attorney allowed us to take control — and we did take control — of all Mr Brangam’s assets, both business and personal. On 1 September 2006, the society closed the firm’s Hill Street office to the public; the Dundonald office was closed to the public on 29 September 2006.

332. The society commissioned an independent forensic report from Goldblatt McGuigan, which is quoted at paragraph 6.2.2. of the Audit Office report:

“The significance of … concealment is that not only does it demonstrate the lengths the perpetrator went to conceal his actions but also clearly demonstrates that those tasked with inspecting and reporting on the handling of client funds by Brangam Bagnall & Co (Law Society and reporting accountants) had little chance of identifying these types of anomalies”.

333. There is a statutory requirement on all solicitors in private practice to deliver an annual accountant’s report to the society to show that they have handled clients’ money properly, in accordance with our solicitors’ accounts regulations. The regulations provide for: the separation of the solicitor’s own moneys, to which he alone is entitled, from those of his clients, to which they are entitled; and easy identification of the clients’ funds for regulatory purposes.

334. Additionally, the society employs its own in-house accountant monitoring staff, who regularly inspect firms. Adverse findings are brought before the society’s central regulatory committee for action. The society has not had to deal with widespread defalcation of clients’ moneys. However, in cases involving defalcation on any scale, the society has addressed the matter immediately and in the interest of clients, as shown in the case of Brangam Bagnall and Co. Council resolutions give us the power to take control of documentation and clients’ moneys. Such resolutions can be put in place when we are concerned simply about the bookkeeping standards of the firm, as well as when there is obvious defalcation.

335. Where, in highly unusual circumstances, there has been defalcation by a solicitor, the society has measures in place to protect clients’ interests, including any moneys lost. First, where there has been defalcation of client moneys involving one partner, the professional indemnity insurance policy, to which the society requires all solicitors in private practice to contribute, covers the innocent partners in respect of lost clients’ money. That happened in the case of Brangam Bagnall and Co.

336. Secondly, for circumstances where defalcation is not covered by insurance, the society maintains a compensation fund that is made up of annual contributions that solicitors make in addition to their practising certificate fee. Payments are made on a discretionary basis. The fund is discretionary to ensure that innocent clients do not suffer loss. The protection of the public interest is the cornerstone of those arrangements and, at a practical level, they ensure that innocent clients do not lose their funds.

337. If a solicitor appears to have been dishonest, the society may refer such matters to the PSNI for investigation and to the solicitors’ disciplinary tribunal, which may order the striking off or suspension of a solicitor. It is fair to say that where a solicitor defaults or seriously mishandles clients’ moneys, he will be struck off, and, in such cases, the society will certainly prosecute disciplinary action, including striking off.

338. The Chairperson: Can you provide the Committee with details of any complaints that were registered with the Law Society about George Brangam or anyone who worked for Brangam Bagnall and Co since he qualified as a solicitor?

339. Mr Eakin: Mr Brangam’s practice was subject to intervention by the society in 2001 after an accounting matter was brought to our attention by the bank. In that case, funds which were coming in through direct payments and transfers had been placed in the office account rather than the client account. We sent in PricewaterhouseCoopers to investigate, and the matter was regularised. The matter was more of a bookkeeping problem, and it was quickly rectified. That was the only disciplinary issue that arose in relation to the private practice of Brangam Bagnall and Co, until after the intervention in August 2006.

340. The Chairperson: Was that the only complaint that was raised with the Law Society about Brangam Bagnall and Co?

341. Mr Eakin: Yes, it was. Following our intervention in 2006, we received a memorandum from the former chairperson of the Central Services Agency about the 1987 investigation. However, that was not received until after the publicity that surrounded the intervention in August 2006. That was immediately referred to the Bar Council and to Dr McCormick in the Health Department.

342. The Chairperson: You said that you sent PricewaterhouseCoopers to investigate some issues in 2001. At that time, did no alarm bells start to ring that something else was wrong?

343. Mr Eakin: None whatsoever.

344. Mr James Cooper (Law Society of Northern Ireland): As happens with every other practice in Northern Ireland, Brangam Bagnall and Co was regularly inspected by our accounting staff — between the time of its establishment and 2006, it was inspected five times. On each occasion, apart from when PricewaterhouseCoopers was sent in, Brangam Bagnall and Co received a clean bill of health. We also received a report from the firm’s accountant each year to verify that the client account was operating exactly in accordance with the stringent requirements that we have agreed with the accountancy profession for all accountancy reports for solicitors. It is not just a question of the one incident; we had regular oversight of Brangam Bagnall and Co in the same way that we have over all 530 firms of solicitors that practice in Northern Ireland.

345. The Chairperson: When complaints are registered with you, what action do you take? Did you report the complaint about Brangam Bagnall and Co to the PSNI?

346. Mr Eakin: A serious complaint was made by the Department, which we received on 3 August 2006. It was dealt with the next day and was so serious that sent independent accountants in to investigate. The action is dependent on the level of the complaint — sometimes internal accountancy staff conduct the initial investigation, but in this case we commissioned Goldblatt McGuigan, which went in with our monitoring officers. A special council meeting was convened a week after the initial reports were received, and we effectively closed the practice down. Therefore, the proportionality of the response depends on the level and nature of the complaint.

347. The Chairperson: Was the PSNI involved at any stage?

348. Mr Eakin: If any member of the public wants to make a claim against the compensation fund, he or she must refer any dishonesty to the PSNI. In addition, the society, of its own volition, will report to the PSNI. I am not sure at what stage the PSNI was invoked in this case, but it was early.

