Report of Matthias Kelly Q.C.
REPORT FOR THE EXECUTIVE COMMITTEE OF ASLEF
By Matthias Kelly QC
ASLEF Report 29th June 2004 1 Report of Matthias Kelly Q.C.
INDEX
Executive summary, page 4. 1. The issues, page 9. 2. Introduction, background, methodology and co-operation, page 10. 3. Finance, page 22. 4. Trustees, page 49. 5. Severance Payments, page 80. 6. The Flat of the Former General Secretary and the Accommodation of the Incoming General Secretary, page 88. 7. Information Technology Concerns and the Issue of Paralogic, page 95. 8. The deletion of files, page 113. 9. The existence of a Password Recovery Programme on the server and “the “Trojan” bug, page 124. 10. The General Secretary, the Executive Committee and relations with staff, page 128. 11. The Handover from Mick Rix to Shaun Brady and Delay in Taking Office, page 137. 12. Governance, page 141.
13. The Blagbrough report, page 149.
14. Miscellaneous issues, page 173.
15. Recommendations, page 181.
Appendices:
1. Resolution 319/424 of 26th March 2004, Terms of Reference.
2. Terms of reference of Paul Blagbrough.
3. List of people interviewed.
4. Interim IT report.
ASLEF Report 29th June 2004 2 Report of Matthias Kelly Q.C.
5. Accountant’s report.
6. Letter of 23rd October 2002 Paralogic.
7. Paralogic’s terms and conditions.
8. APRP Job sheet and instructions.
9. Report of Mr. Peter Sommer, 21st June 2004.
10. Report of MD5, 23rd June 2004.
11. Document from General Secretary’s office.
12. Letter to staff of 29th December 2003.
13. Instruction to proceed.
ASLEF Report 29th June 2004 3 Report of Matthias Kelly Q.C.
Executive Summary
I recognise that the union belongs to the members and not to any officer or body. Officers are in post to serve the membership. I recommend steps be taken to increase transparency, democracy and accountability in the union and the interaction of its officials with the membership.
Finances
1. The finances of the union are sound.. The Union’s total funds have steadily increased from £4,417,719 at the end of 1994 to £5,390,347 at the end of 2003. An increase of £927,628. The Union’s General Funds have also increased from £4,278,106 at the end of 1994 to £4,449,018. An increase of £170,912.
2. If costs are apportioned to the year they were incurred and the effect of inter- fund transfers eradicated the draft result for 2003 is a deficit of £129,298 and not £900,000 as has been reported in the press. From 1997 to 2002 there is a deficit for two out of the six years. Overall there is a surplus of £969,246.
3. No one has provided us with any substantive or credible evidence of fraud. The present and long established system of claming expenses is unsatisfactory. It does not require expense claims to be supplemented by appropriate receipts or other documentary proof. This systemic failure leads to expense claims by members and officers some of which, on their face, are questionable. I do not mean to imply that all, or indeed most, claims are questionable. However, some are. Accordingly the adoption of a system, which requires such evidence, is needed urgently to address this systemic failure. However, I have at no time received any substantial or credible evidence of fraud on the part of any member or officer.
ASLEF Report 29th June 2004 4 Report of Matthias Kelly Q.C.
4. There was disorganisation in the Finance Department of ASLEF in 2003. However, the effect of that in the long term is nil. The Finance Department has been inadequately staffed and inadequately managed. Steps need to be taken to see that an appropriately qualified or experienced Finance Manager is installed.
Trustees
5. The role of Trustees within the Union was considerably enhanced from 1998 onwards. However, although there were beneficial changes to the 2002 Rule Book the rules relating to Trustees are in further need of clarification.
6. From October 2003 until the end of April 2004 the Trustees have all but been excluded from the financial affairs of the union.
Severance Payments
7. The severance payments to Mick Rix and Debbie Dwight were authorised, legal and justified. They were not, as has been alleged, a misuse of the union’s assets.
Allegations of theft
8. Mick Rix did not remove any furniture, which did not belong to him.
Allegations of a “Scorched earth policy”
9. The lease granted to the caretaker was not a life long lease. It was a service tenancy, which was capable of termination.
10. There was no “scorched earth” policy in the period prior to Shaun Brady taking office
ASLEF Report 29th June 2004 5 Report of Matthias Kelly Q.C.
11. The General Secretary, Mr. Brady, did not intend, when he took office, to move into Mick Rix’s former flat.
12. Paranoia gripped the union, particularly on IT issues, when Shaun Brady took office.
13. There was an Advanced Password Recovery programme installed on the union’ IT server to “crack” password protected files, but it was not installed in Mick Rix’s time. It was installed after Shaun Brady took office and at the request of his assistant office manager.
14. The union’s former IT service provider, Paralogic Networks Ltd, were treated unfairly and their contract broken when Mr. Brady summarily dismissed them. They should receive an apology.
Deletion of Files
15. Files were deleted from the IT system. 64,334 files and folders were deleted from the hard drive of Debbie Dwight’s PC from 23 July 2003 onwards. Of those 64,334, some 43,827 files and folders were deleted on 12 November 2003. This was after Debbie Dwight had left the employment of ASLEF. It was also after Paralogic had confirmed that directories were missing on 10 November 2003.
16. Over two thirds of the files or folders which were found to have been deleted on Debbie Dwight’s PC could not have been deleted by her. They were deleted by someone else, most probably in the knowledge that allegations had already been made about deletions by Debbie Dwight. The identity of that person and the purpose behind the deletions on 12 November 2003 are unknown. It is neither proportionate nor productive to spend more time and money inquiring further into this matter. Suffice to say that the deletions by
ASLEF Report 29th June 2004 6 Report of Matthias Kelly Q.C.
Debbie Dwight, although unwise, were not harmful to the operation of the Union. In any event, the deletions which were discovered by The CAS Network on 3 December 2003, commissioned by Mr Blagbrough and Mr. Brady, included some 43,827 files or folders out of a total number of deletions of 64,334 which could not have been deleted by Debbie Dwight as she was not working at ASLEF at that time, had not been doing so for over two months and had no access to the PC involved.
17. I find as a fact that the vast majority of the file deletions uncovered by CAS, and confirmed by MD5, were not carried out by Debbie Dwight. They were of little consequence and hard copies existed. The operation of the union was not, in any event, impeded. There was no malicious intent.
The Blagbrough Report
18. The Blagbrough report was a confidential draft report and was not intended for publication. A disaffected union member took it without consent from the union’s office. The unauthorised and premature publication of the Blagbrough report was damaging to the union and its membership
19. A major failing in the Blagbrough report was its failure to seek explanations from those accused in it. However, it was not written for publication. It was marked “Confidential Draft”.
20. In its draft form it relies upon opinion rather than hard evidence, and creates a very misleading impression. However, it must be remembered that it was a draft and not intended for publication.
The Management of Head Office
21. Shaun Brady handled the union’s staff aggressively and insensitively.
ASLEF Report 29th June 2004 7 Report of Matthias Kelly Q.C.
22. The level of tension within the union has resulted in staff illness.
The Governance of the Union
23. There needs to be a protocol governing the hand-over from one General Secretary to another.
24. The EC are the governing body, not the General Secretary
25. There should be a special AAD to consider this report and the future course of the union
26. Shaun Brady has deliberately engaged in a power struggle to the detriment of the union
27. There has been an attempt to “smear” Mick Rix.
28. Improvements can be made to the way the union conducts its affairs.
29. There needs to be a period of stability and reconciliation within the union.
ASLEF Report 29th June 2004 8 Report of Matthias Kelly Q.C.
Section 1
The Issues
I have identified the following issues as being of importance in this review:
1. Financial Management.
2. Trustees.
3. Severance Payments to the Former GS and Former Office Manager.
4. The Flat of Former GS and the accommodation of the New GS.
5. Information Technology and Paralogic.
6. The deletion of files.
7. Management of Head Office (Recruitment) / Relations with Staff.
8. The Hand-Over Process.
9. Governance.
10. The Structure of the Union (relationship between GS and EC).
11. The Blagbrough Report.
ASLEF Report 29th June 2004 9 Report of Matthias Kelly Q.C.
Section 2
Introduction and background.
Introduction:
1. The Associated Society of Locomotive Engineers & Firemen (“ASLEF”) was
established in 1880. On the 18th August 1881 it was registered under the Trade
Unions’ Acts 1871-1876. It is a union, which has a long and proud history. It
has, historically, played an important role in the life of the nation. It organizes
train drivers on the railways. Its current membership is 17,000.
2. Over the time it has existed the railway industry has gone through enormous
change. The industry started as a privatised one, became nationalised, was
then privatised and currently is a mix of private and public ownership. In
recent years there have been a spate of rail disasters: Clapham, Southall,
Paddington, Potter’s Bar, Hatfield and Selby. There have been large scale
inquiries into some of these events. The union, in short, has in recent years
been confronted with ever changing circumstances and events. There are
currently 24 train operating companies, 6 freight operators, 3 underground
companies and one infra structure company.
ASLEF Report 29th June 2004 10 Report of Matthias Kelly Q.C.
The Inquiry and the immediate background
The Inquiry:
3. On Friday the 26th March 2004 the Executive Committee of ASLEF1 passed
Resolution 319/424, which appears in Appendix 1.
4. Pursuant to that Resolution I was appointed to conduct an independent inquiry
into the financial, operational and other related affairs of ASLEF covering the
period 1st January 1994 to the 26th March 2004 or such later date that should
appear to me to be convenient and to report to the President and to the
Executive Committee with such recommendations as I consider appropriate.
5. The Resolution dealt with a number of ancillary matters including enabling me
to instruct finance and IT specialists or such other specialists as I thought
necessary to assist in the task. The Resolution also directed all past and
present employees, officials, office bearers, trustees, executive committee
members past or present and any servants, agents, contractors or advisors of
ASLEF to co-operate with me and provide assistance as well as any
information within their power and to answer such questions put by me or on
my behalf as soon as practicable. The Resolution also directed that I should
be provided with all records and documents whether in electronic or other
form that I should seek either from the union or any employee, official or
office bearer past or present.
1 See Appendix 1 as to the structure of the Union.
ASLEF Report 29th June 2004 11 Report of Matthias Kelly Q.C.
Immediate Background:
6. In late 2003 Mr Paul Blagbrough was asked by the General Secretary of
ASLEF, Mr Shaun Brady, to undertake a review of the financial affairs and
administration of ASLEF. I attach as Appendix 2 his written terms of
reference. Those were drafted by Mr. Blagbrough himself and came from the
General Secretary, not the Executive Committee. The Executive Committee
was not consulted by Mr. Brady.
