Certification Office
for Trade Unions and
Employers' Associations
Brandon House, 180 Borough High Street, London SEI lLW
TelephoneDirect Line: 020 7210 3690
General Office: 020 7210 3734/3743
Fax No: 020 7210 3612
Our ref: CO/696T/8/99
31 July 2001
Allegation of Financial
Irregularity in the Manufacturing Science and Finance Union
1. On 21 July 1999 I issued
a letter setting out the reasons why I had decided not to appoint inspectors to
investigate the financial affairs of the Manufacturing Science and Finance
Union ("MSF") in spite of six allegations drawn to my attention by
several members of the union and by articles in the press.
2. Subsequently in the
summer of 2000 several members of the union including some who had not
contacted me before wrote to me asking me to reconsider that decision.
3 . Under section 37E of the
Trade Union and Labour Relations Act 1992 ("the Act") where I receive
such a complaint to the effect that the state of affairs specified in section
37B(2)(a) to (d) exist I must consider if it is appropriate to exercise my
power to appoint inspectors. If I
decide not to exercise that power, I must notify the complainants of my
decision and if I think fit give my reasons.
4. In this case, after much
investigation and deliberation, I have decided not to appoint inspectors and to
give reasons for that decision. In this
report I have endeavoured to deal with and give a view on all of the
allegations of which I am aware. I have
tried to do so in a way that is both fair and will enable the union, Mr Lyons
and the accusers to draw a line under these issues which I know have plagued
them for nearly 3 years.
5. The complainants came to
me initially for several reasons. First
they were
unhappy that my letter of
21 July 1999 and the report of H W Fisher and Co.
on which it was largely
based had, they alleged, been presented by the union's
General Secretary (Mr
Lyons) as giving him and the union a clean bill of health. Secondly
during the hearing of an unfair dismissal claim by Ms Solomon, who had been one source of the original
allegations, a number of
new points had arisen
including some critical views on the way H W Fisher
had investigated the
allegation that both Mr Lyons and its Finance Officer (Mr N Mendes) had been made substantial
payments from two MSF accounts.
Thirdly that the union
was not letting members have access to H W Fisher's
full report and fourthly
that substantial payments had been made to Ms Solomon,
Mr Chowcat and a Regional Officer, Mr H John, which had the appearance of "buying their
silence".
6. Subsequently, further
grounds were adduced for the appointment of inspectors under
section 37B of the 1992 Act. It became clear that the Finance
Officer,
Mr N Mendes, had submitted
some improper expense claims. This
meant that the authentication of those claims, that initially
convinced both H W Fisher
and
me, was based on several members of the union providing corroboration
that
was inconsistent with subsequent evidence. Further the General Secretary's ex chauffeur, Mr Keegan, made claims of the
misuse of union resources by Mr
Lyons. Separate allegations were made
against Mr Gardner (the Chair of the General Purposes and
Finance Committee) to whom my letter of 21 July 1999 was addressed. Finally, I was aware that
allegations of corruption in MSF were being published on the internet and
in certain newspapers and that those newspapers still had concerns
about the financing of Mr Lyons' house purchase.
7. These certainly amount
to very strong reasons for me to consider the
appointment of
inspectors as requested by members of the union. Before
reaching my decision though I decided to talk further
with the union (usually
with Mr Gardner) and H
W Fisher. I also interviewed Ms
Solomon, Mr Chowcat and Mr John.
I saw Mr Lyons twice (at his request).
Mr Mendes did not take up an invitation to talk to
me. I obtained the witness
statements prepared by both sides for the Tribunal cases initiated by
Ms Solomon, Mr
John and Mr Keegan, the last two of which were settled
before they reached a Tribunal hearing.
8. During the course of my
enquiries I used the powers under section 37B to
require documents on two occasions. I did so not because of any reluctance
on the part of anyone
to provide the documents. Indeed the
union and others
were generally very
ready to provide me with any information I requested.
However by using my
powers I secured my right to ask questions relating to
the documents and
protected the giver against any accusation of bad faith in
providing them to
me. I should add at this point that I
commend Mr Lyons
and his family for
their willingness to allow H W Fisher access to their private bank accounts.