349. The Chairperson: Perhaps you can inform us of that in future correspondence.

350. In paragraph 5.2.3 of the report, the Audit Office encourages the Law Society to make key reports and findings available to public bodies. Have you taken that on board?

351. Mr Eakin: Our response is reflected in the report. The society is constrained in what it can do until the matter proceeds to the disciplinary tribunal, which is an independent body. Until then, there are issues of data protection, human-rights protection and client confidentiality. Until such times as the independent solicitor’s disciplinary tribunal has made a determination, it is difficult to see what other action the society can take. However, restrictions can be placed on practising certificates or other issues.

352. The Chairperson: Have there been any such incidents since the issue emerged? If so, what steps have been taken to address them?

353. Mr Eakin: Since 2006, a number of firms have been subject to intervention by the society. Some firms have been closed down, and some of those are subject to investigation by the PSNI.

354. The Chairperson: Have many firms been subject to investigation?

355. Mr Eakin: No. Since 1998, the society has intervened 63 times, and some firms have been investigated more than once. The society takes it regulatory role seriously, and the evidence in this case demonstrates the speed with which the society acts. We are not constrained in the process that we can follow — unlike the Department, we can act immediately. Once we apply the schedule, we have the power to move in accountants, solicitors and investigating officers immediately. If there is any risk to clients’ money, we will act immediately — and we have done so.

356. Mr Cooper: We have intervened 63 times. Intervention results often in a satisfactory conclusion — it is not that we have closed down 63 firms. Once we receive an adverse report, we apply the schedule, often on a temporary basis — until, with the firm’s accountants, we can remedy or have explained to us the deficiencies that led us to intervene. A large number of those interventions have resulted in a satisfactory conclusion, and those firms have emerged with a clean bill of health.

357. The Chairperson: How many of those 63 firms have been closed down?

358. Mr Eakin: Less than a dozen.

359. Mr Lunn: You said that your accountants had carried out five inspections on Brangam Bagnall and Co — one every two years — and that there were another 63 incidents in which you identified problems in law practices. Why did you not pick up on the irregularities in Brangam Bagnall’s client account? Money appears to have been moved out of that account into the office account, or somewhere else, and that should not have happened. Your system failed dismally to identify something that should have been picked up.

360. Mr Eakin: Our investigating accountants, Goldblatt McGuigan, and the Audit Office are clear that a paper trail was laid to cover the movement of money. There was no problem in that the money was going into the client account, not the office account; that is the main requirement for client moneys. Once the money is in the client account, it can leave only to go to the client or to be transferred across for costs.

361. The evidence clearly shows that the fraud was so well perpetrated that a paper trail covered money leaving the client account. False invoices and letters were created on behalf of the trusts in order to create that paper trail. Paragraph 6.2.2 of the Audit Office report quotes the assertion made by Goldblatt McGuigan that the paper trail made it very difficult to spot Mr Brangam’s fraud. The money was transferred on the basis of his false invoices.

362. Mr Lunn: Yes, but that paper trail was put together in a bogus manner by Mr Brangam himself. Would your investigators have looked at client files in order to establish whether the papers, receipts and acceptances were genuine?

363. Mr Eakin: There was an element of exposure in the Institute of Chartered Accountants’ requirement to audit sample documents. It must be remembered that we are talking about 27 cases, out of about 5,000 that went through Brangam’s office. Statistically, he was vulnerable to having a fraudulent case chosen during annual sampling by his own accountants.

364. Not only must the accountants report every year, but no solicitor can have a deficit in a client account. Client accounts must be reconciled quarterly and signed off annually by independent accountants. That was happening with Brangam Bagnall and Co. The Law Society’s internal accountants check on firms — primarily their client accounts — about every two years on average, and they would have been in and out of Brangam Bagnall. However, it would have been very difficult to investigate beyond the paper trail.

365. Notwithstanding that, the investigating accountants, Goldblatt McGuigan, have reported back to the Law Society’s internal accountants with recommendations arising from this case. CPD courses were immediately commissioned by the report’s author, Mr Gabriel Greene. The Law Society received his report in February 2007, and, in March and May 2007, Mr Greene gave CPD lectures to the Institute of Chartered Accountants about the type of fraud that was perpetrated and what extra vigilance reporting accountants can use.

366. The bottom line is that if there is a paper trail, it is very difficult to go beyond it. If that trail is sophisticated enough, fraud is more difficult to spot.

367. Mr Cooper: There were 27 instances of fraud out of 5,000 health board cases. However, the firm dealt with more than health board work. We are talking about an accountant spotting that fraud in the context of an examination of the firm’s overall work. Those were 27 instances out of the thousands of case files that were dealt with over 10 years.

368. Our forensic accountant, Goldblatt McGuigan, has been quite specific with us — and this is reflected in the Audit Office report — that, had it been routinely inspecting a firm, without having been alerted to the fact that there was prima facie evidence of fraud, the sophisticated paper trail would have rendered it extremely unlikely to have traced the fraud. That is a reflection of how clever Mr Brangam was in covering his tracks — we must be honest about that.

369. Mr Lunn: A clean bill of health was received from the accountants who acted for Brangam Bagnall and Co, and from those who acted for the Law Society on every occasion that it was requested over those 10 years. There was never any suspicion or suggestion of —

370. Mr Eakin: No, except for the problem that arose in 2001. Funds coming in went into the wrong account — they came into the office account, and were paid out of the client account — and that created a deficit which triggered an investigation. However, that was simply perceived as the money going into the wrong account.

371. Mr Shannon: You said that a check is done every five years, is that correct?

372. Mr Eakin: No, there were five inspections over 10 years. The internal Law Society accountants inspect firms, on average, every two years.