7. A draft of that report, clearly marked “confidential” and dated the 15th March
2004, was, without consent, removed by Mr. Steve Trumm2, the Web Master
of trueaslef.com3, from the Union’s offices in Arkwright Road. Mr. Trumm
told me he had taken it. He said, “when the chance presented itself I took it”.
I have seen a video of the incident. It was taken without anyone’s consent and
in circumstances in which no reasonable person could have thought that they
had consent to remove the document. Having been illegally removed from the
offices a copy of the document was then passed to “The Mail on Sunday”
newspaper4. “The Mail on Sunday” published an extensive report in its
edition of March 21st 2004, in its “Financial Mail” section, under the banner
headline “Shock report lifts lid on Aslef chaos”.
2 Also known as “Rogue Trooper” and “Rouge Trooper” on that Internet site. 3 An unofficial web site directed at ASLEF members. 4 A copy was also published on the website trueaslef.com and passed on by Mr. Trumm to the Metropolitan Police and the Corporate Fraud Squad of the Transport Police.
ASLEF Report 29th June 2004 12 Report of Matthias Kelly Q.C.
8. The story and the contents of the report were damaging to the Union. The
story was written in a way, which sensationalised some of the things within
the report. Unsurprisingly the Executive Committee was unhappy with this
turn of events.
9. Mr Blagbrough told me that his report dated the 15th March 2004 had been
presented to the EC so that it could “be checked for accuracy”. It was not a
finalized report. Mr. Blagbrough was angry that his draft report had found its
way into the public domain. In my view he has every reason to upset that his
report was published in this way.
10. The Executive Committee decided, against this background to commission a
report from me in the terms set out in Appendix 1.
ASLEF Report 29th June 2004 13 Report of Matthias Kelly Q.C.
Methodology
11. I engaged Mr. Rohan Pirani, Mr. Chris Bennett Mr. Peter Sommer, and MD5
to assist me in the Inquiry. Mr. Pirani is a junior barrister and assisted me with
all aspects of the Inquiry. Mr. Bennett is a Fellow of the Institute of Chartered
Accountants and a member of the British Academy of experts. He assisted
with financial matters. Mr Sommer is an expert in IT and computer
technology. MD5 are experts in computer imaging and analysis. They assisted
with the IT aspects of the Inquiry.
12. I began by interviewing individually and collectively the Executive
Committee. I spoke to the whole of the EC in session and then invited each to
come to see me individually. Most did.
13. I also interviewed the General Secretary, Mr. Shaun Brady5, the Assistant
General Secretary, Mr. Mick Blackburn, the Office Manager Penny Bygrave,
the Assistant Office Manager Julie Atkinson, the current Finance Director
Nick Herd, the suspended Finance Officer Martin Starr and Ms Julie Hunt the
GMB Staff Representative at Arkwright Road. I spoke to all of the staff in a
group and invited each of them individually and/or collectively to speak to me.
I also spoke to Mr Paul Blagbrough, Mr Mick Rix, the former General
Secretary of ASLEF, Ms Debbie Dwight, the former Office Manager of
5 In the later stages Mr. Brady did not meet with us.
ASLEF Report 29th June 2004 14 Report of Matthias Kelly Q.C.
ASLEF, the union’s trustees and Mr Nigel Gooch, from Hard Dowdy6, the
Union’s auditors. A full list of those to whom I spoke appears at Appendix 3.
14. On 25th May 2003 the EC suspended the General Secretary Mr. Shaun Brady,
the Assistant General Secretary Mr. Mick Blackburn and Mr. Martin
Samways, the President of the union, following an incident in the garden of 7
Arkwright Road on the evening of 20th May 2004. Mr. Keith Norman was
appointed as acting General Secretary by the EC. He suspended Ms. Penny
Bygrave, the Office Manager, Ms. Julie Atkinson, the Assistant Office
Manager and Mr. Dave Nixon from the policy and research department. I was
due to re-interview Ms Bygrave and Mr. Blackburn that day, but in the
circumstances those interviews did not proceed. I interviewed both on a later
occasion by prior arrangement. A panel inquired into the events that led to
their suspension and has already reported to the union on that matter.
15. My purpose in conducting interviews was to establish the facts, obtain the
accounts of each and to discover from each of those concerned what their
perspective was on any difficulties that the Union might be facing. Later
interviews were concerned with obtaining the comments of individuals on
specific matters raised with me. Not everyone was, particularly in the later
stages of the Inquiry, prepared to meet with us.
6 A firm of chartered accountants.
ASLEF Report 29th June 2004 15 Report of Matthias Kelly Q.C.
16. All of the interviews were informal. Those who wished to be accompanied by
staff or legal representatives were permitted to do so.
ASLEF Report 29th June 2004 16 Report of Matthias Kelly Q.C.
Co-operation:
17. The Assistant General Secretary and the EC have co-operated throughout with
my Inquiry. They have made themselves available for interview and they
produced what I asked them, in so far as they had access to the documents I
sought. Like wise all the staff outside of the office of the General Secretary
co-operated with the Inquiry.
18. Mr. Brady, on the other hand, refused to attend a conference with me in
Chambers on 5th April 2004 after my appointment. He did so, he told me,
because he would only meet with me if instructed to do so by the Executive. I
found this surprising in the light of the resolution setting up the Inquiry. On
the morning of 6th April 2004 when I went to Arkwright Road, Mr. Brady
refused to come into the Executive Committee room until the Executive
Committee resolved that he should. In my opinion such behaviour was
childish. I found it surprising that Mr. Brady thought that this was a profitable
way for anyone to spend time.
19. On a number of occasions throughout the conduct of this Inquiry I have
encountered outright hostility from Mr Brady the current General Secretary.
There has been a lack of co-operation from him. He is reported in an interview
published in The Times on Saturday 5th June 2004 as saying he would not co-
operate with the Inquiry. He has consistently questioned the decision of the
Executive Committee to establish the Inquiry. This is despite the fact that he,
ASLEF Report 29th June 2004 17 Report of Matthias Kelly Q.C.
himself, engaged Mr Paul Blagbrough to conduct a review of the Union’s
finances and administration without reference to the Executive Committee in
the first instance. Mr Brady has been unwilling, on virtually every occasion I
have met him, to discuss in a rationale manner the problems confronting the
Union and the issues as he sees them. When I spoke to Mr. Brady at the
offices of the Union on Tuesday the 6th April he made it plain to me that he
would not instruct the staff to provide files and other records that I might seek.
Again I found this obstructive approach surprising, being in direct
contravention of the resolution of the EC (319/424). Apart from anything else
it meant that my work took much longer7 and was more difficult since we had
to track down documents ourselves. It is strange behaviour for a General
Secretary who claims that he wants the facts established.
20. I have had to write to Mr Brady on a number of occasions. On the 28th April
2004 I wrote to him to make plain that I did not want substantial changes
made to the Union’s IT structure until a forensic IT consultant whom I had
commissioned had had an opportunity to “image” the system and inspect the
same. Mr. Brady was, until I wrote to him, determined to carry on regardless.
Had he done so the IT forensic exercise would have been pointless8.
21. On the 11th May 2004 my junior Mr Rohan Pirani wrote formally to Mr Brady
seeking details of the Union’s investment advisers and portfolio managers, a
complete list of the current investments of ASLEF, reports relating to
7And therefore cost more. 8 A separate interim report on this issue was submitted to the EC on 10th May 2004. It is at Appendix 4.
ASLEF Report 29th June 2004 18 Report of Matthias Kelly Q.C.
investments and their disposal and minutes of meetings with investment and
portfolio advisers. Mr. Brady failed to respond to that letter. We still have not
been given that material.
22. Although Penny Bygrave provisionally booked Tuesday 25 May in Mr.
Brady’s diary, that date was cancelled on Friday 21 May due to the
unavailability of Mr. Brady’s solicitor, Ivan Walker from Thompsons. On
Monday 24 May Rohan Pirani explained to Penny Bygrave that I would meet
Mr. Brady at any time within a 48-hour period on Tuesday 25 May or
Wednesday 26 May. No response was received to that invitation.
23. I wrote to Mr. Brady on 24th May asking to meet him. I told him, in that letter,
that he could bring a solicitor along, as he had said he wished to be
accompanied by one. I pointed out that he had been offered a succession of
dates. No response was received to that letter.
24. Rohan Pirani then sent a letter, dated 1 June 2004, asking for a further
appointment to be made. As no reply was received, Mr. Pirani telephoned Mr
Brady at his home on 4 June to request a meeting. Mr. Brady declined to meet
me saying that he would not be interviewed whilst suspended. He then hung
up the telephone. Five minutes later Mr. Brady called back to apologise for
being sharp with Mr. Pirani. He added "I will only meet you when I have been
unsuspended." There followed a further EC Resolution, at my request, on 7th
June 2004. EC resolution 591/425 re-affirmed 319/424, which set out the
ASLEF Report 29th June 2004 19 Report of Matthias Kelly Q.C.
terms of the Inquiry and expressly pointed out that failure to co-operate with
the Inquiry “may result in any appropriate action being taken by this EC.” Mr.
Pirani wrote to Mr. Brady again on 17th June enclosing a copy of the
resolution and asking him to meet with me. Mr. Brady still did not seek to
arrange to see me. I would like to have explored many issues with Mr. Brady
discussed in this report and some others including the issue of expenditure he
has incurred, such as his drawing out of £6,288.13 on his union credit card on
2nd December 2003. It may be justified and explicable. It may not. I do not
know.
25. In contrast, Mr. Blackburn has at all times fully co-operated with the Inquiry,
despite his reservations as to the need for an Inquiry and his opposition to its
being set up. It was Mr. Blackburn, to his credit, who initially gave us what
accounts he had. They were his own personal set. He has been willing to
answer any questions put to him, despite some of them being uncomfortable.
26. Ms. Bygrave, the office manager, explained her attitude to the process of
locating documents for the Inquiry on 7th June 2004. She explained that she
would only produce files if asked by me and only if I told her specifically
what I wanted. I explained to her that we had made many requests for
documents but those requests were not complied with or we were told she was
too busy. Mr. Brady told me that his view was that I could seek out myself
what I wanted and he was not going to have his staff supply material to me. In
an Inquiry, such as this, the organization usually identifies material, which
ASLEF Report 29th June 2004 20 Report of Matthias Kelly Q.C.
may be relevant, for example, in this case, the union’s files on PNL9, activity
logs, minutes or sets of accounts. Ms. Bygrave, on 26th April 2004, when we
first interviewed her, said she would produce a list of files, which she alleged,
were missing. She never did. However, to her credit, on 26th April 2004 she
showed us where files were stored in the building.