9. In discussion with me
the union asked H W Fisher's forensic department
carry out a substantial
programme designed to expand the ambit of their earlier
report and the
implications for the findings in that report of the discovery of
Mr Mendes' improper expense claims. At my insistence the further work by H W
Fisher was done according to a detailed Work Programme agreed by me
and drawn up with
Davidsons, an independent firm of forensic accountants.
This programme
concentrated on those allegations where subsequent developments
suggested further work was required.
The final report on that
work programme that was
presented to me was dated 24 July 2001.
The substance of the report had however been with me since
mid-June.
10. I have now received
confirmation from Davidsons that H W Fisher properly
performed the work set
out in the Work Programme; that the areas covered by, and the results
of, the Work Programme are fairly stated in the Supplemental
Report* dated 24 July;
and that the conclusions reached in the Supplemental
Report are consistent
with and properly reflect the results of the Work Programme.
*It is referred to as the
Supplemental Report to distinguish it from the original report on which my
letter of July 1999 was based, and which was disclosed in connection with Ms
Solomon's Tribunal hearing.
11. The union has signalled its intention to make the Supplemental
Report (excluding the appendices) widely available within the union. With my agreement one substantial section
will be withheld and possibly certain other small passages will be blanked out
because they contain information made available to H W Fisher and to me the
wider dissemination of which would, in my judgement, offend Mr Lyons' and his
family's right to privacy.
12. Against that background I turn now to the six original allegations
of financial irregularity within MSF and to the subsequent allegations
concerning Mr Gardner. I should stress
that in what follows I have drawn on all of the sources mentioned above not
just the report from H W Fisher. Indeed
paragraphs 29-31 discuss issues that have never been put to H W Fisher.
13.I shall not comment
separately on Mr Keegan's claims and Mr Lyons' responses
to them contained in the papers prepared for the Tribunal. The claims
were struck out by the Tribunal considering Ms Solomon's case and
were withdrawn in the
settlement of Mr Keegan's claim before it was considered
by a Tribunal. I will though comment
below on Mr Lyons' approach in
regard to expenses and the use of union resources.
14. Allegation
One. Unauthorised interest free loans. In my letter of 21 July I effectively
endorsed H W Fisher's conclusion that while no rules had been broken and that loans had been made
to other full time officials it would have
been more appropriate for
the General Secretary to have sought approval from the Chair of
the GPFC for these advances.
15. The only thing I would add now is that Mr
Lyons has consistently referred
to these as salary advances and therefore at the time
denied the existence of
any
loans. I do not think a sum of £4,000,
the equivalent of five weeks pay
after tax, repaid over a
12 month period would normally be described as an
advance
of salary. In most people's eyes both
the £4,000 and £2,000 were
interest
free loans. As H W Fisher said in their
first report it would have been more appropriate if these loans had
been approved by the Chair of General
Purposes
and Finance Committee. However they had been repaid before the
allegations were first raised in February 1999 and also
before the union's procedures
had been tightened.
16.Allegations Two and
Three and Six. Private use of union
credit cards,
claims for sustenance at meetings and other expenses by Mr Lyons. On these
H W Fisher's first
report concluded that proper justification had been made for the
credit card expenses except insofar as a few items - totalling £357 - involved
a degree of personal use. These they
said should have been cleared
with the Chair of the
General Purposes and Finance Committee.
They also
noted that there
existed significant variations between individual officer's
interpretation of the
appropriate category and level of expense claims that
should be submitted for
reimbursement. They recommended
some codification
of policies. New procedures were
introduced from 1 January
2000 and these are
being followed through and developed further in conjunction
with the annual audit.
17. I did not then, and
do not now, question H W Fisher's findings or
judgement on these
matters and accept that the role of General Secretary brings with it
heavy and unpredictable demands and responsibilities. I note
that
Mr Lyons has said he "fully accepts [his] judgement and [the union's]
systems
have not been flawless". In so far
as this relates to his expense claims I
would put it somewhat more strongly in that I was extremely surprised to see the detailed items for which Mr
Lyons claimed as expenses incurred on union
business. Many of these have been the
subject of adverse comment in the press
and the media. Based on H W Fisher's
report I can see why the impression
has been created that Mr Lyons treated the union's expense system
and his chauffeur as
one of the perks of office
and he pushed the concept of
claims
to be using them on union business to the limit. That though is a matter for the union and its members. It does not appear to me that he went beyond
any limit that existed
at the time and therefore it does not amount to circumstances that suggest I should appoint inspectors.