373. Mr Shannon: You mentioned that just under a dozen solicitors have been suspended due to your —

374. Mr Eakin: No. The Chairman asked me how many firms have been closed down. We reckon that about a dozen have been closed down as a result of this.

375. Mr Shannon: A dozen firms have been closed down. Have irregularities similar to those identified in this case arisen with regard to the other firms of solicitors that have been closed down as well? Were those firms closed down for similar reasons? Is this the first time that you have come across this level of fraud in a solicitors’ firm?

376. Mr Eakin: It is not the first time that I have come across this level of fraud, but I stress that this is a very unusual case. We have had bigger defalcations in the past, but this is unusual. We have had situations where solicitors spend more than they earn and dip into their client account. That is quickly spotted, and it has closed them down very quickly. However, a fraud like this is unusual.

377. Mr Shannon: The examinations and the work that the compliance unit does to identify irregularities are based on the biennial checks backed up by the accountant. What made you aware of this problem? Did the accountant identify it and tell the Law Society about it? What brought it to your attention?

378. Mr Eakin: The initial notification to the Law Society came from the health board. Their letter came in on 3 August 2006 and identified a problem. Acting quickly, we went into the practice on 4 August with the benefit of that knowledge, and saw that there was —

379. Mr Shannon: The point that I am trying to get at is this. Your system involves the accountant identifying issues, but it was not your process that identified the problem; it was the health trust. Is it your intention to change your system of biennial checks? My point is that there has apparently been a history of allegations in relation to this firm over a number of years. When you make spot checks, do you contact boards, trusts and the people with whom the firms do business? To use a cliché, there is no smoke without fire. If a minor complaint arises, do you apply the same level of investigation to it as you would to a more major one? I want to gain some insight into your system. It failed to identify this fraud: what will you do to try to improve it?

380. Mr Eakin: First, it is quite clear from the record that there were no complaints at all, small or otherwise, about Mr Brangam. Secondly, the accounting internal mechanism — reconciling the client account every quarter, signing the client account every year and the accountants’ reports — are all in order. Thirdly, the investigating accountants for the society are investigating whether there was a misapplication of the solicitors’ accounts regulations.

381. It must be acknowledged that what was happening between the board and Mr Brangam would not happen in any other area of activity. My firm does defence litigation work. It would be inconceivable that any of my insurance clients would make a damages cheque for a third party payable to me. That cheque would be made payable to the third-party solicitor only if there were a paper trail in place authorising that. What was going on here was something that evidence has shown involved a cosy relationship between Mr Brangam and the trust. If there had been a paper trail, it would have been impossible to spot.

382. The Law Society, as I have told the Committee, takes on board the lessons that have been learnt in relation to what it asks its internal accountants to look for when they inspect accounts. However, with the best will in the world, if a solicitor’s office is receiving money from a trust, board or Government Department, it is a big step to go beyond accepting that. In fact, in this case, evidence in the Goldblatt McGuigan report highlighted falsified correspondence from the boards and falsified invoices to transfer across the money.

383. I defy anyone to come up with a foolproof system or a mechanism that would deal with that, other than being caught out by repeating the action. As Mr Brangam found when he applied for the same money twice, going down the same road creates more and more difficulties and eventually the offender will, or possibly will, be caught out. However, if there is a paper trail, it must be acknowledged that the scrutiny role of internal accountants in the Law Society or that of external auditors is rendered very difficult.

384. Mr Shannon: The point that I want to ascertain is whether it is possible to make the Law Society’s two-yearly check more robust.

385. Mr Eakin: That is difficult to achieve because, as Mr Cooper has said, in a firm that has thousands and thousands of dealings, accountants require prescribed sampling as part of the audit by the firm that signs off on the accounts. Some transactions will be looked at in more detail. If Mr Brangam had been unfortunate, questions might have been asked in relation to the accounts. I know from my own experience that our accountants will sometimes ask questions in relation to the accounts.

386. Mr Cooper: Mr Eakin has already said, but it is worth repeating, that this experience was confined to a firm that was getting regular lump-sum payments from 11 different clients, which is an unusual situation, and, frankly, a very loose and flexible arrangement. Adequate precautions were not taken about various sums that Brangam Bagnall and Co habitually paid into its clients’ account from trusts every week.

387. In its investigatory role, the Law Society has never come across such a situation. However, in the first instance, the case has resulted in the Law Society having its forensic accountants draw up advice for the society’s own accountants about how similar operations must be looked at it in the future. Secondly, it has resulted in the society’s forensic accountants arranging lectures for the accountancy profession, and there are possibly as many as 300 firms of accountants that report annually on solicitors’ practices.

388. We have ensured that all accountancy firms that report on solicitors’ practices pay particular attention to any firm that has that specific model. Those are the sort of proactive steps that we are taking to ensure, hopefully, that a similar situation will not happen again. However, it has to be acknowledged that, in all fraud, the world is such that there will always be a level of sophisticated fraud that someone will get away with until it is spotted and people learn from it — as has happened in this case.

389. Mr Dallat: You say that you received no complaints from anyone until the point of crisis. I have letters dating back 12 years that express concern about Brangam Bagnall and Co. You must be disappointed that people did not have the confidence, or never thought, to convey their concerns to the Law Society.