27. Ms Julie Atkinson failed to meet with us. This was despite repeated requests
for a meeting. Mr. Pirani wrote to her on 27th May, 1st June and 7th June
inviting her to arrange a date and time for a meeting. She responded on 7th
June, leaving a message that she concerned that the Inquiry had been
commissioned by the EC. On 17th June Mr. Pirani wrote to her suggesting a
meeting on 22nd June. She did not attend, nor did she contact us until the day
after the suggested meeting. On 23rd June a message was left in chambers to
the effect that Ms. Atkinson was unable to meet with us, as she was ill, but
would write to us to explain the situation and arrange another date. To date we
have not received that letter.
28. Mr. Blagbrough co-operated fully with us at all times. Likewise the union’s
auditors and the rest of the staff.
9 Paralogic Networks Ltd.
ASLEF Report 29th June 2004 21 Report of Matthias Kelly Q.C.
Section 3
The Finance Department and the Management of the Union’s
Finances
1. Section 28 of the Trade Union and Labour Relations (Consolidation) Act 1992
(“TULRA”) provides that every trade union must keep proper accounting records.
This means that the accounts produced must not only be accurate but that they
must give “a true and fair view of the affairs” of the organisation and “explain its
transactions” in accordance with section 28(2). Section 28(1) provides that there
must also be a proper system of checking the accounts and controlling the
finances.
2. Importantly there is a range of criminal offences connected with financial
mismanagement of a union. For example, section 45(1) of TULRA provides that
it is an offence to refuse or wilfully neglect to perform any of the duties set out
above. The offence is also committed by any individual officer of the union whose
job it is, under the union’s rules, to see that the duty was carried out. It is also an
offence for any person to falsify (with intent) any document for the purposes set
out in section 28. An official or agent commits an offence if he destroys, mutilates
or falsifies any document relating to the financial affairs of the union, or if he is
privy to any such conduct. Section 45(7) of TULRA provides that he is presumed
guilty unless he proves that he had no intent to conceal the financial affairs of the
union “or to defeat the law”.
ASLEF Report 29th June 2004 22 Report of Matthias Kelly Q.C.
3. Members of unions have a statutory right to inspect the accounting records.
Section 29 provides that a union is obliged to preserve its accounting records for
at least six years. Failure to do so is a criminal offence under section 45.
4. The 2002 Rule Book provides that the General Secretary shall:
“Send to the Certification Officer every year before the first day of June,
the Annual Report and Financial statements along with a copy of the rules
in force at the end of the previous year.” Rule 6.2 (a)(xvii).
“Keep ASLEF’s accounting records in a form and for such a period that
accords with any relevant statutory obligations.” Rule 6.2 (a)(xviii).
5. The union’s auditors are also given specific duties under Rule 19. In particular:
“It shall be the duty of the auditors to prepare an Annual Report and
Financial statements and in preparing the same to carry out such
investigations as will enable them to form an opinion on the following
matters, that is to say:
Whether Head Office has kept proper records
Whether Head Office has maintained a satisfactory system of control
over its transactions; and
Whether the accounts to which the balance sheet refers are in
agreement with the accounting records.” Rule 19 (b)
ASLEF Report 29th June 2004 23 Report of Matthias Kelly Q.C.
“The auditors shall append a detailed report on such investigations to the
Annual Report and Financial Statements” Rule 19(c)
Recent History of the Finance Department at ASLEF
6. Martin Starr, the full time Finance Officer, was appointed on 13 August 2001. He
had no formal accountancy qualifications but had a background in finance going
back to 1980. His experience included working for a number of different
companies and he had been involved in all aspects of preparing and submitting
accounts. In December 2000 he signed on with Hayes Accounting doing
temporary accounting work. Then in June 2001 he started temping with ASLEF,
working under the instruction of Moira Darby. His initial rate, as a temporary
worker, was £20.45 per hour plus vat, which equates to just under £35,000,
excluding vat, for a 35 hour week for 48 weeks per year.
7. An employee of Hard Dowdy, the union’s auditors, was present on the panel that
interviewed him. In his personnel file there is a list of questions, which were asked
during his interview. They deal with various aspects of accounting and were
drawn up with the help of Hard Dowdy. Two references were also taken up from
his previous employees, both of which were good.
8. Martin Starr’s initial role was that of “Finance Department Team Organiser” at the
rate of £35,000 per annum (this increased to £37,019.21 as of October 2003).
ASLEF Report 29th June 2004 24 Report of Matthias Kelly Q.C.
Moira Darby then became his assistant. Later his position was changed to that of
“Finance Officer”, but this appears just to have been a re-labelling of the job he
was already doing. However, after he was appointed he was given no formal
induction process and very little training. No appraisal system was in place.
9. His job was to “ensure that ASLEF accounts, investments etc. are properly
managed and are to an auditable standard at all times. He was also to “oversee the
work of the department, and have detailed knowledge of what takes place in the
department, and either take responsibility for, or delegate work to the Team under
your management in your department and to ensure that your Team are fully
aware of the department’s priorities at all times”
10. Mina Chavda was appointed as Deputy to the Finance Officer in January 2003.
Her job was to “ensure that basic accounting and payroll records are effectively
maintained and that they will comply with the requirements of fiscal and trade
union legislation”.
11. Moira Darby was in fact due to retire in June 2003 at 60 after many years of good
service to ASLEF. Because of her experience in the finance department she was
described to me as “the engine room of finance”. However, unfortunately in
January 2003 she slipped on ice and broke her ankle. This was the same time that
Mina Chavda started work at ASLEF as Assistant to Martin Starr.
ASLEF Report 29th June 2004 25 Report of Matthias Kelly Q.C.
12. Under normal circumstances there would have been a properly managed handover
process from Moira to Mina. However, Moira was coming in only two days per
week because of her broken ankle. Added to this there were problems with the
central heating system at Arkwright Road, which lead to Mina being away from
work for periods of time.
13. Around this time demands were also demands made of the Finance Department by
the North Western strike fund, which had been set up by the EC in October 2002
by Resolution 778/41810. However, the resolution and circular failed to establish a
direct debit system, which meant that the department, in addition to its normal
workload, had to deal with the processing of many cheques. At the time of the
2003 AAD it was reported “the sum of £68,000 has been given to our members on
First North Western through these initiatives. Money is still coming in dribs and
drabs. I have been reliably informed that £72,000 came in overall.” Problems were
also encountered with the accounting software at this time. The SAGE accounting
system, which was in place, was not flagging up duplicated invoices.
14. I have also been told by Mick Rix that the Finance Department was also kept busy
with new electronic banking systems and a number of new bank accounts which
were set up as a result of the 2002 Rule book. In addition Mr. Starr was assisting
in locating and planning for a new education centre for the union.
10 “That the report be noted and the General Secretary instructed to make the necessary arrangements to conduct a levy of £5.00 per member to be collected by all branches and to be assisted by District Councils.”
ASLEF Report 29th June 2004 26 Report of Matthias Kelly Q.C.
15. When, in July 2003, Mick Rix lost the election to Shaun Brady it was decided that
there would be an early audit to facilitate the handover process. This was to take
place in September 2003 for the period 1 January 2003 to 31 August 2003. At this
time invoices were being left un-entered because the Finance Department was
concentrating on the audit to 31 August 2003.
16. This process culminated in circular 515/2003 which was headed “Interim Special
Audit of all ASLEF accounts” and dated 7 October 2003. Attached was a “full
report by ASLEF’s Independent Auditors of the state of the accounts up to 31
August 2003.” It was placed before the EC on 6 October 2003 and under
resolution 668/422 that “report was adopted with appreciation”.
17. It is clear that the attached accounts, although compiled by Hard Dowdy, were not
a “certified audit” of the kind that is produced for the AAD conference each year.
Although the circular does not state that the audit was certified, the language is
ambiguous. For example, it ends with the statement “attached are the audited
accounts with explanations, which will be placed before the 2004 AAD for
explanation by the independent auditors.” Therefore, although the report does not
explicitly say that the audit is certified it may give the impression that it was.
18. However, I do not find that there is anything suspicious in the ambiguity of this
description. Mick Rix told me that a “full certified audit” would have cost the
union a disproportionate amount of money. In fact audit fees from Hard Dowdy
for 2002 were £38,307 and for 2003 were £39,934. In addition, it is clear that
ASLEF Report 29th June 2004 27 Report of Matthias Kelly Q.C.
Nigel Gooch would have made the point that the interim audit was not certified at
the 2004 AAD in any event. Therefore it is not reasonable to conclude that Mick
Rix was trying to conceal the fact that there was no certified audit as it was bound
to come out that none took place. The fact that they were not signed and deemed
by the auditors as such would have meant that those with experience of finance
and audit would have realised this immediately.
19. Hard Dowdy were, of course, involved in carrying out the audit. They are a firm
of accountants who specialise in Trade Unions and Not for Profit Organisations.
They act for unions representing over two million individuals and 30% of the
membership of the Trades Union Congress The senior partner, Nigel Gooch, is the
partner in charge of the ASLEF account and has been for the last five years. He
has twenty-five years experience providing financial services to the Trade Union
and Labour Movement. He is also a member of the Institute for Employment
Rights.
20. Nigel Gooch told me that although the accounts at that time were not in any state
to be deemed a “certified audit” there no reason why the “interim audit” did not
reflect a “fair picture” of the state of the finances at the time. However, that is not
to say that he was of the opinion that the accounts were in an easily auditable state
at that time. In an e-mail from Nigel Gooch to Debbie Dwight, the then Office
Manager, dated 19 September 2003, Mr. Gooch states that “Reg and Stephen from
my office are working on accounts for the first three quarters of 2003 for
presentation to Mick on 6 October before the executive meeting. I understand that
ASLEF Report 29th June 2004 28 Report of Matthias Kelly Q.C.
the finance department is some long way behind with the posting of transactions
and until this work is completed substantial progress on the production of the
required accounts will not be possible. I realise that Martin is tied up with
meetings and other administrative matters and is not able to devote the required
time to finance. I have spoken to him this morning and he has told me that he will
be working over the weekend and engaging a temp to catch up with the processing
of entries and I trust that this will enable the timetable to be met.”
21. As a result of the underperformance of the Finance Department, which was
apparent after the “interim audit”, an extra position was created in order to
alleviate the workload on the staff already in place. Accordingly, Bev Quist, after
being interviewed for the new post transferred from GSP to Finance.