18. One matter that
would justify the appointment of inspectors would be if
claims were made for expenditure
which was not incurred. The
investigation
of this possibility was
one of the major parts of the Work Programme agreed
with Davidsons and
dealt with in H W Fisher's Supplemental
Report.
19. H W Fisher examined expense
claims made by, and paid to Mr Lyons, for
20
months during 1997 and 1998. These
totalled just over £10,000. Approximately £3,300 of these
expenses were either backed by some form of
documentary
evidence that they had been incurred or related to engagements
eg.
in the bars in the Palace of Westminster or in broadcasting studios, where
the
systems operated gave credibility to the claims. In connection with the
claim
for internal meetings, the value of which is incorporated within the £3,300 I refer to above, I note that
H W Fisher have commented as follows.
"We have some
concern that the amounts claimed for sustenance are higher
than
we would have expected given the type of food that RAL (Mr Lyons)
said
that he generally purchased. However
RAL has subsequently provided
explanations
regarding purchases of beer, wine and other beverages with his
meals
that account for such additional sums.
"
cash
from his bank to pay for all of the items for which he subsequently claimed on the union. They found on first analysis that Mr Lyons
appeared to
consistently
claim more in expenses than cash that he had withdrawn from his
bank
account. Mr Lyons produced a variety of
explanations as to where he
got
the extra cash to meet these expenses.
The most significant of these were
cash
transfers within his family, for which some corroboration was provided.
Having
plotted Mr Lyons' expenses against hypothetical cash flows, modified
to
take account of his explanations of the alternative sources of cash, H W Fisher were unable to draw
conclusions one way or another from the occurrence
of the few small deficits arising within the final and more detailed financial
analysis.
21. Against this
background I do not believe that any inspectors I appointed
would be able to add
much to what H W Fisher have found. The
events happened four years
ago, the total sum involved is not huge and is made up of
very many small items
in the region of £5 to £20. The
explanations given could remove the
discrepancies reported and I therefore propose to take no
further action on this
matter.
22.Allegation
Four. Nelson Mendes' euense claims. In their initial report H
W Fisher concluded that
most of Mr Mendes' expense claims to which they
had access were
supported by actual vouchers and that all significant discrepancies relating to meetings and journeys had been
adequately explained and
independently verified. Like me they had been deceived. It is now clear
that
Mr Mendes' claims for rail expenses to attend meetings around the country were backed by false
documents (tickets or receipts issued at destination
station not departure station).
23.Several of the meetings to which
these claims were related were confirmed
to
H W Fisher by union officials and/or members.
(It was partly this that led
me to describe their
investigation as thorough). Allegations
were made to me
that this stemmed from
a coordinated effort to protect Mr Mendes and avoid
giving credence to
other allegations. This was denied by
those named in the
alleged cover-up
operation. There is no independent corroborative
evidence
on these matters and no
indication that further investigation would determine
or deal with the
allegations of a coordinated cover up. However there remains a problem in relation to those
individuals who were reported by H W Fisher as confirming
meetings with Mr Mendes thatit now seems he did not attend. I
note, and welcome, the
fact that the union is investigating these matters under
its internal
procedures.
24. When these improper
claims came to light H W
Fisher re-examined Mr
Mendes
expense claims for 1997. In total Mr
Mendes claimed £12,089. The
claim
forms made available to them totalled £4,743 of these they concluded
£3,797
were improper.
25. Mr Mendes has left
the unions employment but the union is pursuing him
for return of the money
he was paid in respect of his improper claims.
26. Allegation
Five. Payments to Mr Lyons and Mr
Mendes from undisclosed bank
accounts. This was and is much the
most serious of all the allegations.