390. Mr Eakin: If there were concerns when Mr Brangam was in private practice, yes, it is a matter of disappointment. Let me be very clear: the society does not want people like Mr Brangam in practice, and it does not want that activity going on. The bottom line is that the rest of us pay the cost of Mr Brangam’s fraud. If it is a compensation fund claim we contribute to that. If it is a professional indemnity claim we operate a master policy. Therefore, all solicitors pay the premium. Activity such as that costs us money. The more money that is paid out, the higher the premium rises, which results in higher contributions for us. We cannot make people complain to the society, and we can deal only with the complaints that we receive.

391. Mr Dallat: Sorry, I was going to suggest that perhaps there is a need to encourage the public to complain to the Law Society. However, it must have been terribly embarrassing to have awarded that man your highest award of excellence in 2004, bearing in mind what the Committee has heard today about what he was doing — thieving and stealing from the weakest members of society. Did the Lexcel quality mark of professional excellence entail any detailed inspection of the books?

392. Mr Eakin: Lexcel accreditation is a systems-based accreditation, in the same way as ISO 9001 is a systems-based accreditation. It is awarded by external examination — not the Law Society — and it is awarded following external satisfaction of certain criteria. However, it is largely a systems-based method of accreditation. Again, to go back to the basics, the systems were in place — albeit that there was an element of fraudulent activity involved in the systems.

393. Mr Dallat: The Law Society certainly takes ownership of the system as it is displayed on its website, which is where I discovered it.

394. Mr Eakin: ISO 9000 is an international accreditation system. Lexcel is specific to legal practices and is operated by the Law Society of England and Wales, and the Law Society of Northern Ireland is an accredited provider for it. However, it is subject to external verification of standard.

395. Mr Dallat: Bearing in mind that it is subject to external verification, do you agree that it is not worth the paper that it is written on?

396. Mr Eakin: It is worth the paper that it is written on, in that it is an independent verifiable accreditation of systems, in the same way as someone could be ISO 9001 accredited, and still perpetrate such a fraud. The basis of the accreditation is having the systems in place.

397. Mr Dallat: I have two final questions, which can be answered as one. Have you evidence in your books or any paperwork that shows that Mr Daly was a partner in Brangam Bagnall and Co.

398. Mr Eakin: The society regards Mr Daly as a partner in Brangam Bagnall and Co. The criteria that the society applies is when someone is held out as a partner and applies for professional indemnity cover as a partner — both of which are applicable in Mr Daly’s case.

399. Mr Dallat: Chairman, that is something that we must examine again with the Department. One of the reasons given to the Committee as to why MSC Daly could be accepted was the fact that Mr Daly was not a partner. However, that is not a matter for you, Mr Eakin. My other questions have, by and large, been answered.

400. Finally, in light of this, I do not get the impression that the Law Society intends to change the way that it operates in order to ensure that scavengers who prey on the most vulnerable people can be caught more easily.

401. Mr Eakin: With respect, I have to disagree. The Law Society is very keen to preserve its good reputation across the board. We regularly review our solicitors’ accounts regulations, which are signed off by the Lord Chief Justice and the FSA, and are subject to scrutiny. However, there are limits to what we can do.

402. We have learned lessons from this case. Our internal accountants go out into practices and Goldblatt McGuigan provides the Institute of Chartered Accountants with training on the requirements for signing off accounts. I do not want to minimise the seriousness of this case in any way. However, any type of fraud that is as complex as this, and where there is a paper trail, in any activity, legal or otherwise, is very difficult to cover.

403. Mr G Robinson: Mr Dallat referred to this point, but is it correct that the Law Society gave a quality award to Brangam Bagnall and Co in 2004?

404. Mr Eakin: Yes, as Mr Dallat mentioned, the practice was awarded the Lexcel accreditation.

405. Mr G Robinson: On what basis was that accreditation awarded?

406. Mr Eakin: As I indicated earlier, the Lexcel accreditation is independent and systems-based. A practice has to show that the correct systems are in place, that the correct instructions are being carried out, that accounts are being dealt with properly, and so on. The Lexcel accreditation is systems-based in the same way that ISO 9001 is systems-based. If the correct systems are being complied with and are subject to independent verification, the accreditation will be awarded.

407. Mr G Robinson: Given the case that we are dealing with today, it seems incredible that that accreditation was awarded.

408. Mr Eakin: The records show that large firms whose members of staff have perpetrated a fraud have been awarded the ISO 9001 accreditation.

409. Mr Craig: Every Government Department is required to have a whistle-blowing policy. Has the Law Society established a whistle-blowing policy?

410. Mr Eakin: When there is a complaint — whether it comes from a professional colleague, an independent source, or an anonymous source — the Law Society assesses the evidence and makes the response that it deems to be appropriate. The complaint in respect of Brangam Bagnall and Co was received on 3 August 2006. We were on the case on 4 August, and the practice was closed down a week later.

411. Mr Craig: I would not dream of questioning the speed at which you responded to the complaint. I want to establish whether the Law Society has a known whistle-blowing policy. Is there a route by which Law Society members and, more importantly, people working in practices know that they can contact you directly to provide information about illegal activity?

412. Mr Eakin: Everyone knows where the Law Society is, and everyone knows that we deal with problems concerning solicitors. Mr Dallat articulated the view that he received complaints that were not forwarded to the Law Society. However, my experience is that, nowadays, members of the public are very well aware of their rights vis-à-vis solicitors.

413. Mr Cooper: It is worth saying that the smallness of the profession in Northern Ireland — compared to England, the Republic of Ireland and Scotland — means that there is a collegiality among our members. That is widely acknowledged, and it has enabled us to be much more successful in operating the regulatory regime than other jurisdictions have been. That is because all firms of solicitors and all practising solicitors in Northern Ireland are very well aware that any type of fraud is, first, a blot on the landscape of the whole profession, and, secondly, has the potential to seriously hurt their pockets.

