December 10 2024

“They slipped the surly bonds of earth to touch the face of God.”

Those words from the poem, High Flight by John Magee, were said by President Reagan on the afternoon of Tuesday 28 January 1986. They ended his address to the nation after the Challenger Shuttle exploded barely 2 minutes after its launch earlier that day.

The seven astronauts on board did not disappear into the sky. As described in Adam Higginbotham’s magisterial, detailed and gripping account of the tragedy and its aftermath – “Challenger: A True Story of Heroism and Disaster on the Edge of Space”, the cabin where they were seated did not break up but plunged two minutes 45 seconds later into the ocean where it was recovered from the ocean floor along with what remained of the astronauts and their personal effects. As recounted in the final chapters of this book, the extraordinarily detailed recovery efforts and forensic investigations revealed that at least three of the astronauts had been operating their personal Egress Air Packs (designed for ground emergencies only), containing air supply connected to their helmets. One of them had been breathing from it for the length of time it took for the cabin to fall into the ocean. As the author writes, not only had the astronaut “been conscious when he began his long descent toward the ocean, but … he had been busy, working through every procedure he could think of as he fell. He was nobody’s fool; he knew he was going to die. But he never stopped trying to live.”

It is one of many details which makes the book so absorbing to read but must have been unbearable for the families to learn.

The astronauts knew the risks of space flight. But they did not know – and were not told – of the very specific risks they were running on this flight. What makes the book so fascinating – despite us knowing what happened and why – is its minute-by-minute account of the decision-making process in the hours leading up the flight. The night before the flight (already delayed by a few days by unexpectedly cold weather) the engineers working for the manufacturer of the rocket boosters, Morton Thiokol, had said the flight should not go ahead because the very cold temperatures meant the rubber O-rings designed to seal the joins in the booster rockets during ignition would not work as they should. They knew this – not just from theory but because they had been repeatedly compromised on previous flights. (The engineers had been trying to find a solution but had not yet succeeded and there had been repeated memos explaining the problems and risks, all of which were largely ignored by the complicated and extensive process NASA had put in place for assessing the viability of its projects and specific flights.) What raised the risks were the freezing temperatures which meant – because extreme cold prevents rubber from stretching as needed – the seals failed long enough for highly flammable fuel to leak leading to what NASA’s commentator, after an agonising wait, called a “major malfunction”. But what turned this flight into a tragedy was the decision of Morton Thiokol’s managers to change the original advice to NASA from “Do Not Launch” to “Go” in little over an hour.

Why was the engineers’ advice overridden? The usual reasons: the more senior managers did not want to be responsible for a failure to launch a flight on which so much depended – for itself and for its main client – NASA. So they rationalised away the engineers’ concerns (there was no conclusive proof that if the seals were damaged, disaster would result – a bizarre approach to assessing a risk since if there were such proof, there would be no decision to take) and simply ignored it, giving NASA the answer they knew it wanted to hear.

As in Challenger, so in many other tragedies.

Even after this visible failure, Morton Thiokol senior managers sought to mislead the Congressional Commission about what had gone wrong. Not just to protect themselves but their most valuable customer. It was only because the senior engineer present at the hearing (Allan McDonald), realising what was happening, had to jump up and down waving his hand furiously to catch the panel’s attention, that his evidence was finally heard and the full story came out. The accident was not simply a technical failure. It was caused by years of NASA and its manufacturers not understanding the specific risks they were running with their design of the rocket boosters and the rubber rings in particular and – because of this – the final catastrophic failure of the launch approval process. Human decisions and human errors, in short.

The final report was, as is all too familiar, damning: cost-cutting, faulty design, management blunders, repeated warnings ignored, institutional hubris, safety and quality assurance structures weakened. As one of the Commission’s members wrote: “For a successful technology, reality must take precedence over public relations, for nature cannot be fooled.” NASA was described as having exaggerated “the reliability of its product to the point of fantasy” to continue getting government money: a finding echoed over the decades in very different sectors.

What might those not involved in space travel learn from this story?

