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.

January 12 2024

Why has no-one called  the subpostmasters whistleblowers?

My GRIP article here –

The victims of the UK Post Office scandal are whistleblowers – and should be recognised as such

The full article is below –

The UK Post Office subpostmasters have been called many things over the years:

• thieves, crooks and fraudsters (often garnished with appalling racial epithets) by Post Office investigators and managers;
• victims by those campaigning for them, including MPs;
• heroes by some; and
• the “skint little people” by the dramatist, Gwyneth Hughes, telling their story in the recent TV drama.

But the one thing they have not been called, surprisingly because this is what they indubitably were, is “whistleblowers”.

Why has no one called them this? They did not call themselves that. They did not send an email marked “Whistleblowing”. They did not refer to any internal policy or press a button on the corporate website marked “Making a Whistleblowing Report” (even assuming the Post Office had such a procedure).

They weren’t even Post Office employees. But the substance of what they did was to blow the whistle on a flawed accounting system. And, subsequently, on flawed, badly understood contracts (see the March 2019 Bates Common Issues judgment) and the behavior of its internal investigators and lawyers, whose conduct is currently being reviewed by the Williams Inquiry.

It is all too easy for organisations, focused on drafting whistleblowing procedures, to forget what whistleblowing is for.

It is the substance of the message which is what makes something a whistleblowing. Not the how of its communication or the status of the messenger. If someone is telling you that something is – or may be – wrong, then rather than worry about how to categorize them, or what legal arguments you can use to justify ignoring them, you need to listen, investigate and not go after the messenger.

It is the difference between taking a “tick-the-box / does this fit the procedure?” approach and understanding what the point of whistleblowing is and why it matters.

The Post Office did not treat the subpostmasters as whistleblowers because this would have required it to accept that there was something which needed investigating – and doing so properly. It would also have made it impossible for it to demand the money it wanted. But at some more fundamental level it simply did not recognise that this was what was happening.

This is not surprising. It is all too easy for organizations, focused on drafting whistleblowing or, as they are often now called, “Speak Up” procedures, on understanding the finer points of the latest EU Whistleblowing Directive, if they have operations within the EU, or regulatory requirements or the precise remit of the Public Interest Disclosure Act 1998 to forget what whistleblowing is for.

It is not meant to be an intellectual legal categorization exercise for employment lawyers or HR personnel. Too often it devolves into an assessment of whether an individual has brought themselves within scope of the relevant law and what legal arguments might be used against them to protect the organization from an employment claim and the payment of damages.

Nor is it meant to be another process or procedure to be proudly displayed to one’s regulator or talked about in the Annual Report, a token of how “transparent” and “compliant” the organisation likes to present itself as being.

One of the hardest things for organizations – especially large ones – to do is see what is really going on in their organization. Partly it is because there is so much information and, paradoxically, despite its quantity it can too often be silo’ed. But partly it is because the information collected or focused on is about what is going well: profits made, targets met, new customers, new contracts etc …

But what you also need to know is what is not going well: complaints, demands for information from regulators or other outside bodies, legal actions, internal investigations, disciplinaries, grievances, reasons for departures, system problems, faults, monitoring reports, whistleblowing claims and so on. All of these are signs that the organization’s health is not what it should be.

Whistleblowing reports do not always come neatly packaged as such. The person raising an issue may not even realise that that is what they are doing. They may only have part of the picture, or get some of it wrong, or not understand the implications. Or miss out key facts which can only be teased out when they are spoken to. They may do so for self-interested reasons.

But none of that really matters. A concern raised – in whatever context – is a warning that something is or may be going wrong. It is a chance to look at it properly before it becomes a crisis to be managed. It is something to be welcomed because it tells you something that you might not otherwise have spotted. Or it helps you connect seemingly random bits of information and understand what that tells you.

Who tells you and what their motives may be are less important than what they are telling you, certainly until you have investigated and established the facts in a robust and reliable manner.

What organizations need is the skill to realize that they are being given clues needing proper investigation. And the sense to realise that this – proper investigation and resolution of the concerns raised – is the point of having all these procedures, processes, policies, training, Whistleblowing Champions and the rest.

Those subpostmasters were whistleblowers. It is a mark of how poorly understood the importance and purpose of whistleblowing is that it has taken two decades after the first whistleblowing legislation, passed at around the same time the Horizon scandal started, ironically enough, for their concerns to start being properly understood and addressed.

Photo: author’s own.

January 11 2024

The announcement of a law to overturn the subpostmasters’ convictions has provoked some concern amongst m’learned friends, on constitutional grounds. Are these concerns valid? Why is the government in this position?

The Dilemma

If every convicted subpostmaster in the last 25 years applied to the Criminal Cases Review Commission (“CCRC“) to have their convictions reviewed and referred to the Court of Appeal, even if they started tomorrow, it would taken an inordinately long time to deal with them (even if the Post Office did not object, which it has been doing for some). Many subpostmasters would likely die before their cases are heard; their lives would still be blighted in the meanwhile. They would have to wait for the convictions to be quashed before getting compensation. Some may simply refuse to get involved with the justice system. Who can blame them, given their experiences thus far.

