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These two Articles written by or on behalf of Brian Duckworth are reproduced on the this web site in order to give Brian's side of the story. (Both articles were emailed to the web site by Brian Duckworth on the 1st July 2008.)
WHAT HAPPENED TO THE PRESUMPTION OF INNOCENCE?
In most courts of law there is a clear division between the prosecution and
defence teams. That’s how we see courtroom dramas unfold everyday on
our TV sets. But yesterday, at the Old Bailey in London, both prosecution
and defence appeared to be on the same side, but for widely differing reasons.
In the case of Regina v. Severn Trent Water (STW), the Serious Fraud Office
(SFO) was prosecuting STW for ’knowingly and/or recklessly providing
false information’ on water leakage to OFWAT in 2001 and 2002. Central
to the prosecution’s case were allegations of wrongdoing made about
former directors of the company, including myself, at a time when I was Managing
Director of the company.
STW had already pleaded guilty to the charges and agreed to pay £200,000
of the SFO’s costs. So the key task for the defence was to try and mitigate,
or reduce, any fine which the judge might impose as part of his sentencing.
Central to STW’s defence was running a set of critical comments about
the way the former directors had managed the business.
Fortunately I was not in Court to hear all this, but none of the reports from
the Court came as a surprise to me. In the four years since I retired from
the Company, I’ve become used to the regular criticisms from Severn
Trent: its new management claims to have an ‘ethical culture’,
publicly promising to resolve all the ‘failings’ of my team!
I wasn’t in Court for the very simple reason that I had no place there.
Whilst I had been interviewed by the SFO in April 2007, I was neither arrested
nor charged with any offence. At that one meeting with the SFO no allegations
of dishonesty or recklessness were put to me. Neither were criminal charges
of ‘intentionally misleading the regulator’ ever subsequently
put to me.
It was therefore outrageous that the SFO sought to implicate me in court,
without giving me the opportunity to challenge its ill-judged assertions.
The SFO took the view that it would be complex, costly and lengthy - and therefore
against the public interest - to prosecute individuals from the company.
Conveniently, this ignored the likelihood of the SFO failing to prove at trial
that I acted in any way dishonestly. However, it did achieve the SFO’s
objective of prosecuting a financially sound company, irrespective of the
personal implications for its former directors.
When STW’s board decided to plead guilty, they did so in the full knowledge
that I resolutely denied any suggestion of personal wrongdoing. Public statements
have sought to distance its new management by apportioning responsibility,
and therefore guilt, at the hands of the ‘previous regime’ –
in circumstances where there has been absolutely no opportunity for us to
legally defend ourselves and thereby publicly clear our names.
Yet how could the current Directors of Severn Trent decide in 2008 to plead
guilty to charges of providing false information and recklessness dating back
to 2001 when none of those Directors held office at that time? How could they
make such a decision when those then in charge - the so called ‘controlling
minds’ – denied the Company’s guilt from the outset, and
continue to do so?
Leakage monitoring, control and reporting are very complex issues, all part
of a very imprecise science. There are many uncertainties associated with
trying to estimate the amount of water leaking from millions of tiny holes
in thousands of miles of pipes buried underground several decades ago. No
water company will be able to measure customers’ precise consumption
until all homes have a water meter; until then estimating both consumption
and leakage will continue.
At the time of the alleged offences there was much uncertainty about the validity
of leakage data. The key components could not be relied upon for accuracy.
With hindsight, it seems some reporting mistakes were made by the Company
in 2001 and 2002 – but that’s a far cry from criminal dishonesty.
It is also important to say that neither the Company nor any individual gained
from this so-called ‘fraud’. Similarly, it is plainly wrong to
suggest customers were overcharged as a result. If anything, it was the reverse.
Had Severn Trent increased the reported leakage figures, the Company would
have made its case to OFWAT much earlier, for a significant acceleration in
the costly programme of renewing water mains. It is these costs which would
have increased customers’ bills.