414. The consequence of that is that the Law Society frequently gets “comments” — let us put it that way — from practising solicitors about concerns that they have about other firms of solicitors. Some of those concerns are ill-conceived and have no basis; however, there is no attempt on the part of the Law Society to discourage the flow of information from firms of solicitors to the Law Society as the regulatory body.

415. That may not happen in other jurisdictions where perhaps the regulator is viewed more harshly by its members. We do not have a whistle-blowing policy as such, but, I think, we are satisfied that there is an ethic that if there are concerns, particularly about public money, they will very rapidly come to us, in this small jurisdiction, from our own members.

416. Mr Craig: I understand what you are saying: Northern Ireland is a small place; everybody knows everybody, and everybody knows everything in some cases. Perhaps the solicitors or barristers will not blow the whistle on each other; however, it strikes me that in that practice, people were dealing with the paperwork and perhaps suspected something, but did not know where to pass that information on to, or were afraid to pass it on. For that reason, perhaps it would be a good idea to have a whistle-blowing policy within firms.

417. Mr Cooper: I have to say that there is no evidence whatsoever from our accountants, or from any of the investigatory authorities, that anyone else in the practice knew what Mr Brangam was, very personally, doing. It is very clear from the case that it was he personally who did, and was in charge of, the paperwork. As somebody said earlier, a characteristic of the entire matter is that he had almost exclusive personal conduct of those 27 individual cases.

418. The Chairperson: On that point, do you think it would be a good idea for your organisation to have a whistle-blowing policy, and if so, would you implement one?

419. Mr Eakin: Certainly, we would be very keen that anybody who has any concerns about a solicitor’s practice, particularly when it involves client moneys or the conduct of solicitors, would be proactive in reporting it to the society.

420. From a realistic point of view, it is very difficult to say how a whistle-blowing policy could be implemented or communicated to anyone, other than reaffirming that solicitors have to operate as officers of the court to the utmost integrity, and that any diminution of that should be brought to our attention.

421. The Chairperson: Perhaps that is something we will return to.

422. Ms Purvis: Paragraph 6.3.2 of the report states:

“The Law Society’s view is that it is not appropriate for health bodies to be provided with details of any concerns which the Law Society might have as to the professional conduct of solicitor firms acting on their behalf.”

423. You go further than that; you support placing the onus on the firm, or the individual tendering, to disclose details of any professional conduct findings or investigations. Would it not be better for the society to disclose such details?

424. Mr Eakin: I think it should be seen in context. If a solicitor goes to a disciplinary tribunal and a finding is made against him or her, those will be published and made available. Until that stage, it is difficult to see how a law society, or anybody else, could make an adverse finding against someone, around a complaint that has not reached its logical conclusion.

425. Ms Purvis: I was thinking more along the lines of the Law Society passing a list of tenderers, so that public bodies can see clearly which firms or individuals have not been the subject of professional misconduct findings.

426. Mr Eakin: That list is available and is published. As Dr McCormick said, in the tendering process the disciplinary record of the firms has to be disclosed. Certainly, it is open to anyone to ask the society about a firm’s disciplinary record.

427. Ms Purvis: Is the onus on the firm to disclose that information?

428. Mr Eakin: As part of the tendering process, firms are required to disclose such information.

429. Ms Purvis: Earlier, you mentioned the issue of practising certificates for individuals. Do those certificates have penalties noted on them in the same way that driving licences do?

430. Mr Eakin: Practising certificates run from 6 January in any year to 5 January the following year. The deadline for certificate applications for next year is soon. Certificates can be an absolute entitlement to practise; however, restrictions can be placed on them. For instance, if the tribunal has put a restriction on a solicitor, that solicitor is not entitled to practise on his or her own account. That is a matter of public record.

431. Ms Purvis: Is the information behind a restriction available?

432. Mr Eakin: Yes; if a restriction is the result of a determination from the disciplinary tribunal, that is a matter of public record and is published annually.

433. Mr McLaughlin: Can the society share with the Committee the outcome of any investigations relating to Brangam Bagnall and Co, or anyone associated with the practice, that may since have been concluded and that are not documented in the report?

434. Mr Eakin: Obviously, the disciplinary tribunal reference against George Brangam died with him. The position with former partners or the current partner at the time of the ceasing of the practice was subject to investigation by the society. The society had no issues with the findings of the Audit Office about the fraud for either former partners or the current partner at the time of dissolution.

435. Mr Daly’s position, and his accountability as a partner, is subject to ongoing — potentially disciplinary — activity by the society. The matter has been fully investigated, and the papers have been transmitted to the Law Society’s solicitors to ascertain whether there will be a reference to the disciplinary tribunal recommended by it regarding the evidential aspect. That relates solely to Mr Daly’s status as a partner and, therefore, his accountability for the activities of the practice.

436. The insurers were satisfied that Mr Daly was an innocent party, and therefore not party to the fraud. That was the basis on which the professional indemnity insurers dealt with the matter. Nevertheless, the society has to consider whether he, as a partner, should have been in a position to ensure that the accounts were not falsified. That matter has been investigated, and papers have been referred to our solicitors for a determination as to the likelihood of a finding by the tribunal on that matter. Once that determination is made there will either be a reference to the disciplinary tribunal or there will not be.

437. Mr McLaughlin: Are you still investigating any issues related to the sequence of events outlined in the report?

438. Mr Eakin: The Law Society has gone to considerable lengths to investigate the issues, including the commissioning of a comprehensive report by Goldblatt McGuigan in February 2007.