There are other questions too. Who pays the costs? What about those who pleaded guilty because they were bullied into it? What about those who have died? Or those who paid money they did not owe in order to avoid prosecution? Do they get the money extorted from them under false pretences repaid?

This matter has lasted a quarter of a century. It is unconscionable to drag it out still longer. Speed is essential if justice is to be done. And it is justice which is needed now – not endless legal arguments.

Could there be a mass appeal via the normal legal process? Possibly. But would it be any quicker? Where are the resources to do it?

Unprecedented?

The main concern has been the worry about setting a precedent: the executive and legislature should not interfere with the judicial process. If these convictions are overturned by Parliamentary fiat, what is to stop a future unscrupulous PM using a large Parliamentary majority to absolve friends rightly convicted? The boundaries between the executive, legislature and judiciary are important ones. It is not daft to worry about a rush to breach them. They exist for good reasons.

But.

The legal system

A touch of humility from the legal fraternity is needed. More than a touch, in fact. This miscarriage is in large part due to multiple failings over years by lawyers and the legal process, starting with the Law Commission (which recommended the computer law change – explained here and here),via investigators, in-house prosecutors, members of the external Bar, defence lawyers, judges, those supervising or reviewing or even noticing the activities of those bodies with statutory prosecution powers (was anyone doing this? A question for the Ministry of Justice, perhaps), the CPS (to the extent it was involved), the lawyers responsible for non-disclosure, those who failed to blow the whistle (in breach of their professional duties and those owed to the courts), those advising the Post Office’s Board on its corporate law obligations, those relating to prosecutions and civil litigation and those owed to the Williams Inquiry and ending with the judiciary which did nothing about a senior retired Law Lord advising on how to get rid of the judge hearing the Bates litigation for no reason other than the Post Office’s annoyance at not getting its own way.

The legal system does not come out of this story well, however much praise is now due to those lawyers who have worked tirelessly to expose the scandal and help its victims. It is, frankly, a bit much for it to ignore all this in the rush to preserve constitutional proprieties. Doing right is what is needed now, followed by extensive reflection on its own part in this abysmal affair.

How might this be done?

It is not correct to say that there is no Parliamentary interference with the judicial process. The Attorney-General has always had the power to discontinue a prosecution in the public interest – nolle prosequi – and, in exercising this power, is answerable to Parliament not the courts. It is true that this power is only exercised before a court judgement. After, the normal route is an appeal against conviction or, exceptionally, a pardon. But note one important fact about these options: in both, a crime has been committed. But it is decided that either the wrong person has been convicted or that, for reasons of public policy, even though they had committed it, the law was unjust (e.g. pardons of soldiers for cowardice in war-time or gay men for now lawful sexual behaviour). There was a crime though.

No prima facie case

Here, we cannot say this. This is not overturning convictions because the wrong people were convicted. But because there never was any crime. There never was any money missing. The alleged “missing” monies were figures plucked out of Horizon’s behind. If this had been known at the time, would there have been prosecutions? Could there properly have been any? Wouldn’t the A-G have issued a nolle prosequi order, if the prosecutions had not been halted by the Post Office? In effect, what is being proposed now is a retrospective nolle prosequi, a finding that the prosecutions were, as the Court of Appeal has already ruled, an affront to the conscience of the court. They should never have happened because there never were any crimes to be prosecuted (as some of the Post Office’s own documents revealed to the Williams Inquiry now show). As for those prosecuted on non-Horizon evidence, based on what the Inquiry has uncovered about the conduct of Post Office investigative/prosecuting staff, no reliance can be placed on any of their work.

Why this option?

For years the criminal justice system has been underfunded. Plenty have warned of the consequences; these have been dismissed as special pleading, alarmist or unimportant. The CCRC was seen as so unimportant that it has a part-time Chair with eight other jobs, including Head of the Judicial Appointments Commission (the CCRC’s conflicts of interest policy having been lost in the post, presumably). It is why, when the Andy Malkinson case – itself one of the most serious miscarriages of justice of recent times, involving as it does, the conduct and professionalism of the CCRC itself – hit the news last summer, we were treated to the spectacle of its Chair promoting her holiday home business in Montenegro.

We see the result of this under-resourcing now: an inability to follow normal processes in a timely way; unpalatable options.

Why the rush to act? Why – because of the endless delays and denials by government and its wholly owned entity, the Post Office, only finally shamed into action by a TV drama and the consequent public outrage.

Underinvestment, a lack of professionalism, denial and delays. There are some lessons in there for governments. And the legal world. Perhaps they might heed them this time. Perhaps.

Photo by Tingey Injury Law Firm on Unsplash