22. Eventually, due to the pressure that was being placed on the employees of the
Finance Department both Martin Starr and Mina Chavda went off sick with work
related stress in October 2003.
23. On 4 December 2003 Shaun Brady, the then General Secretary sent a circular,
651/2003, criticising the state of the Finance Department to all branches and
representatives to be brought to the attention of all members entitled “Finance
Department”. It was unfortunate, even if the allegations in that circular were true,
that there was no consultation with Martin Starr before this circular was sent out.
Mr. Starr considers that this lack of consultation had an adverse impact on his
ASLEF Report 29th June 2004 29 Report of Matthias Kelly Q.C.
health.
24. On 19 December 2003 Martin Starr wrote to the General Secretary setting out his
concerns about circular 651/2003. He ends his letter by saying that “This episode
as you can imagine, has set back my recovery and has made me both angry and
stressed causing me further depression and sleeplessness.” There is no response to
that letter on Martin Starr’s personnel file.
25. Nick Herd became acting Finance Officer in December 2003. Then, on 3 January
2003, further agency staff were interviewed and Florence Lee appointed. Mina
Chavda and Martin Starr had been off with work related stress since October
2003. On his arrival there was one person temping in the finance department who
had been there since November 2003, but no one else working there. Bev Quist
had been removed from the Finance Department and placed in the Administration
Department.
26. Nick Herd is a professionally qualified management accountant who has many
years experience of working in industry. He was introduced to ASLEF by Hard
Dowdy and tells us that he was brought in to work for ASLEF by Paul
Blagbrough and the General Secretary. Mr. Herd formed the opinion that the
temporary worker was worth keeping, but he was instructed that the General
Secretary and the Assistant General Secretary “wanted rid of him”. Mr. Herd
disagreed with their decision and told them that he thought that the temporary
worker was doing a good job in the circumstances. Part of Mr. Herd’s reasoning
ASLEF Report 29th June 2004 30 Report of Matthias Kelly Q.C.
was that it would not be easy to replace him and that there would be extra time
spent on training up a new temp.
27. Mr. Herd’s considered view, as explained to me, is that “no one at ASLEF either
now or previously has understood the discipline that is required to run the finance
operation.” He attributes part of the problem to the fact that both the EC and the
General Secretary, by their very nature, do not have managerial or financial
expertise. This is no different from many other unions or Not For Profit
Organisations and did not detract from Mr. Herd's overall admiration for ASLEF,
its officers and employees. It was also the view of Mr. Herd, that there is the risk
that some staff may become “politicised” and involve themselves in the various
factions that have arisen at Head Office. He also complained of unrealistic
demands being placed on the Finance Officer and requests made of him that
should be directed elsewhere.
28. Nigel Gooch was of the opinion that Martin Starr was better than the previous
incumbent, James Hood. However, he told me that there were many examples of
Hard Dowdy wanting Martin Starr to perform various tasks but were told that he
was busy with other work related activities and therefore had no spare time to
assist them. He explained that it is not unusual, in his experience, for Trade
Unions to require more assistance with their audit than a commercial organisation
would. In a note provided to ASLEF, Mr. Gooch said “it is very common for a
union to maintain its bookkeeping/accountancy function but the skills and
experience necessary to take this basic information through a published set of
ASLEF Report 29th June 2004 31 Report of Matthias Kelly Q.C.
accounts will very often be provided by the auditors, acting as accountants”.
29. Nigel Gooch agreed with Nick Herd that one of the problems in the department is
that the Finance Officer is often asked to do menial tasks which should be directed
elsewhere. Nick Herd was still being asked to do menial tasks despite his level of
expertise and high daily charges relative to administrative staff.
30. The essential requirements for the job of Finance Officer in the union according to
Mr. Gooch, who draws on his many years of experience, is that the post holder
needs to be apolitical in terms of the organisation of the union, to be permanent as
opposed to temporary and also needs to be professionally qualified. This means
that the post needs to be better remunerated than it has been in the past. However,
simply putting up the salary and advertising does not necessarily mean that the
right candidates will apply before the post. In his experience, unions and NFP
organisations do find it difficult to attract and retain experienced and qualified
staff. In a note dated 17 February 2004 Mr. Gooch said that “It may be useful to
observe ….that a majority of unions (especially smaller ones) do not have
qualified accountancy staff possibly because of a reluctance for that professional
generally to work in the ‘not for profit’ sector and/or the salaries offered by unions
for finance positions.”
31. It is instructive to note that Nick Herd was engaged at the rate of £365 per day
plus vat which equates to some £87,600 plus vat for a 48 week year as opposed to
the £35,000 per annum that Martin Starr was initially engaged on or the £143.15
ASLEF Report 29th June 2004 32 Report of Matthias Kelly Q.C.
for a 7 hour day when he was temping for ASLEF.
Forensic Inquiry
32. I instructed Mr. Christopher Bennett of the accountancy firm Smith & Williamson
Limited to carry out an investigation of the finances at ASLEF. Mr. Bennett’s
forensic work has included 18 years to date on the accountant’s panel to the
Metropolitan Police Fraud Squad (now the Police Liaison panel at the Institute of
Chartered Accountants in England and Wales) of which he is now chairman. He is
also a member of the Fraud Prevention Working Group, which is a forum between
industry and the Police. Over the years he has helped with a number of
investigations into various types of fraud. He has also investigated asset tracing in
connection with money laundering and has appeared in the Crown Court as an
expert witness on a number of prosecutions.
33. The report produced by Chris Bennett, dated 23rd June 2004, considers the
competency and level of the finance department staff and also comments on those
issues in the Blagbrough report. The report is attached at Annex 5. The report
reviews the union’s financial systems, offers advice on how to improve financial
administration and the administration of investments for the future. It reviews the
financial performance of the union. I adopt its conclusions and recommendations.
Conclusions
ASLEF Report 29th June 2004 33 Report of Matthias Kelly Q.C.
34. There are a number of factors, which lead problems in the Finance Department
during the course of 2003. Moira Darby, who had worked in the finance
department for many years, broke her ankle after slipping on ice. This not only
removed her and her undoubted expertise from the department but also meant that
she was unable effectively to facilitate any handover process to Mina Chavda.
Nigel Gooch said that “the sick leave and subsequent retirement taken by Moira
removed the stability in the finance department” and that “the work of all the last
three finance managers was supported by Moira who was a methodical
employee”. There were also problems with the heating system at Head Office,
which meant that Mina Chavda was away from work leaving the department
understaffed. Martin Starr had extra duties, which included dealing with cheques,
which were being sent in for the First North Western dispute. EC Resolution
778/418 on 8 October 2002 provided that the “General Secretary instructed to
make the necessary arrangements to conduct a levy of £5.00 per member to be
collected by all braches and to be assisted by District Councils”. The failure to
establish a system of direct debit meant that he was engaged in unnecessary and
time-consuming work. The Finance Officer’s time was being taken up with other
projects given to him including those relating to the potential purchase of
buildings. It seems to me that staff numbers were insufficient and there was a
shortage of expertise. This was exacerbated by the lack of any appraisal system.
35. When carrying out a review of the financial performance of the union over the last
ten years Smith & Williamson Ltd. discovered two ways in which the accounts
ASLEF Report 29th June 2004 34 Report of Matthias Kelly Q.C.
might appear to be confusing11. First, there have been occasions when
transactions should have been included in years other than the years in which they
have been recognised. According to the report, where it appears that there is a
transaction that should strictly have been included in an earlier year and, if it had
been, the impression given by those accounts, would have been different, then the
transaction should not be included in the current year. I agree. For example, Chris
Bennett believes that the Southall and Cullen inquiry costs fall into this category.
36. The Southall and Cullen Inquiry costs are so large that to include those which
actually arose in the 2001 and 2002 years, in the 2003 accounts, distorts the result
for that year. These costs were mentioned in a note to the 2001 and 2002 accounts
but with the benefit of hindsight Chris Bennett is of the opinion that they should
have been included in the Income & Expenditure account and should not be
considered to be an element of the 2003 costs. I agree with his opinion. Their
inclusion in the 2003 accounts distorts the true picture. It is to be noted that
exceptional, large and unexpected costs can take any organisation by surprise and
frequently do, but it is important that such costs are considered in a way that helps
to understand what their true impact is on a year’s results.
37. The effect of these changes is shown in Appendix II of the Smith & Williamson
report. Thus, if it is accepted that all of the Southall and Cullen inquiry costs are
not a true cost of the 2003 year, as they were not incurred in 2003, then allocating
them to the year in which they actually arose dramatically alters the result for the
11 I am also of the opinion that the Union should not charge itself rent on the occupation of 9 Arkwright Road.
ASLEF Report 29th June 2004 35 Report of Matthias Kelly Q.C.
year ended 31 December 2003. On this basis the result in the General Fund for the
2003 year is a deficit of £376,059 rather than the deficit at present of £701,344.
38. The second point of note is that the basic principle of “comparing like with like”
be adhered to when looking at the accounts. It is important when preparing
accounts to do so on a basis that is consistent from year to year so that numbers
can be compared easily with each other. In order that a fair comparison may be
carried out from year to year Smith & Williamson prepared a summary of the
accounts from 1994 to 2003 which can be used to directly compare one year with
another. This is contained in Appendix II of their report.
39. Distortions to the General Fund have occurred because inter-fund transfers have
been used to start and subsequently assist other funds, notably the
Hardship/Distress Fund and are an integral element of the Union’s activities. In
order to create a “level playing field” for comparison of the results over the past
ten years Smith & Williamson have used and quoted results inclusive of all funds.
This is because inter-fund transfers are not external payments and should not be
considered to be such. They are part of the union’s assets.
40. When the playing field is levelled in this way Smith & Williamson conclude that
the Union’s total funds have steadily increased from £4,417,719 at the end of
1994 to £5,390,347 at the end of 2003. An increase of £927,628. The Union’s
General Funds have also increased from £4,278,106 at the end of 1994 to
£4,449,018. An increase of £170,912.
ASLEF Report 29th June 2004 36 Report of Matthias Kelly Q.C.
41. They also conclude that when looking at the General Fund the result for the year
to 2003, taking all movements into account and treating the Cullen and Southall
Inquiry costs as relating to the years in which they were paid, the result is a deficit
of £376,059. The result for 2002 on the same basis is a deficit of £394,558. These
are the only two significantly loss making years and they have been significantly
affected by the inquiry costs and inter fund transfers.