1.     Controls / processes / systems are only as strong as at their weakest point. Any part of a system can become its weakest link if it is not properly understood: either why it exists, how it works – or is meant to – and what happens when it doesn’t.

2.     Understanding the risks you run is essential if effective action is to be taken to eliminate or mitigate them. NASA’s very success in establishing and running a space programme at all blinded it to the unnecessary risks it was running with these rocket boosters. How could a rubber ring similar to that found in most taps be allowed to hold up the astonishing achievement of space travel? But – are you listening Post Office executives, indeed all executives? – just because something works – or appears to – most of the time is no reason to ignore warnings about what happens – or might happen – when it doesn’t.

3.     Successful systems contain the seeds of their own failure, if pushed too far. NASA was by far Morton Thiokol’s biggest customer. Morton Thiokol had every incentive to do the best possible job. But what that meant was that it also had an incentive to ignore or cover up failings which threatened that lucrative business. What NASA wanted, it got. But it was not always what it needed.

Understanding and identifying the point at which a good system or control tips over into creating the very mischief it is seeking to avoid – or a risk no-one has anticipated – is the essence of all risk management. It is not so much a question of having or not having a control or rule but of understanding how it works, how the humans operating or responding to it behave and how that behaviour may itself undermine the control or lead to unexpected or unwelcome outcomes.

Ah – humans.

What happened to those engineers and managers who spoke up explains why it is often so hard to do so when much is at stake. Allan MacDonald knew that if he told the Commission what happened the night before the launch, he would damage NASA, his employers, his colleagues’ jobs and his own career. He went ahead anyway. When he and other engineers who gave evidence returned to their jobs, they were shunned by their colleagues and managers. So badly were they treated that they called themselves the Five Lepers. It took intervention by Congress for them to get their jobs back. It takes guts to speak up in such circumstances. Few people can – or are willing to – withstand the consequences of being made to feel a pariah by colleagues and bosses. A beautifully written law or procedure about no retaliation is cold comfort when you hear a colleague shouting furiously: “If I lose my job because you guys couldn’t resist testifying, then I’m going to dump my kids on your doorstep.”

If we want evidence of this more recently and closer to home, listen to the evidence given by junior employees of Kingspan, Celotex and Arconic, manufacturers of the dangerous cladding and insulation used on Grenfell Tower, to the Moore-Bick Inquiry (into the fatal 2017 fire), which found those companies to have deliberately deceived customers and the regulatory authorities about the safety of their products. Despite their concerns, they felt unable to challenge senior management, either because doing so wasn’t “doing any benefit to my career” or they were “embroiled in the culture of the business and it becomes second nature” or because they didn’t know who to speak to or because they “lacked the, I guess, the life experience to find the right way forward and it was – it was a failure of courage and a failure of character and a failure of moral fibre on my part not to do so.”

What they said, what happened to the Morton Thiokol employees nearly 40 years ago says more clearly than anything else what a toxic culture looks like. It is not just a culture which puts commercial interests above ethical ones. It is not just a culture which seeks to break the law or take unnecessary risks. It is not just a culture which seeks to mislead those who put their trust in its people and products. It is also a culture which puts the most junior employee in positions where they feel unable to do the right thing, which encourages and rewards them for doing the wrong thing then leaves them exposed when the consequences of the decisions taken at senior levels are cruelly revealed.

And finally – note how quickly the Commission was able to report – 4 months after the disaster. Contrast this with the years – often decades – needed for the many public inquiries Britain now has. Would it be unkind to suggest that they are a magnificent tool for the British state to appear to be doing something while in reality making sure that nothing of substance gets done at all? Potemkin justice: a magnificently expensive, intricately detailed facade, while behind it the systems and behaviours which led to the scandals continue as before, the people responsible for what went wrong get away with it and, as has happened countless times before, the recommendations are not acted on but neatly filed away, as a historical record of what might have been – if only death and weariness had not taken over. The process working exactly as intended, in other words. Or is that too cynical?

Whatever your thoughts on that, this book is well worth reading.