439. Mr McLaughlin: I know, but is there an ongoing investigation?

440. Mr Eakin: The investigation is now concluded.

441. Mr McLaughlin: There is one other issue. Mr Brangam’s involvement in this area of work goes beyond the practice that he established in 1995. The first example of fraud that the investigation discovered happened in 1998 — three years after that. Going back to 1987, he was the director of legal services in the CSA. Earlier, Department representatives told the Committee about the guidelines for the retention of records and their legitimate and safe destruction. Do such guidelines exist for practising law firms?

442. Mr Eakin: There are requirements to have records available for the period of limitation. There is a recommendation that a conveyancing file, for instance, is retained for longer. However, there is no requirement to have records on claims, for example, available for longer than the period in which any proceedings may result from it.

443. Mr McLaughlin: Are there any guidelines in relation to the retention or destruction of records, or is that a matter for the practices to decide?

444. Mr Eakin: Once the period in which a claim may arise has expired, there is no requirement to hold records any further.

445. Mr McLaughlin: We have heard how difficult it is to speak with certainty about the extent of the fraud. There is a degree of confidence that we understand the quantum of the fraud, but there is no guarantee that we know when it started or the amount of fraud involved. In order to assist the Department and the PSNI, have you considered canvassing Law Society members who, through representing clients, encountered Mr Brangam, either in his capacity as the director of legal services in the CSA or as a practitioner, subsequent to his establishing his own firm in 1995?

446. Mr Eakin: Directly, the answer has to be no, because we would not be able to identify who those parties were. However, there has been very extensive publicity in relation to the activities of George Brangam, not only in relation to this fraud but also in relation to other clients —

447. Mr McLaughlin: Would you be capable of reaching out to your members and their practices?

448. Mr Eakin: I am not sure what you are saying — are you suggesting that the Law Society should write to its members and ask them to let either us or the PSNI know if they have any evidence of a problem emanating from George Brangam’s practice?

449. Mr McLaughlin: It might be for others to pursue the evidence rather than the Law Society. In fairness, the Law Society seems to have a very rigorous approach that I am impressed by. There is an issue with the fact that those who investigated the matter have come up against a blank wall when trying to locate departmental records or the records of the practice in question. However, many of the claimants against the Department would have had legal representation that would have interfaced with the Department’s legal representation, and the claimants’ representatives may have records that would assist us in establishing the quantum of fraud involved.

450. Mr Eakin: There must be an element of proportionality about this. Once the Law Society intervened, we got custody of all the records that were available on 4 August 2006, and all those records have been made available to the Department and the PSNI. With respect, I cannot see how a general query sent out to colleagues would assist the investigation; I would have thought that anyone who had any reservations about a case that involved George Brangam would have been on the ball by now.

451. Mr McLaughlin: Those who carried out the forensic investigation have acknowledged that they were unable to access all the records that they would have wished to. There were two primary sources of those records — the Department and George Brangam’s company. I am suggesting that there is a third source, which is the network of practising solicitors who could be canvassed as to whether, when representing clients, they had any contact with George Brangam, either in his role as director of legal services role for the Department or as a franchise solicitor representing the Department in such claims.

452. Mr Eakin: My experience from private practice is that when a situation like that happens, prudent practitioners consider whether there has been any concern or reservations about dealings that they have had. If so, they will bring them to the attention of the society and the authorities. I must reiterate the fact that fraud has been identified in 27 cases out of 5,000. Therefore, I am not sure that we are in a position to go beyond those 27 cases.

453. Mr McLaughlin: I am aware of how many cases of fraud have been discovered. I wonder how many have not been discovered.

454. Mr Cooper: All of the experts who have examined the fraud have concluded that it seems to have been perpetrated against health boards because of their, frankly, questionable method of dispersing money. We understand that there is no evidence whatsoever of any private individual having been defrauded. I must reassert what Mr Eaken has said: I am confident that, because of the publicity that the situation has engendered, if any lawyer thought that there was a possibility of recovery of money, he or she would contact the Law Society without hesitation. We would then deal with the matter proactively. There has not, however, been one scintilla of evidence that anyone lost any money apart from the health boards that paid out money as defendants in those cases.

455. Mr McLaughlin: It is helpful that you have made that point. I am focused on the fraud that was perpetrated against the health boards. I understand how the opportunity for fraud was constructed. Therefore, I was not thinking about individual or private cases, but about cases that involved the boards. We do not know, with any degree of certainty, the quantum of the fraud that was perpetrated. I wonder whether there are lines of enquiry with which we could assist the society.

456. Mr Eakin: As regards lines of enquiry, I must be clear that Goldblatt McGuigan was given a comprehensive and thorough remit in order to determine where fraud had occurred, with the benefit of hindsight of where a board had said that it had been perpetrated. The firm carried out a detailed examination. The Department’s representative indicated that ASM Howarth also increased its sampling to investigate other activity in order to try to ascertain whether there was a wider picture of fraud. It concluded that there was not. The society’s firm of solicitors, Goldblatt McGuigan, conducted a comprehensive investigation.

457. Mr Lunn: Am I right in thinking that had Mr Brangam operated on his own, without partners, the Law Society’s professional indemnity cover would not have applied?

458. Mr Eakin: That is correct.

459. Mr Lunn: It is, therefore, useful, from the point of view of other solicitors, that Gary Daly turned out to be a supposed partner?