42. Taking all funds together, i.e. which eliminates the effect of inter-fund transfers,
the result for 2003 is a deficit of £129,298 and for 2002 a deficit of £217,004.
43. Appendix III of the Smith & Williamson Report shows the different elements of
Income and Expenditure in the General Fund in graphical form. It can be seen
quite clearly that contributions from members have been rising steadily. In the
years from 1999 to 2003 expenditure has also risen steadily. 1999 was the first
year that an inter-fund transfers was seen and they along with the Inquiry costs are
a significant part of the union’s financial picture.
44. Appendix IV of the Smith & Williamson Report shows how the balance sheet is
made up and demonstrates that assets far exceed liabilities and that in recent years
the assets are relatively liquid, i.e. they are or can be converted into cash quickly.
45. Appendix V shows the detailed figures from the balance sheet and illustrate in
numerical terms that the net assets i.e. total assets less total liabilities, have
ASLEF Report 29th June 2004 37 Report of Matthias Kelly Q.C.
remained steady since 1999 which covers the period in which the Southall and
Cullen inquiry costs of £429,984 were incurred.
Recommendations
46. It is of course a vital aspect of good financial management that an organisation
should not spend more than it can afford but in “not for profit” organisations and
in members’ organisations, in particular, this should not necessarily mean that
only receipts in a year should be spent. It is permissible to plan to spend
previously accumulated balances on funds in such a way that the interests of
members are served without jeopardising the future financial health of the
organisation. Chris Bennett has made a number of recommendations in his report
for the improvement of financial administration and administration of
investments. I endorse all those recommendations. In addition, I make the further
recommendation that an independent and appropriately qualified person, who has
not had previous involvement with the Union, be employed for the specific and
discrete purpose of carrying out the tasks and implementing changes listed below:
1. To codify and update the financial procedures of the Union in line with the
recommendations made by Smith & Williamson.
2. Devise and implement a uniform procedure for branch accounts.
3. Compile an accurate asset register.
4. Establish a banking policy in conjunction with the Union’s bankers.
ASLEF Report 29th June 2004 38 Report of Matthias Kelly Q.C.
5. Establish the reporting lines for the Finance Department, the General
Secretary, the EC and the Trustees on matters relating to finance and
investments.
6. Devise a uniform procedure for the claiming of expenses by members and
officers. That procedure should provide that all expense claims be signed
off (approved) by a designated person, be supported by appropriate
documentation and be accompanied by the relevant documentary evidence
when submitted for payment.
Mr. Blagbrough’s Conclusions on Finance
47. I asked Mr. Gooch directly about the comment in the Blagbrough report that “the
Union’s financial administration was in a “shambolic” state with no meaningful
accounting records kept from January 2003. He disagreed that the accounts were
“shambolic” but did say that they were “disorganised" in the latter part of 2003.
When I further inquired about the impact this had on the finances and
management of the union he replied that in the short term it would make their
audit process longer than it usually would be, but in the long term there was no
impact at all.
48. Before going onto consider what my own forensic inquiry uncovered it is
noteworthy that Paul Blagbrough told me that when he was initially instructed
Shaun Brady told him that he expected him to uncover evidence of “significant
ASLEF Report 29th June 2004 39 Report of Matthias Kelly Q.C.
fraud” on the part of Mick Rix. Paul Blagbrough told me that he uncovered
“nothing of the kind”. The areas that concerned him were that of the management
of the finances, the furniture and severance payments. Nigel Gooch, in a note
dated 17 February 2004, stated that “I have been given no reason to believe that
there has been any dishonesty within the finance department and the difficulties
have arisen because the staff were ‘out of their depth’ in experience and did not or
were not, because of other commitments, able to devote all their working hours to
finance matters.”
49. Nick Herd did tell me of his concerns about certain expense claims that had been
made. I met with him for a second time specifically to discuss this issue. He
agreed that his concern was that the present and long established system of
claming expenses is unsatisfactory. It does not require expense claims to be
supplemented by appropriate receipts or other documentary proof. This systemic
failure leads to expense claims by members and officers some of which on their
face are questionable. I do not mean to imply that all, or indeed most, claims are
questionable. However, some are. Accordingly the adoption of a system, which
requires such evidence, is needed urgently to address this systemic failure.
However, whilst Mr. Herd expressed concern I have at no time received any
substantial or credible evidence of fraud on the part of any member or officer.
50. My concern is to ensure that there is in place a system, which compels the
production of a proper expenses claim form, supported by receipts which is then
approved for payment and authenticated by a designated and accountable
ASLEF Report 29th June 2004 40 Report of Matthias Kelly Q.C.
individual. In short, before expenses are paid there must be proof that the expense
was incurred and incurred on legitimate Union business. In my view the task of
seeking proof of expenses should not be delegated to the Finance Department.
Proof should be submitted with the expense claim form and if it is not submitted
the expense claim should be rejected.
51. Mr. Blagbrough was of the opinion that the “union has operated a structural
deficit” and has not “managed its asset base adequately”12. The forensic
accountants instructed by me disagreed. The union has net current assets (i.e.
funds that can be converted into cash quickly) of £1,156,762 on top of its
investments and property portfolio. This represents significant amounts, which are
not tied up in long-term balances such as investments and property. This is despite
the fact that there has been a decrease in General Funds in 2003 due to the
exceptional costs of the Southall and Cullen enquiries. The draft 2003 accounts
disclose total funds of £5,390,347 of which £4,449,018 relates to General Funds,
which represent a significant fund value.
52. Another allegation contained in the report of Mr. Blagbrough is that the “EC has
failed to address effectively its long term structural deficit….within its
administration, particularly the Finance Departments and to ensure adequate
oversight of the activities of the General Secretary particularly in the period
following his defeat in the Union elections. 13” Mr. Blagbrough also raises the
12 Page 5 of the Blagbrough Report. 13 Page 6 and 7 of the Blagbrough Report.
ASLEF Report 29th June 2004 41 Report of Matthias Kelly Q.C.
concern that from 1997 –2002 there was an operating deficit for 4 of the 6 years.14
Although the statement that there were losses for 4 of the 6 years from 1997 –
2002 is factually correct, the 4 years of losses amount to £276,617 and the
surpluses amount to £1,006,751. These results are inclusive of investment related
income and gains and losses, which is appropriate. In other words, there was a
surplus of over £700,000 over this period.
53. If the method of accounting is synchronised so that like can be compared with like
the figures from 1997 – 200215 are:
1997: £492,153 surplus
1998: [£74,518] deficit
1999: £518,008 surplus
2000: £155,425 surplus
2001: £95,182 surplus
2002: [£217,004] deficit
14 Page 8 of the Blagbrough Report. 15 See Appendix II of the Smith & Williamson Report.
ASLEF Report 29th June 2004 42 Report of Matthias Kelly Q.C.
54. Therefore for the period considered by Mr. Blagbrough there is a deficit for two as
opposed to four of the six years. Overall there is a surplus of £969,246.
55. I have, therefore, concluded that there is no long-term structural deficit, if by this
Mr. Blagbrough is implying that it is not possible for the union to make a surplus.
In the years from 1997 to 2002 the total funds of the union increased from
£5,042,552 to £5,844,930, an increase of £802,378.
56. Mr. Blagbrough also says that the “EC clearly did not understand that the Union’s
financial management processes had collapsed.16” When questioned, Nigel
Gooch stated that the only short-term effect of the disorganisation that occurred
during 2003 was that the audit would take longer. Chris Bennett agrees with this
assessment. The fact that the accounts had not been kept up to date does not mean
that the information does not exist and could not be brought up to an acceptable
state of preparedness, as seems to have been done for the draft 2003 accounts
which have recently been produced and examined by Smith and Williamson.
There are no long-term effects of the disorganisation in 2003. This is the opinion
of both Nigel Gooch and Chris Bennett as long as a suitable Finance Manager is
employed in the near future. It is also noteworthy that Nigel Gooch did not raise
any concerns about the state of the Union’s accounting procedures at the 2003
AAD.
16 Page 27 of the Blagbrough Report.
ASLEF Report 29th June 2004 43 Report of Matthias Kelly Q.C.
57. Nigel Gooch, in a note produced in February 2004, set out part of the explanation
for the failure by the EC or the General Secretary to appreciate that
disorganisation occurred in 2003. He wrote “[Moira] did the greatest share of the
routine work needed to run the finance department and it is apparent since her
accident and subsequent retirements that the newer members of the department,
Mina and Martin, were unable to carry on her duties at the same level of
competence. This was not particularly obvious when the accounts for 2002 were
prepared and audited since Hard Dowdy were working on records maintained by
Moira.”
58. As to the allegation that there was “No effective mechanism either for prioritising
expenditure or controlling it”17 the Foreword to the 2000 and 1999 accounts
includes sensible references to financial management and planning. In the 2000
forward by Mick Rix it states that the “aim as reported in 1999 and 2000 AAD is
to get membership income into line with expenditure without hurting benefits and
services to the membership.” He goes on to say “salaries and wages along with
management costs are now below 50% of the membership income level, which
the aim is to get to 40% over the next few years, which will be difficult but not
impossible.” The reports also make reference to plans to reduce overhead salaries,
reduce reliance on investments, budgeting and the need to reduce unnecessary
expenditure, the accumulation of funds for contingency purposes and a Five Year
Financial Plan.
17 See page 5.
ASLEF Report 29th June 2004 44 Report of Matthias Kelly Q.C.
59. In December 2000 the General Secretary reported to the Executive Committee
“expenditure has continued to outstrip income…Legal bills for the rail inquiries
have amounted to £55,000 and have been a drain on the Society’s funds. Further
large inquiry bills are expected next year and we need to plan for these.” As a
result of the concerns that were raised, the overview of the report was “It is
anticipated that we will have an extra 2,000 members in the next few years. The
income from contributions will rise accordingly. However, we will have to invest
in both staff and resources over the coming years to deal with the increase.
Careful financial planning will now play a large dividend in the future”.
60. Part of this strategy was to implement cost cutting measures. Not only was a Legal
Officer employed to do in-house work, but also savings were made in relation to
district Secretaries’ phones and suppliers to Head Office.
61. Chris Bennett does not accept that there can have been no effective mechanism of
prioritising or controlling expenditure and believes that if this had been the case it
would have been addressed by the auditors.
62. Mr. Blagbrough also alleges that there were no meaningful accounting records
kept from January 2003 and the financial administration was in a “shambolic”
state at this time18. As pointed about above Nigel Gooch regarded the accounts as
disorganised but not shambolic. Chris Bennett, whist agreeing that the accounts
were not in a good state in 2003, makes the point that the fact that the finance
18 Page 5 of the Blagbrough Report.
ASLEF Report 29th June 2004 45 Report of Matthias Kelly Q.C.
department was disorganised during 2003 does not imply directly that financial
information did not exist and could not be constructed.