Photo by NASA on Unsplash

April 10 2024

Scandals and misconduct do not come out of nowhere. When people misbehave there is usually a clue, often more than one, usually ignored (even if carefully collected and correctly filed) or hand-waved away as unimportant (see the Angiolini Report on Wayne Couzens, for instance). The same applies to scandals involving organisations and actions (or a lack of action) by many people. There were warnings; there were whistleblowers; people were told. Coupled with this is a failure to take this information seriously, a failure to investigate properly or at all, a determination to ignore evidence and, often, a decision to remove, ignore or badmouth those raising concerns. Out of these two ingredients are our scandals made.

This is the case in the Post Office scandal and – this is critical – very much earlier than 2013 when the independent investigators, Second Sight, were telling senior managers some uncomfortable truths. The understandable focus on this period is making us forget there were explicit warnings of the issues much earlier on – and to people right at the top of the Post Office. This became clear from Alan Bates’ evidence yesterday at the Williams Inquiry (during the morning hearing – here – from about 1 hour in until 1:52).

Two key pieces of evidence came out.

The Letter

The first was a letter he sent in August 2003 to the then Chair of the Royal Mail, Allan Leighton. (The Post Office was still part of Royal Mail.) Mr Bates’s contract had been terminated following extensive correspondence with managers from 2000 onwards in which he pointed out that “the Horizon system cannot be relied upon to give 100% accurate figures” (a letter dated 19 December 2000), he could not check the data being produced by Horizon (nor seemingly could anyone else) and therefore could not be legally held liable for so-called shortfalls if the transaction data in Horizon could not be checked and verified. He also says that he was not the only one facing problems. In that correspondence, copied to the Chair, he described – in essence – the two problems which are at the heart of the scandal:

(1) Horizon data was unreliable; and

(2) the Post Office did not properly understand its own contracts with subpostmasters. It acted as if all losses were the responsibility of the subpostmasters whereas in fact it was only ones caused by their negligence, carelessness or error. This faulty understanding lay behind the decisions to prosecute or bankrupt some subpostmasters, such as Lee Castleton.

It was Mr Justice Fraser’s judgment in the Bates litigation in 2019 which spelt out how right Alan Bates had been: Horizon was unreliable and the Post Office’s understanding of its own contracts was wrong. It should not have taken 16 years, two exceptionally long, detailed judgments and endless, ruinously expensive litigation for this to be established. Allan Leighton was alerted to these issues in 2003: a full decade before the Second Sight investigation. Various Post Office managers from 2000 onwards had also been told repeatedly of both the Horizon problems and the contractual issues but had never addressed them.

Why did Mr Bates contact the Chair? In his own words:

“I thought it was well worth trying to write to the Chairman to make him aware of what was going on because he may well have not known…..hoping that he might be able to undertake some sort of review into it and look into the case for us and take it on board a little more seriously.“

“I can’t force them to read it but if you don’t write to them then they’ll never know.“

Allan Leighton could not have been expected to look into these matters himself. But there should have been a proper investigation into what Mr Bates was saying. There wasn’t. The inadequacy of the response makes this clear. It was simply a justification of the decision taken, a polite “we’re right, you’re wrong; no we’re not going to explain anything or answer your questions.” brush-off. In part, this was because there was no proper investigations team within Royal Mail. What was called that was in reality a debt recovery team. It had neither the authority, capability, willingness or independence of mind to investigate concerns or complaints to the organisation.

It is worth noting that when asked why he thought his contract had been terminated Mr Bates said:

“They didn’t like me standing up to them, in the first instance; they were finding it awkward; and I don’t think they could answer these questions. I think they had a feeling I was going to carry on in a similar vein going forward.“

His answer summarises succinctly why whistleblowers are mistreated by organisations, why challenge is so unwelcome and why an investigation, so that you can answer the questions put to you, is so essential. Any person, any organisation, any sort of body or ideology unwilling to be challenged is a red flag, a sign of a poor culture and one well on its way to becoming a toxic and, often, a dangerous one.