460. Mr Eakin: No, it is not. As I said earlier, one way or t’other, the rest of us practitioners pay for it.

461. Mr Lunn: That is exactly the point that I make. Either the insurance company had to pay, which may have affected your premiums, or you would have had to contribute more to the compensation fund. The reason that I ask is because I am curious as to whether the Law Society now has a view about the advisability of solicitors acting on their own account, without partners, particularly in difficult cases that involve a lot of money?

462. Mr Eakin: The Law Society recognises that in Northern Ireland, two thirds of members practice in small units; in firms of either one or two partners. The society feels that, due to the current economic climate and work/life balances, larger firms are more appropriate: nevertheless, if people want to be sole practitioners, they can assume that role.

463. The professional indemnity premium is substantially more for a sole practitioner than for people who are in partnership. The cost to run a practice is also probably more, proportionately, for sole practitioners than for larger practices.

464. Mr Lunn: Do you know if MSC Daly Solicitors was a sole practitioner when Gary Daly took over the work from Brangham, Bagnall and Co?

465. Mr Eakin: It was a new partnership: M,S and C are the initials of the partners.

466. Mr Lunn: Then there were, presumably, four partners: an M, an S, a C and a G?

467. Mr Eakin: Yes, there were four partners.

468. The Chairperson: Thank you very much, Mr Eakin and Mr Cooper. That concludes our questioning. Thank you for coming in today. If we have further questions, we will put them in writing to you. The Committee appreciates the time you have taken.

469. Mr Eakin: May I say in conclusion, Chairperson, that this is an embarrassment to the society? Mr Cooper has referred to the collegiality of our membership. I do not want any member of the Committee to be under any illusion: the society is not prepared to tolerate the activities of people like Mr Brangham. In our role as regulators, we will do our best to ensure that people like that are not practising and, if they are found out, that they will not practice. In addition, we will ensure that no member of the public suffers as a result of the activities of people like this.

470. The Chairperson: I appreciate that, Mr Eakin. Thank you again.

Appendix 3

Correspondence

Chairperson’s Letter of 9 December 2008
to Dr Andrew McCormick

Public Accounts Committee
Room 371
Parliament Buildings
BELFAST
BT4 3XX

Tel: (028) 9052 1208
Fax: (028) 9052 0366
Email: Alison Ross@niassembly.gov.uk

Date: 9 December 2008

Dr Andrew McCormick
Accounting Officer
Department of Health, Social Services & Public Safety
Room C5.11
Castle Buildings
Stormont
Belfast BT4 3SQ

Dear Andrew

Re: Public Accounts Committee Evidence Session 4 Decmeber 2008

Further to the evidence session at the Public Accounts Committee on 4 December 2008, please provide the following additional information which members requested at the meeting.

1 Details of the specific guidance on retention of records within your Department, which was issued following the discovery of the fraud by Mr Brangam.

2 The full cost of the Department’s investigation into the fraud perpetrated by Mr Brangam, i.e legal expenses, departmental expenses, consultancy, etc.

3 Confirmation as to whether Mr Andrew Hamilton was involved at any stage in the process of allocation of legal contracts following the outsourcing of that service from the Central Services Agency and which eventually awarded its contract to Brangam Bagnall & Co.

4 Assurance from the Department to the Committee that no other firm of solicitors received the same level of ‘undue trust’ which appeared to be given to Mr Brangam.

I would appreciate a response by Friday, 9 January 2009.

Yours faithfully

Paul Maskey

Chairperson, Public Accounts Committee

Correspondence of 9 January 2009
from Dr Andrew McCormick

C2 Letter to Paul Maskey - PAC Evidence Session 4 December 2008

Chairperson’s Letter of 8 December 2008
to Mr Alan Hunter

	Public Accounts Committee Room 371 Parliament Buildings BELFAST BT4 3XX Tel: (028) 9052 1208 Fax: (028) 9052 0366 Email: Alison.Ross@niassembly.gov.uk

Public Accounts Committee
Room 371
Parliament Buildings
BELFAST
BT4 3XX

Tel: (028) 9052 1208
Fax: (028) 9052 0366
Email: Alison.Ross@niassembly.gov.uk

Date: 8 December 2008

Mr Alan Hunter
Chief Executive
The Law Society
40 Linenhall Street
Belfast BT2 8BA

Dear Alan

Re: Public Accounts Committee Evidence Session 4 December 2008

Further to the evidence session at the Public Accounts Committee yesterday, please provide the following additional information which members requested at the meeting.

1 Confirmation of the date when the Police Service of Northern Ireland were called in to investigate Brangam Bagnall & Co.

2 You also agreed to confirm the number of solicitors’ firms which have been closed down since 1998.

I would appreciate a response by Friday, 9 January 2009.

Yours faithfully

Paul Maskey

Chairperson
Public Accounts Committee

Correspondence of 19 December 2008
from Mr Alan Hunter

C4 LawSociety

Correspondence of 19 January 2009
from Gary Daly

C5 Gary Daly re Brangam Bagnall &Co 220109

Appendix 4

List of Witnesses who
Gave Oral Evidence
to the Committee

List of Witnesses Who Gave
Oral Evidence to the Committee

1. Dr Andrew McCormick, Accounting Officer, Department of Health, Social Services and Public Safety.

2. Mrs Julie Thompson, Acting Senior Finance Director, Department of Health, Social Services and Public Safety.

3. Mr Dean Sullivan, Director of Planning and Performance, Department of Health, Social Services and Public Safety.

4. Mr Donald Eakin, Senior Vice-President, The Law Society of Northern Ireland.

5. Mr James Cooper, former Senior Vice-President, The Law Society of Northern Ireland.

6. Mr Kieran Donnelly, Deputy Comptroller and Auditor General, Northern Ireland Audit Office.

7. Mr David Thomson, Treasury Officer of Accounts, Department of Finance and Personnel.

Session 2008/2009

Eighth Report

Public Accounts Committee

Report on Brangam, Bagnall & Co: Legal Practitioner Fraud Perpetrated Against the Health and Personal Social Services