63. The total and general funds of the union have increased significantly over the
period 1997 – 2002. Given this fact Chris Bennett disagrees with the accusation
that assets have not been managed adequately19. Over the period 1997 – 2002 the
union has managed to convert its investment base from relatively risky equities to
low risk gilts and as a result of this exercise has realised investment gains of
£2,019,164. The 1997 accounts show that the union held quoted net investments at
cost of £1,961,037. At the end of 2002 the union had investments at cost of
£1,325,055. During the same period cash at bank has increased from £106,631 to
£1,523,526 as a direct result of the investment transactions. Given that in the same
period a large number of investors were showing significant investment losses the
union appears to have managed investments “extremely well” according to Chris
Bennett.
64. Since the 2003 draft accounts have now been produced the assertion by Mr.
Blagbrough that the “management accounts (produced by the auditors) were based
on poor information and are of little value20” can be assessed with the benefit of
hindsight. The August 2003 non-certified management accounts disclose an
Operating Surplus of £199,944, before investment gains of £294,691 and a
transfer to the Westbrow fund of £179,617. The draft accounts for 2003 disclose
an Operating Deficit of £546,051 before investment gains of £274,691. The
19 Page 5 of the Blagbrough Report. 20 Page 13 of the Blagbrough Report.
ASLEF Report 29th June 2004 46 Report of Matthias Kelly Q.C.
transfer to the Westbrow fund of £179,617 is included within the Operating Result
in these accounts and so the deficit to December of £546,051 should be compared
to a surplus of £20,327 (£199,944 – £179,617) to August. These figures do not
take account of the level playing field approach, which has been employed by
Smith & Williamson.
65. However, the operating deficit of £586,378 in the period September – December
2003 is explained by a decrease in subscriptions over August 2003 which pro-
rated amounts to £139,048, and increase in salaries over August 2003 which pro-
rated amounts to £182,977 and an increase in inter-fund transfers of some
£214,764. This amounts to £536,789. In addition, after the Operating Deficit, the
2003 accounts have been charged with the costs of the Southall and Cullen
enquiries of £429,984. In total general funds have been charged with £701,341 in
the year to December 2003. No mention is made of the Southall and Cullen
enquiry costs in the August management accounts.
66. If the level playing field is introduced into the calculation of the figures the deficit
for 2003 in reality reduces substantially. Taking all the funds together which
eliminates the effect of inter-fund transfers, the result for 2003 is a deficit of
£129,298.
67. On the basis of the above Chris Bennett does not agree that the management
accounts prepared by the auditors were of limited value. In any event, Nigel
Gooch was of the opinion at the time the non-certified management accounts were
ASLEF Report 29th June 2004 47 Report of Matthias Kelly Q.C.
produced that they represented a “fair reflection of the financial state of the
union.”
ASLEF Report 29th June 2004 48 Report of Matthias Kelly Q.C.
Section 4
Trustees
1. Section 12(1) of the Trade Union and Labour Relations (Consolidation)
Act 1992 (“TULRA”) provides that “all property belonging to a trade union
shall be vested in the Trustees in trust for it”. This is because the trade union,
being an unincorporated association, is not able to hold or dispose of property
as a legal entity.
2. The Trustees of an unincorporated association, such as a union, are little more
than “custodian” Trustees. This means that their function is to act as a
repository for the legal title to the union’s property. In other words, they are
the vehicle by which the union is able to hold property. Where a person holds
property on behalf of others he is said to hold the property in trust for those
others and is called a Trustee.
3. Although commercial transactions are conducted in the name of the Trustees
of the union the Executive Committee takes the relevant decisions. Rule 7.3
(c) gives the Executive Committee “full control over the funds of ASLE”. By
rule 7.3 (t) such funds “as may not be wanted for immediate use shall, with the
consent of the Executive Committee, be invested in the names of the Trustees
in such of the following ways as such committee shall direct.” There then
follows a list of permitted investments. Rule 9.2 (g) directs an ethical
ASLEF Report 29th June 2004 49 Report of Matthias Kelly Q.C.
investment strategy based on the best traditions of the Labour movement. The
Trustees also hold for the union as a whole, in other words the members
collectively, rather than the members as individuals. This means that the
Trustees of the union have a direct relationship with the union, and the union
has a direct relationship with the members, but the individual members does
not, as such, have a direct relationship with the Trustees.
4. Trustees of unions do have a number of specific duties under the under both
the common law and the statutory framework. The law relating to Trustees of
unions and the duties, which they owe to the union and the trust, is complex.
However, it is useful to set out in brief form what the main duties of the
Trustees are. They include:
5. The first duty of a Trustee is to acquaint himself with the terms of the trust
under which he acts and the state of the trust property. In other words, he must
know what the union’s assets are and the position and state of its investments.
6. A Trustee must execute the trust with reasonable diligence, and conduct its
affairs in the same manner as an ordinary prudent man of business would
conduct his own affairs. Subject to the right of Trustees to delegate their duties
and the ability to employ agents, a Trustee is personally responsible for the
exercise of his judgment and for the performance of his duty and cannot
escape his responsibilities by leaving to another person the exercise of that
ASLEF Report 29th June 2004 50 Report of Matthias Kelly Q.C.
judgment or the performance of his duty.
7. In practice and subject to any express prohibition in the Rules of a union,
Trustees often delegate their powers to employed agents acting on their behalf.
The Trustee Act 2000 provides that while an agent, nominee or custodian
continues to act for the trust, the Trustees must keep under review the
arrangements under which the agent, nominee or custodian acts, and how
these arrangements are being put into effect. In other words, if Trustees
appoint advisors they must to some extent keep an eye on what they are doing.
8. They have a duty to see that the EC’s decisions are lawful and within the
terms of the rule book. In the event of any conflict it is right that the Trustees
should take independent legal advice at the union’s expense.
9. The Trustees have a duty to invest the society’s assets. In doing so they must
act in accordance with the statutory duty of care and observe the standard
investment criteria. The Trustee Act 2000 provides that, before exercising any
power of investment, a Trustee must obtain and consider proper advice about
the way in which, having regard to the standard investment criteria, the power
should be exercised. The standard investment criteria are (1) the suitably to the
trust of investments of the same kind as any particular investment proposed to
be made or retained and that of the particular investment and (2) the need for
diversification of investments of the trust. If, in the exercise of their
investment powers, the Trustees commit a breach of trust, then under the
ASLEF Report 29th June 2004 51 Report of Matthias Kelly Q.C.
general laws of trusts they will be liable to make good any losses to the funds
unless the breach was adopted or instigated by the union.
10. Individual ASLEF members are given the statutory right, pursuant to section
16(1) of TULRA, to ask a court to review the conduct of Trustees if they
claim that the Trustees are causing or permitting the unlawful application of
the union’s property. The member may complain, under section 16, that the
Trustees have complied with or propose to comply with an “unlawful”
direction given to them under the union’s rules.
11. It is important to appreciate that a direction from the Executive Committee can
be unlawful even if it is apparently given in accordance with the rules of the
union. For example, in Clarke v Heathfield (no.2) [1985] ICR 606 the
National Executive of the NUM ordered the union’s Trustees to transfer
money aboard in an attempt to avoid the payment of a £200,000 fine for
contempt of court. A member of the union then asked the court to remove the
Trustees from office. The judge held that the Trustees were not obliged to
comply with any unlawful instructions of the executive. The court went so far
as to remove the Trustees from office because it was decided that they were
deliberately flouting the court’s authority and were putting the union’s assets
in danger by risking further heavy fines.
ASLEF Report 29th June 2004 52 Report of Matthias Kelly Q.C.
12. Under section 16(3) of TULRA the court may order that Trustees protect or
recover property for the union. If the Trustees appear unlikely to cooperate the
court may appoint a recover to do the job for them.
13. Section 15 of TULRA provides that it is unlawful for the property of a trade
union to be applied in or towards unlawful conduct such as indemnifying
individuals in respect of penalties imposed on him for an offence.
14. Not only can a court remove Trustees from office but under section 16(4) of
TULRA where the disposition or threatened disposition contravenes a court
order the court must removal all the Trustees from office except for any
Trustee who can show good reason for allowing him to remain in office.
15. A member can also complain under the common law of trust of a wrong
allegedly done to him as an individual. An individual could, for example,
complain directly of a breach of trust if the Trustees failed to pay benefits due
to him personally under the rules of the union.
Change in ASLEF’s Rules
16. The 2000 Rule Book provided under Rule 17(5) that:
“One Trustee shall attend the Annual Assembly of Delegates on
the day Finance Matters are to be discussed and have the right to
ASLEF Report 29th June 2004 53 Report of Matthias Kelly Q.C.
speak and reply to questions thereon. At least one Trustee shall
attend the Executive Committee on the days stipulated by the
Executive Committee for the purpose of providing factual
information on Financial Matters which the AAD and/or the
Executive Committee may take into account in carrying out their
functions”.
Rule 16(1) provided that
“The Executive Committee shall consist of eight members (one
from London Underground Limited) and at least one Trustee who
shall sit ex-officio when dealing with financial matters…”
17. During the course of 2000 there was a period of extensive consultation in
relation to the Rule Book. This lead to various changes to the powers and
duties of the Trustees, which were incorporated into the 2002 Rule Book. The
Trustees were appreciative of the fact that they were consulted and regarded
the changes in the rules as an improvement.
18. The Powers of Trustees are now more clearly set out in Rule 9.1 of the 2002
Rule Book which states:
ASLEF Report 29th June 2004 54 Report of Matthias Kelly Q.C.
“The Trustees shall take action, with the consent of the Executive
Committee, to bring or defend, or cause to be brought or
defended, any suit, prosecution or complaint, in any court or
equity, touching or concerning the property, right or claim to
property of ASLEF”.
“Any Trustee having been removed from office who shall refuse,
or neglect to convey, assign or transfer or deliver up any property
of the union as the Executive Committee shall direct, shall be
deal with in accordance with the provisions of Rule 17.”
19. The duties of Trustees, set out in Rule 9.2, include:
• “At least one Trustee shall attend the Executive Committee on the days
stipulated for the purpose of providing factual information on financial
matters which the Committee may take into account in carrying out its
functions.”