The Loss Authorisation Form

Mr Bates had rolled over in a suspense account the shortfalls he could not explain. After 2 years, the Post Office wrote this sum off using a Loss Authorization Form which stated that the loss “was attributable to Horizon system/software/equipment/training failure.” It was a standard template, a document which came to light in disclosure. By 2002 the Post Office had in place a form – and procedure – for writing off sums attributable to a variety of causes, one of which was the “Horizon system“. Yet it continued to claim that Horizon was “robust” etc., (what does “robust” even mean here?) even while it had recognized from an early stage that losses might be caused by it and be written off. Look not at what organisations say but at what they do – especially when they think no-one is looking.

Had there been any sort of proper investigation into what Mr Bates had been saying, had his letter to the Chair been taken seriously – as should have happened – the scandal would very likely never have happened, or not to the extent it has.

The majority of the miscarriages of justice happened long before Ms Vennells became CEO and for a long time after Allan Leighton had been informed of the problems.

As Jason Beer KC said, in August 2003:

“many people had yet to be terminated, many people were yet to be prosecuted, many people were yet to be convicted and many people were yet to go to prison.”

When you strip away the reports, the millions of documents, the interviews, the evidence, the court cases and judgments, the lawyers, the documentaries, the dramas, remember this. At the heart of all these scandals – whether in the police, the post office, the NHS, childrens’ homes or elsewhere – are people (often some of the most vulnerable) whose lives have been ruined, people who have been harmed, people who have suffered and whose suffering could and should have been stopped if only those who had the power and the responsibility to do so had paid attention to the clues waved under their noses and acted. This failure to do so and the accompanying lies – by so many bodies from government down – has degraded trust in our public and private institutions. There is still far too much resistance and denial by those responsible for the problems. It will be quite the effort to rebuild that trust. There is little sign that the scale of the task or its overriding necessity are fully understood.

Photo by Alexander Lyashkov on Unsplash

April 7 2024

What should in-house General Counsels do when they become aware that their organisation – or senior people within it – are, or may be, behaving unlawfully?

Back in the USA

It is not a new question.

In 1991 the head of Salomon Brothers’ Government Trading Desk, Paul Mozer, deliberately breached the rules at 5 separate auctions of US Treasury bonds between December 1990 and May 1991, falsified trading records then lied to supervisors as US regulators started to ask questions. What made the firm’s behaviour worse was that, despite the GC, Donald Feuerstein, the Chair, John Gutfreund, and two other senior executives (John Meriwether and Thomas Strauss) being told of Mozer’s behaviour during the February auction in April 1991, despite them agreeing that his conduct should be reported to the US Treasury, they did nothing. It was only in August that the Treasury was informed and, even then, the firm failed to say that top executives had known for months but failed to act, a delay described as “inexplicable and inexcusable” by Salomon Brothers’ new Chair, Warren Buffet. 3 of those 4 executives had resigned by then but not the GC who had repeatedly told senior management that they must act but had failed to make any reports himself. Eventually, he too resigned.

The report into this matter – and the conduct of the GC – was one of the first things I read when joining Salomon’s Legal Department a few years later. It was made crystal clear that, when it came to legal issues, especially reporting to authorities, lawyers could not, should not satisfy themselves with telling others that something had to be done but had an obligation to ensure that it was done and, if necessary, by them. Lawyers were not just there to advise others. Sometimes they had to act too.

And now?

Some 30 years later that lesson still needs learning, judging by what we are learning from the never-ending revelations of the Post Office Inquiry and, lately, the release of numerous recordings, involving conversations between the independent external investigators, Second Sight, and the Post Office’s General Counsels, Susan Crichton and, later Chris Aujard. Much of the focus has been on what they show about Paula Vennells’ knowledge of Horizon’s failings and its consequences for subpostmasters, contrary to what she later claimed to a Parliamentary Select Committee.

Worse is what they show about the response of the Post Office’s General Counsel, their most senior lawyer and the person who should, if they understand their responsibilities properly, be ensuring the company complies with the law even if this adversely impacts its commercial interests or is deeply embarrassing (whether for the organisation or him personally of his team).

The latest recording, released by ITV, is worth dissecting. The new GC, Chris Aujard, was told by Second Sight, that his organisation may have pressured subpostmasters improperly into pleading guilty to serious criminal offences on the basis of false or non-existent evidence, failed to carry out investigations and misled the court.