Mr Chowcat who originally
put it to the union's president subsequently withdrew
it. However Ms Solomon and others have
not. The payments were
alleged to have been of
over £29,000 and of £5,000. They were
drawable on
Unity Trust Bank
accounts called either "MSF Guildhall" or "MSF Daxo". In
my first letter I
recorded and endorsed H W Fisher's conclusion that there was
no evidence to support
the allegation that the two accounts concerned actually
exist or ever
existed. H W Fisher's work on this
allegation was attacked at Ms
Solomon's Tribunal
hearing which is why further investigation was needed.
27. Now that work is
complete I would add that I am satisfied that MSF accounts at Unity Trust Bank in 1997, (the year to which
the allegations relate) have again been
thoroughly investigated (whether or not they had MSF in the
title). The recipient of every cheque for ;£4,000 or
more has been identified
and it has been
demonstrated that none were payable toeither Mr Lyons or Mr
Mendes and none were
written on any account by the name of MSF Daxo or
MSF Guildhall. H W Fisher also examined all non-cheque
payments of £4,000 or more and
confirmed that none were paid to Mr Lyons or Mr Mendes or anyone with their surnames. Some large payments were made by BACS in
respect of payroll and
expenses and these were tested on a restrictive sample
basis. None of these payments could be those
mentioned in the allegations.
Moreover the bank
accounts of Mr Lyons and his family show no unexplained receipts of £4,000 or more. Although I found Ms Solomon's evidence to me
straight forward and
plausible, I have to conclude that the payments to Mr Lyons and Mr Mendes which are the substance of Ms Solomon's
allegation
were not made.
28. In both the initial
investigation by H W Fisher and during this latest round
allegations
were made that Mr Lyons used union resources to improve his properties in both England and
France. In their first report H W
Fisher were
satisfied
that Mr Lyons financed these improvements from separately identified personal borrowings. A view which I continue to accept and these
issues
have not been examined further.
29. It has also been
put to me that there is a question about whether Mr Lyons
has ever repaid the
union for the loan he received for house purchase when he
was Assistant General
Secretary of ASTMS in 1988. At one
stage it was proposed that
this loan be converted into a 16.5 % share in the equity of Mr
Lyons house. This conversion does not appear to have been
effected. However I have seen clear evidence that Mr Lyons repaid
part of the loan through
deductions from his salary until November 1992 when he cleared the
balance.
30. I turn now to the allegation
directed at Mr. Gardner's involvement with a
company
called Causeway Travel. This company,
which no longer exists, received
a considerable amount of business from MSF and Mr Gardner was on its board. Given that Causeway provided travel services for MSF members
and
that this was the bulk of its business it is neither surprising nor sinister
that Mr Gardner was on the
board of that company, nor that he was paid for that
participation
- a fact which I understand was covered in Causeway's reports to
Companies
House.
31.
A more specific allegation was that an invoice for £2,000 submitted to MSF Whitehall College for work for
Causeway Travel in March 1999 was not paid
because the College knew nothing about the commissioning of the work.
Subsequently
the person who submitted it claims he was told to submit it again to MSF without any mention of
it being for Causeway. This he did and
the
invoice was paid. I am satisfied with
the explanation given by the union
that
the work concerned was a training programme for one of the union's IT
trainees. It was meant to be, but turned out not to
be, of use to Causeway, and
hence
it was appropriate to require an invoice for payment by MSF rather than Causeway.
Conclusion
32. My enquiries have revealed a
number of disturbing features in the financial
stewardship of this union among full time officials in and around 1997.
Mr Lyons received what I consider to have been interest free loans and
which
H W Fisher and some others in the union believe should have been authorised by lay officers of the
union. Although no rules were broken my
impression
is that Mr Lyons appeared to treat the expenses system of the union and its provision of a
chauffeur as one of the perks of office - pushing
the
claim to have been using them on union business to the limit. An extensive
and detailed examination of his expenseclaims in relation to cash
availability
has failed to determine whether or not he claimed more in expenses than he actually
spent. Mr Mendes (a former employee of
the union) made and was paid for
improper expense claims. An allegation
that members
of
the union appear to have corroborated Mr Mendes improper claims is now
being
investigated by the union.
33. These are now
largely matters to be resolved between the union and its
members. The issue of improper claims and their corroboration is more serious but in my view the appointment of
inspectors would add little to our
knowledge
of what happened.
Moreover the union is seeking to recover its
lost funds,