• “Trustees shall invest and withdraw the funds of ASLEF as instructed by
Executive Committee subject to the instructions not being in
contravention of any statutory obligation and the rules of the union.”
• “Trustees shall meet with the General Secretary and President of the
Executive Committee once per quarter, where they shall deal with
ASLEF Report 29th June 2004 55 Report of Matthias Kelly Q.C.
matters of investments. Special meetings may be called as necessary.”
• “Consultation shall take place each year between the General Secretary
and the Trustees to deal with matters on long term investment policy and
contribution income.”
• “Each quarterly meeting of the Trustees, General Secretary and President
shall result in a report being presented to the Executive Committee.”
• “All investments in the name of ASLEF shall, as far as practicable be
account invested with due regard to social responsibilities and ethical
based approach, based on the best traditions of the Labour and Trade
Union Movement.”
20. Related Duties of the General Secretary are set out in Rule 6.2. Other than
those duties which relate to him carrying out the instructions of the Executive
Committee the only relevant specific duties are:
• “Be responsible for and have sole charge of ASLEF head office.”
• “Transact all the unions’ business…”
ASLEF Report 29th June 2004 56 Report of Matthias Kelly Q.C.
• “Keep ASLEF’s accounting records in a form and for such a period that
accords with any relevant statutory obligations.”
21. The related Duties and Powers of the EC are:
At least one Trustee shall sit ex-officio with the Committee when
financial matters are discussed. (Rule 7.1)
The Executive Committee shall exercise full control over the funds of
ASLEF in strict accordance with these rules and shall have the power to
appoint a special audit. (Rule 7.3)
Changes in the Rules
22. There is little doubt that there were improvements in the rules relating to
Trustees when changes were made to the 2000 Rule Book and incorporated
into the 2002 Rule Book. These included:
• The express provision of an ethical investment policy – Rule 9.2 (g).
• Provision for quarterly meetings with the General Secretary and the
President - Rule 9.2(d). This rule undoubtedly enables the Trustees to
ASLEF Report 29th June 2004 57 Report of Matthias Kelly Q.C.
keep a better check on the activities of the General Secretary and the
Executive Committee and therefore in turn comply with their own duties.
• Express provision for consultation with the Trustees on matters of long
term investment – Rule 9.2(e)
• The provision of quarterly reports to the EC - Rule 9.2(f)
• Involvement of the Trustees in matters of subscription income – Rule
9.2(e)
23. Nick Whitehead, a Trustee from 1996 – 2003 and ASLEF member for 24
years, described the initial standing of Trustees in the union as being
“prehistoric” compared with when he left office in December 2003 after the
implementation of the new rules. Martin Barter, a current Trustee who also has
many years of experience in various ASLEF positions, said that originally the
Trustees were simply “names” in the union with no apparent purpose. He
explained that, in his opinion, the standing of Trustees has dramatically
improved.
24. Not only is the standing of Trustees within the union enhanced by these rule
changes, but collectively new Rules also act as a safeguard to the potential
misuse of funds by the General Secretary or the Executive Committee. They
stand in stark contrast to the limited role of Trustees that was envisaged by the
ASLEF Report 29th June 2004 58 Report of Matthias Kelly Q.C.
2000 and previous Rule Books. In my opinion, the changes also facilitate the
Trustees to carry out their statutory and common law duties as Trustees.
25. However, after discussion with the Trustees it does appear that there are a
number of ways in which the rules still require further clarification. These
include:
26. Rule 9.1(b) concerns the removal of Trustees from office and the potential
disciplinary action against such a Trustee. Its inclusion in the section relating
to “Trustee Powers” is therefore anomalous. It is not a power.
27. Although there is a duty on the Trustees to meet with the General Secretary
and the President quarterly to deal with matters of investments there is no
correlative duty on either the General Secretary or the President. The Rules
should be aligned so that if one party has a duty to meet another party then that
other party is subject to a similar duty.
28. There is no definition of what constitutes an “investment”. One suggestion is
that this should be defined as including all classes of asset.
29. There is no definition of what constitutes “financial matters” which requires
the ex-officio attendance of a Trustee at Executive Committee meetings. If
read literally this could include almost all the business that the EC conducts. I
have been told that custom and practice has restricted its interpretation to
ASLEF Report 29th June 2004 59 Report of Matthias Kelly Q.C.
“matters of investments”. However, recently the Trustees have written to the
General Secretary and the EC arguing that if capital expenditure over £500
needs to be approved by the EC, as per resolution 668/422, then the Trustees
should have a place at the EC table when such decisions are taken.
Accordingly there is an urgent need to clarify what “financial matters” mean.
30. Trustees are expected to consult with the General Secretary and President each
year to discuss long-term investments policy and to meet on a quarterly basis
to deal with investment matters more generally. However, there is no
definition of what constitutes “consultation” in the Rules. This leaves the
Rules open to abuse. “Consultation” may be narrowly interpreted as
amounting to little more than simply informing the Trustees when decisions
are taken.
31. There seems to be agreement that standing of the Trustees within the union
faces two fundamental contradictions:
32. It is the Executive Committee and not the Trustees who have full control over
the funds of ASLEF. They are the ones who make financial decisions whether
or not the Trustees agree with them.
33. Although the Trustees are, according to the Rules, on hand to provide “factual
information” and to be consulted on issues of investments they are not trained
ASLEF Report 29th June 2004 60 Report of Matthias Kelly Q.C.
or necessarily experienced in matters of finance or investment. This situation
has been exacerbated by amongst other things:
• The lack of any training or induction for the Trustees.
• Uncertainty about how to interpret the new rules.
• The lack of a clear system to provide the Trustees with information on the
assets of the union.
• Inadequate minutes being taken of Trustee meetings combined with a
failure to provide any effective system for storage or filing of the minutes.
34. A number of different changes have been suggested to ensure that this inherent
contradiction does not have a detrimental impact on the role of the Trustees.
Each suggestion has its pros and cons and I am therefore loath to recommend
any particular one to the Executive Committee or the AAD. As was the case in
2000, the most appropriate way of proceeding, I suggest, is by way of a round
of further consultation. However, all parties seem to agree that the starting
point is that there needs to be formalised expert input in matters of finance and
investment. This was, for example, the firm view of Clive Jones, the senior
Trustee and former President of the EC. Some options are:
ASLEF Report 29th June 2004 61 Report of Matthias Kelly Q.C.
(1) The formation of a Finance Group (without executive powers), as
suggested by the Blagbrough report. Blagbrough envisaged that the
Trustees would operate as an advisory Finance Group to the Executive
Committee. He suggests either the appointment of a general financial
advisor or the co-option of an experienced non-member as a Trustee.
(2) An appropriately formed Finance Group might be made up of the
President, the General Secretary and the Trustees as well as the expert
third party. Alternatively allowing ordinary members of the EC on the
committee might facilitate the appointment of individuals with a special
interest of experience in financial matters.
(3) If my proposal of ensuring that Finance Officers are appropriately
trained and qualified is adopted, I see no reason why the Finance Officer
could not act as an advisor to the Trustees and the EC. It has been
pointed out that there may be a conflict of interest as the Finance Officer
acts under instruction of the General Secretary. However, if this
argument were taken to its extreme it would militate against the
appointment of any Finance Officer in the union.
(4) Alternatively, instead of the Trustees attending meetings relating to
finance and investments they could delegate their powers and duties to a
third party who may be the Finance Officer of the union.
ASLEF Report 29th June 2004 62 Report of Matthias Kelly Q.C.
(5) The Trustees may wish to delegate their duties such that they will not
in the future attend EC meetings at all. Alternatively, issues of “finance”
may be categorised so that they attend the meetings where for example
those issues that fall into the “major” category of financial issues are
decided.
(6) Another solution may be that one trustee is invited to attend each EC
without having any voting rights, and the President or Vice President (or
in the event of the president or Vice President being unable to attend) a
member of the EC nominated by the President attends at meetings of the
Trustees. This or something similar would provide the necessary linkage.
Concerns of the Trustees
35. There was general agreement amongst the Trustees who were interviewed that
when they took up their position they were not provided with sufficient
information about their role. There is no system of formalised training or
induction in place for Trustees. Nick Whitehead said that after asking about
the duties of Trustees in 1996 he was told that “if he did not know he should
not have applied to become one in the first place”. John Robson compared and
contrasted his ASLEF experience with the training he received as a Trustee of
the London Regional Transport Pension Fund. For that role he received an
initial two-day induction course followed by a week-long course. Martin
Barter said that when he took up his role he had “no idea” what Trustees were
ASLEF Report 29th June 2004 63 Report of Matthias Kelly Q.C.
supposed to do and had to learn as he went along.
36. The Trustees did not suggest that the level of training appropriate for pension
fund Trustees was necessarily required, but they seemed to agree that some
training and induction process was long overdue and should be “tailored to
their needs”. That is not to say that there were not some efforts made in the
recent past. Copies of the minutes that have been provided to me show that on
16 December 1999 there was a meeting at which Clive Jones raised the issue
of training. It was then agreed that the Trustees would visit Charles Stanley,
the investment advisers. However, it was felt that training from an
independent third party might be more beneficial as it may not be in the
commercial interest of a body already retained by ASLEF to keep the Trustees
too well informed or trained.
37. There was also a general concern raised about the level of information that
was given to the Trustees about finances and investments. Prior to Mick Rix
taking over as General Secretary I was told that there were no formal meetings
with the President and the General Secretary. Mick Rix introduced these
before there were formally incorporated into the Rules. The Trustees regarded
this change as beneficial.
38. The efforts of Mick Rix in this area were regarded as a “step in the right
direction” and made what happened previously “look prehistoric”. Prior to that
I was informed that the Trustees were lucky if they attended the EC more than
ASLEF Report 29th June 2004 64 Report of Matthias Kelly Q.C.
once in December each year and met with the investment advisors more than a
couple of time per year. I was also told that minutes were never taken at
Trustee meetings in the past.
39. The Trustees were divided on the issue of whether, prior to October 2003, they
received sufficient information relating to the financial affairs of the union.
Some regarded this as being partially true under the time of Mick Rix,
although they agreed that what he had done was an improvement on the past.
The alternative view was that since there were quarterly meetings set up, plus
occasional meetings with the auditors and the investment managers together
with attendance at the AAD they were sufficiently well informed.