“It’s that serious.” he is told.

He responds:

“My focus now is on dealing with each case as it comes through. So yeah, the macro, macro issues are another pot. They’re not in my pot. They belong to other parts of the organisation. I can feed through some of the thoughts on this call into that pot.”

And

“… I will absolutely relay on to the right people.”

What is this garbage management-speak? He was the chief lawyer. He was one of the “right people“. He had an overriding duty to ensure that the organisation of which he was the GC did not behave unlawfully. He had an overriding duty to the court to ensure that it is not misled, whether expressly or by omission, a duty overriding any other duty to his client. If there was – as he was clearly told – the slightest chance of his organisation misleading a court during litigation and/or in criminal prosecutions, he should have been all over this. Not wittering about “pots”, “macro issues” and dumping his responsibilities on others like some latter-day Pontius Pilate. “Not my job” is not what a GC should be saying when told of unlawful, potentially criminal behaviour. A GC is not a passer-by at the scene of an accident.

What should have happened

He should have informed the full Board, including the non-executive directors, of what he’d been told and what needed to be done. Did he? If he was either not listened to or told to do nothing or that it was none of his business, he should have resigned and told the legal regulatory authorities, the courts and the government why. Of course, this would have required a sense of professionalism, some ethical sense and courage. Were these qualities more widespread in public and commercial life, our organisations would be in a much better state than they are.

What does this show us?

What this vignette (and the other recently released recordings) suggest is a Board lacking the necessary curiosity alerting them to what was happening at the executive level. Or, just as likely, a Board not wanting to know, making that clear and thereby stifling any chance of independent ethical action by managers from the executive level down.

It also suggests a legal department unwilling or unable to take full and proper responsibility for the company’s investigations team and the consequent prosecutions. What sort of an investigations team the Post Office actually had and whether it really did any investigations in the proper sense of that word will be for another time. (Spoiler: no.)

It is worth noting that this approach did not start with Mr Aujard. In 2010 the Post Office’s Head of Criminal Law, Rob Wilson, when asked for his views on having an independent investigation into Horizon said:

“To continue prosecuting alleged offenders knowing that there is an ongoing investigation to determine the veracity of Horizon could also be detrimental to the reputation of my team.” (Emphasis added.)

His full response (see here) shows someone more concerned with adverse publicity, the Post Office’s reputation and damage to the business, as well as to his own team. His team’s reputation simply should not have been a factor when determining whether or not to have an independent investigation into a system whose data was being relied on in criminal prosecutions. In any event, it took another 2 years before such an investigation was commissioned.

What this recording also suggests is an organisation splitting up its management of – and responsibility for (“They’re not in my pot.”) – its response to what was being alleged in a way which weakened the GC’s authority, made it harder for any one senior person or department to see the extent of what was happening (or easier to turn a blind eye and disclaim responsibility, depending on how cynical you’re feeling) and easier to treat the constituent parts of the scandal as problems to be managed away rather than fully understood and properly handled.

Bad stuff happens

Employees will often break the rules, whether deliberately or by mistake. Sometimes they will try and cover up what they have done. Or say nothing, hoping the problem will go away. Or lie when asked. There is nothing unusual about this. But that is precisely why we have gatekeepers – in-house lawyers – to act when others don’t, when others are foolish or malicious or afraid to act. It is why the best test of an organisation’s culture is how it – its senior managers, its lawyers – respond when bad stuff happens, when things go wrong, when misfeasance, misconduct or just plain stupid mistakes come to light.

The Williams Inquiry resumes its hearings on 9 April with the interviews of a number of senior Post Office lawyers. It will be interesting to hear from them how they understood the scope of their role, whether they understood that they might sometimes be in a position where their duty to the court was in conflict with what their client wanted and what they should do in such a situation. And whether what they actually did was in line with the high standards which ought to be expected of them.

This is something all lawyers, especially in-house ones, have to have an answer to, even if you hope never to be put in such a position. An “I can’t remember.” or an “I see no ships” answer will not be good enough.