Together with the Minutes of Proceedings of the committee relating to the report and the minutes of evidence

Ordered by The Public Accounts Committee to be printed 5 February 2009 Report: 26/08/09R (Public Accounts Committee)

Membership and Powers

Table of Contents

Report

Appendix 1:

Appendix 2:

Appendix 3:

Appendix 4:

List of Abbreviations Used in the Report

Executive Summary

Introduction

Frauds perpetrated by George Brangam and why they were not picked up earlier

Adequacy of the Department’s investigation

Concerns over the conduct and probity of George Brangam prior to setting up Brangam Bagnall & Co

Procurement of legal services

Regulatory regime for the legal profession

Summary of Recommendations

Frauds perpetrated by George Brangam and why they were not picked up earlier

Adequacy of the Department’s investigation

Concerns over the conduct and probity of George Brangam prior to setting up Brangam Bagnall & Co

Procurement of legal services

Regulatory regime for the legal profession

Introduction

Frauds perpetrated by George Brangam and why they were not picked up earlier

Recommendation 1

9. The Committee recommends that the Department monitors the performance of other firms providing legal services to the health sector, to ensure they are complying with guidance issued since the frauds were discovered.

Recommendation 2

Weaknesses in financial procedures and compliance

Recommendation 3

Recommendation 4

Weaknesses in supervisory controls

Recommendation 5

20. The Committee recommends that training needs and leadership in the area of contract claims is reviewed within the health sector and rolled out as a matter of urgency. The Department should also consider the extent of the fraud awareness training currently delivered within the health sector.

Wider impact on other contracts within the health sector

Recommendation 6

Adequacy of the Department’s investigation

Recommendation 7

25. Procurement processes in the public sector often take many months to complete. The Committee recommends that all Departments review their contingency arrangements to ensure they have:

(a) an up to date Fraud Response Plan in order to minimise the time required to think through the scope and nature of any investigation once a fraud is notified; and

(b) appropriate standby measures in place to allow them to get forensic investigations up and running quickly.

Scope of the investigation

Recommendation 8

31. The Committee is very concerned about the apparent inadequacy of health bodies’ records management systems if records have now appeared that were previously considered to be legitimately destroyed, and recommends that the Department provides a fuller explanation.

Recommendation 9

Consideration of collusion between Brangam and health bodies

Recommendation 10

Consideration of supervisory negligence

Recommendation 11

Concerns over the conduct and probity of George Brangam prior to setting up Brangam Bagnall & Co

Conduct and probity of George Brangam

Recommendation 12

Recommendation 13

45. The Committee reiterates a recommendation made in its Report on HANI that, in situations where it is in the public interest to protect standards in public life and the public purse, there should be a mechanism for information sharing.

Circumstances surrounding Brangam’s departure from the Central Services Agency

Recommendation 14

Procurement of legal services

Development of an open market

Recommendation 15

Duration of the Select List

Lessons arising from the collapsed procurement exercise

Recommendation 16

56. The Committee is seeking assurance from the Department that there will be no further cases of competitions being abandoned due to its inability to assess and compare bids.

Recommendation 17

Recommendation 18

59. The Committee is concerned that the Department has failed to fulfil assurances previously given. It expects departments to respond quickly and appropriately to address all assurances provided to the Committee through regular monitoring of progress.

The Transfer of cases following discovery of the frauds

Recommendation 19

62. The Committee recommends that, in cases like this, where allegations of fraud or other impropriety exist, public bodies should consider suspending financial dealings with those directly, and indirectly, involved until the main investigation has been completed.

Regulatory regime for the legal profession

Frauds not detected through regulatory inspections

Complaints raised and disciplinary issues arising in Brangam, Bagnall & Co

Extent of abuse in the profession

Publication of professional misconduct findings

Review of current regulatory regime

Recommendation 20

Report on Brangam, Bagnall & Co:
Legal Practitioner Fraud Perpetrated
Against the Health and Personal
Social Services

Together with the Minutes of Proceedings of the committee
relating to the report and the minutes of evidence

Ordered by The Public Accounts Committee to be printed 5 February 2009
Report: 26/08/09R (Public Accounts Committee)

List of Abbreviations
Used in the Report

Concerns over the conduct and probity of George Brangam prior to setting up
Brangam Bagnall & Co

Concerns over the conduct and probity of George Brangam prior to setting up
Brangam Bagnall & Co

Frauds perpetrated by George Brangam
and why they were not picked up earlier

Adequacy of the Department’s
investigation

Concerns over the conduct and probity of George Brangam prior to setting up
Brangam Bagnall & Co

Regulatory regime for the
legal profession

Minutes of Proceedings
of the Committee Relating
to the Report

Thursday, 4 December 2008
Senate Chamber, Parliament Buildings

Thursday, 5 February 2009
Room 144, Parliament Buildings

Chairperson’s Letter of 9 December 2008
to Dr Andrew McCormick

Correspondence of 9 January 2009
from Dr Andrew McCormick

Chairperson’s Letter of 8 December 2008
to Mr Alan Hunter

Correspondence of 19 December 2008
from Mr Alan Hunter

Correspondence of 19 January 2009
from Gary Daly

List of Witnesses who
Gave Oral Evidence
to the Committee

List of Witnesses Who Gave
Oral Evidence to the Committee