Throughout my 30 years with Severn Trent I passionately argued for strong
regulation to ensure that customers had sufficient protection in an industry
dominated by monopoly companies. So I am deeply saddened that yesterday’s
sentence may leave some of Severn Trent’s customers feeling they have
been let down.
I still do not understand the SFO’s case or the company’s guilty
plea - both are utterly baffling. In my view, the criminal prosecution was
ill-conceived and manifestly unfair. STW itself branded the prosecution pointless.
Although it will no doubt be trumpeted by the SFO as a great success, others
in the legal profession are much more sceptical. It has already been suggested
that the SFO’s decision to accuse individuals in court , who have no
opportunity to defend themselves, goes against one of the fundamental tenets
of law; the presumption of innocence.
Additionally, large fines and a patently inept regulatory regime do nothing
to address the real issue – that of improving customer service and reducing
water leakage. That’s what really matters - to consumers and shareholders
alike; and I suspect it will become a real issue for the company when it holds
its Annual General Meeting on July 22 at the International Convention Centre
in Birmingham.
Regrettably, the only result of this long-winded and expensive investigation
is a leakage of much needed Severn Trent funds to Mr Darling at the Treasury.
Clearly the £2 million fine would have been much better spent on further
improvements to water services in Nottinghamshire and other parts of the Midlands.
That’s the real outrage of this case.
“Today is a day of great personal frustration and disappointment. It is also one of questionable benefit to Severn Trent’s customers and shareholders.
“The company has been fined £2 million, having pleaded guilty to two charges of knowingly and/or recklessly providing false information on water leakage figures to its regulator, OFWAT, in 2001 and 2002, following an investigation by the SFO.
“I was the company’s Managing Director from 1994 until my decision, in 2004, to retire in March 2005. From the outset of its investigation, I sought to provide the SFO with my full assistance. I was neither arrested nor charged with any offence. I was asked to meet the investigators on just one occasion, during which no allegations of dishonesty or recklessness were put to me. Neither were criminal charges of ‘intentionally misleading the regulator’ ever subsequently put to me.
“Yet the new management of Severn Trent took a decision this year to plead guilty to two criminal charges in the full knowledge that I, as the then Managing Director, resolutely denied any suggestion of personal wrongdoing whatsoever. Moreover, Severn Trent in court today branded the investigation “pointless” – given the general recognition that there had been no loss suffered by anyone as a result of STW’s leakage reporting.
“It is therefore outrageous that the SFO has sought to implicate me in court, without affording me the opportunity to challenge its ill-judged assertions. The SFO has taken the view that it would be complex, costly and lengthy - and therefore against the public interest - to prosecute individuals from the company. Conveniently, this ignores the likelihood of the SFO failing to prove at trial that I acted in any way dishonestly. However, it does achieve the SFO’s objective of prosecuting a financially sound company, irrespective of the personal implications for its former directors.
“Severn Trent’s own public statements have sought to distance
its new management by apportioning responsibility, and therefore guilt, at
the hands of the ‘previous regime’ – in circumstances where
there has been absolutely no opportunity for us to legally defend ourselves
and thereby publicly clear our names.
“Leakage monitoring, control and reporting is a massively complex issue
and a very imprecise science. We at Severn Trent, and the rest of the water
industry, properly sought to revise the way in which water management and
leakage issues had been traditionally, and unsatisfactorily, calculated and
reported to OFWAT. But, as so many components of that leakage calculation
were estimates – for example, we used just 1100 metered homes to estimate
the consumption of all 7million people who lived in the region – it
was never easy.
“At all times my colleagues and I worked hard to promote best practice in complex circumstances. So, on a personal level, I am deeply saddened that after a career of 30 years devoted to the water industry, mistakes have been laid at my door without affording me the opportunity of a defence.
“Similarly, there has been no opportunity to demonstrate that there was neither dishonesty nor financial gain sought, or achieved, by either the company or the individuals named today. Most importantly, however, the SFO has failed to make clear that no customers were affected as a result of the leakage reporting errors.
“My greatest concern is the impression the Company’s plea and resultant sentence leaves in the minds of Severn Trent Water’s customers and shareholders, whom I believe have not been properly served by this prosecution. Most disappointingly, it has failed to address the real issue of importance – that of reducing water leakage and improving the water industry’s leakage calculation and reporting methods.
“In my view, the criminal prosecution was lazy, ill-conceived and manifestly unfair. It will no doubt be trumpeted by the SFO as a great success, albeit only achieved by impugning the integrity of former directors. The law is often accused of being imperfect – from my experience, the prosecutorial system certainly is.
“Still, whatever frustration I may feel, today’s sentencing of Severn Trent at least provides a relatively expedient, if highly unsatisfactory, resolution of the prosecution.”
ENDS
Issued on behalf of Mr Duckworth by:
Bell Yard Communications + 44 20 7936 2021
Melanie Riley +44 777 55 912 44
melanie@bell-yard.com
Below is STW response to SFO Court case:
Severn Trent Plc announces that at the Central Criminal Court today Severn
Trent Water Ltd was fined £2 million and ordered to pay £220,000
costs after pleading guilty to two offences relating to leakage data supplied
to Ofwat in 2001 and 2002.
Commenting on the court case and related legacy issues listed below, Tony Wray, Chief Executive of Severn Trent Plc, said:
"We are finally close to resolving these issues from the past and putting this organisation back into the positive position our customers, regulators and staff deserve.
"We deeply regret the mistakes of the previous regime for which we have apologised to customers. There were indefensible shortcomings in Severn Trent's previous management and control systems during the 2000 to 2004 era.
"On behalf of our customers and staff we deplore the breach of the essential trust between Severn Trent and all our stakeholders. We are already repairing that trust with the root and branch reorganisation of Severn Trent undertaken since 2005.
"Almost four years of intensive management time and effort has been spent sorting out these legacy issues – time better spent benefiting customers.
"No one who was responsible is with our organisation now and we have already ensured that Severn Trent did not profit from these failures by crediting customers' accounts and altering bills appropriately,” he concluded.
Having taken legal advice, and considered the best interests of customers and stakeholders generally, the Board of Severn Trent has decided not to take action against the former management.
Tony Wray said: “Severn Trent is now focused on our ambition – to achieve the highest quality of customer service standards while offering our customers the lowest prices.”
Legacy issues
In March 2006 Ofwat published an interim report concerning allegations of
false reporting made against Severn Trent Water in 2004. Ofwat concluded that
Severn Trent Water:
- Had poor internal processes and controls which led to incorrect income
data being submitted to Ofwat in 2004 and price limits being £8m a year
too high for five years to 2010.
- Provided data to Ofwat in 2002 which was deliberately miscalculated and
which meant customers were overcharged by £2m in 2004.
- Approached the collection and submission of data in a manner which causes
Ofwat serious concerns.
Severn Trent Water has credited customers’ accounts and altered future bills appropriately to ensure the company has not profited in any way.
Following information volunteered by an internal Severn Trent Water investigation in 2006, Ofwat proposed in April 2008 to fine Severn Trent Water £35.8 million for deliberately providing false customer relations information to the regulator and providing a poor service to customers in 2005 and earlier years. A final decision on the fine is expected to be announced soon.
Without waiting for Ofwat’s conclusion, Severn Trent Water is lowering customers’ bills by £10.6million, around £2.40 per household, to ensure the company has not profited in any way.
In April 2008, having carefully studied the details of the charges, and having taken legal advice, Severn Trent Plc announced that Severn Trent Water was pleading guilty to two offences relating to leakage data supplied to Ofwat in 2001 and 2002.
Following today's conclusion of the court case, discussions will commence
with Ofwat concerning the resolution of the interim report of March 2006 which
may result in further amends being made to customers.
For further information contact:
Peter Gavan
Director of External Affairs
Severn Trent
Andrew Marsh
Public Affairs Manager
Severn Trent
Telephone: 0121 722 4121