40. However, all the Trustees were extremely concerned that since October 2003
to the end of April 2004 there had been no meetings at all with both the
General Sectary and the President contrary to Rule 9.1(d). Things have
undoubtedly got worse. The Trustees have, through no fault of their own, little
idea as to what the financial position of the union currently is. John Robson
said that since he became a Trustee in December 2003 he was continually
asking for information on the financial state of the union but had received
nothing. Martin Barter wrote a letter, dated 13 January 2004, to the General
Secretary complaining of unreturned phone calls and the fact that the
December 2003 Trustee’s meeting had been cancelled. He requested that the
Trustees “be brought fully up to date on all financial matters that concern the
ASLEF Report 29th June 2004 65 Report of Matthias Kelly Q.C.
Trustees”. His concerns effectively went unheard. These concerns continued
up to the cancellation of the June 2004 AAD which was done without
consultation with the Trustees.
41. Concern was also raised by some of the Trustees about events that took place
at the end of 2001. These are reflected to some extent by a letter written by
Clive Jones dated 13 December 2001 to his fellow Trustees. In it Clive Jones
makes a number of complaints about matters, which were taking place around
that time. His primary concern was that no Trustee was present in September
2001 when the EC took a decision to sell off a significant proportion of the
union’s portfolio. There was another meeting on 14 November 2001 at which
the broker was instructed to sell off further shares but no Trustee was present
at this meeting either.
42. In his letter Mr. Jones does say that a Trustee meeting took place around this
time on 11 October 2001 at which it was agreed that there be a planned review
of the portfolio. The minutes of that meeting show that it was agreed in the
presence of three Trustees, the President, the Finance Officer and two
investment advisors from Charles Stanley that some shares be sold and some
shares be kept. In particular it was agreed to “sell the small companies over
the next 6 weeks”. At the end of the minutes it was further agreed that Martin
Starr, the Finance Officer, “should investigate different forms of investments
and also how to dispose of shares”. No dissention or concern about lack of
consultation is contained in those minutes.
ASLEF Report 29th June 2004 66 Report of Matthias Kelly Q.C.
43. There is a dispute between the Trustees in office at the time as to whether or
not there was a meeting that took place before September 11 2001, which was
the date before which a large portion of the shares were sold off fortuitously
before a large fall in the stock market on that date. Resolving that dispute is
made difficult by not having a full set of minutes for that period. However, it
does appear that there were a series of further meetings with the President and
the General Secretary running up to Christmas 2001. One of those meetings
was, in effect, a “beauty parade”, during which the Trustees, in conjunction
with the General Secretary and the President, were able to choose between
prospective investment advisors. In the aftermath of these concerns of the
Trustees, the then General Sectary agreed that they would be provided with
more regular information. Consequently the Trustees were put on the internal
e-mail system in the office, which helped to facilitate a greater flow of
information.
44. Whatever the exact chronology of events it seems that during this period the
Trustees were reasonably well appraised of what was occurring regarding the
investments. However, it is also reasonable to conclude that decisions were
being taken quickly and in a fast changing market without always consulting
the Trustees first. In other words, on occasion it does seem likely that the
Trustees became aware of decisions concerning investments after they had
been taken.
ASLEF Report 29th June 2004 67 Report of Matthias Kelly Q.C.
45. However, in 2001 when these events were taking place there was no
requirement in the 2000 Rule Book for quarterly meetings with the President
and the General Secretary. It is clear that efforts were being made on behalf of
the General Secretary and the President to involve the Trustees in the events
that were taking place over and above what was required by the Rules, which
is to be contrasted with what had occurred previously. In addition, even the
new 2002 Rules, which were not in place at this time, do not envisage that
Trustees be present at EC meetings or any other meetings when financial or
investment decisions are actually “taken”. Rule 7.1 provides that at least one
Trustee shall be present ex-officio in EC meetings when “financial matters are
discussed”. It has also never been the case in the union that the Trustees have
to agree with or ratify any decision that is taken by the EC or the General
Secretary.
46. By the time the 2002 AAD came round it is clear that there was no residual
concern expressed by the Trustees. Martin Barter addressed the Conference in
the following terms:
“As you are all aware, the last couple of years have been turbulent ones
for stocks and shares. Last year was obviously no exception. In that
period most other trades unions made massive loss on their
investments. In late August/early September 2001 it was decided by
the EC that we should sell the high risk shares in our portfolio and
deposit the monies received with the Unity Bank for the future
ASLEF Report 29th June 2004 68 Report of Matthias Kelly Q.C.
investment when the Stock Market improves. This proved a successful
move as we sold most of the high risk shares in the first week of
September. After the events of September 11 our remaining portfolio
(after the initial hiccup) held steady in the weeks and months
afterwards.
Our then broker disagreed with our strategy but following events
proved us right. As the shares that were sold lost a value of £650,000
after they were sold most of the remaining portfolio held on its own.
Since then we have decided to appoint a new team of investment
managers, Henderson Global Investors, to oversee the portfolio. The
portfolio in future will be made up of blue chip companies, bonds and
a cash deposit. We will, of course continue to support the Trade Union
Managers portfolio which is currently valued at £396,788. The new
investment managers have also been made fully aware of our wish for
a total ethical policy.
In line with an open government policy the President of the EC now
attends Trustee’s meetings, and likewise Trustees are also becoming
more involved in the financial day to day running, with the increase in
contributions discussed at a Trustees meeting before it was put forward
to the EC.”
47. Prior to that at the 2001 AAD the Trustee report noted that the last year was
“an extremely difficult and disappointing year for our portfolio.” 2000 was the
ASLEF Report 29th June 2004 69 Report of Matthias Kelly Q.C.
first full year that the portfolio was run on a discretionary basis. The estimated
fall of the portfolio was 21%, taken against the FT index fall of 8%.
48. The Trustees in their address to the 2003 AAD said that they regarded the
actions over the previous few years as being prudent and moving in the right
direction by adopting a low risk strategy. All three Trustees were in fact
delegates at the 2003 AAD. Martin Barter addressed the conference in the
following terms:
“As reported in last year’s address, it has been a volatile time for the
stock market and 2002 has been no different. Having sold the high risk
shares of our portfolio in August/September 2001, which proved a very
prudent move, it was decided to sell the rest of our portfolio due to the
continued turbulent state of the stock market. Again, this decision
proved to be the right move as the stock market has still struggled
since 9/11. Monies from the sale of the remaining portfolio have been
invested in low risk Government stock. We, as Trustees, along with the
General Secretary and the EC, will continue with our low risk strategy
with the Society’s assets.
As a result of a rise in membership and prudent housekeeping, the
society’s functions solely on membership income, a position we have
not been in for a number of years. Continuing with an open
government policy, the President and Vice-president have attended
ASLEF Report 29th June 2004 70 Report of Matthias Kelly Q.C.
Trustee’s meetings throughout last year”
49. Another concern raised by the Trustees with us was the content of circular
515//2003. On 22 January 2004 Clive Jones, Martin Barter and John Robson
singed a “Trustee Report” stating “the Trustees are concerned at their names
being appended to circular 515/2003 headlined ‘Interim Special Audit of
ASLEF’s accounts’ which are not now known to have been a certified audit”.
50. Nick Whitehead, who was a Trustee at the time in October 2003 (although
John Robson signed the Trustee report he was not in fact a Trustee when the
circular was produced) said that on the day of the report and Resolution
668/422 adopting the Interim Finance Report he met with the General
Secretary and in effect “approved the report” before it went to the EC.
51. The concern that the Circular recorded that it was “for and on behalf of the
Executive Committee, independent Auditors and National Trustees” was
based on the fact that the Trustees were not specifically aware that the
accounts were not certified and not that it reflected an endorsement, which had
not been apparent. This issue is dealt with in the finance section of the report.
Conclusions
52. From the above I conclude the following:
ASLEF Report 29th June 2004 71 Report of Matthias Kelly Q.C.
1. The Trustees have very little by way of training and have no induction.
2. There is no systematic way of making or storing minutes of Trustee
meetings.
3. After 1998 the status of Trustees within the union improved. More
meetings took place than had done previously and they became more
involved with decision making in relation to investments.
4. The consultation process that took place in 2000 lead to improvements
in the Rules relating to Trustees both in terms of clarity of their duties but
also in relation to increasing their role.
5. The Rules are still however ambiguous.
6. Confusion over the exact role of Trustees has lead to some of them
feeling legitimately that they have not been provided with adequate
information about expenditure, finances and investments.
7. There was some legitimate concern in 2001 in relation to the extent to
which decisions were being taken without adequate consultation with the
Trustees.
ASLEF Report 29th June 2004 72 Report of Matthias Kelly Q.C.
8. Since October 2003 until the end of April 2004 the Trustees have all
but been excluded from the financial affairs of the union.
Recommendations
53. I make the following recommendations in relation to Trustees:
1. The Trustees be given an induction and training so they are able to
carry out their duties in an informed manner.
2. The Rules be further clarified so that Trustees and the EC are
aware of when they should attend EC meetings.
3. The quarterly meetings between the Trustees, the General Sectary
and the President be re-commenced as soon as possible.
4. Investment managers and banks be requested to send monthly
statements of investments direct to the Trustees.
5. Consideration be given to the setting up of a Finance Committee. I
would suggest that such a committee be composed of the trustees,
the President or Vice President or in the event of the President or
Vice President being unable to attend a member of the EC
nominated by the President. The General Secretary and the finance
manager should be in attendance. The EC should continue to have
ultimate control over the finances of the union, as it is the body
charged with making the strategic decisions for the union. If such a
ASLEF Report 29th June 2004 73 Report of Matthias Kelly Q.C.
committee is not established then the EC must send a
representative, who may be the President or Vice President, to
every meeting of the Trustees.
6. I further suggest that one trustee is invited to attend each EC
without having any voting rights. This or something similar would
provide the necessary linkage.
The Blagbrough Report and Trustees
54. Paul Blagbrough made the allegation that the Trustees received little
information on the financial state of the union21. I found that the Trustees were
divided on this issue. Some regarded this as being partially true under the time
of Mick Rix, although they agreed that what he had done was an improvement
on the past. The alternative view was that since there were quarterly meetings
set up, plus occasional meetings with the auditors and the investment
managers together with attendance at the AAD they were sufficiently well
informed.
55. However, all were concerned that since October 2003 to the end of April 2004
there had been no meetings at all with both the General Secretary and the
President contrary to Rule 9.1(d). Things had undoubtedly got worse. The
21 Page 26 of the report.
ASLEF Report 29th June 2004 74 Report of Matthias Kelly Q.C.
Trustees had no idea what the financial position of the union was. John
Robson said that since he became a Trustee in December 2003 he was
continually asking for information on the financial state of the union but had
received nothing. Martin Barter wrote a letter, dated 13 January 2004, to the
General Secretary complaining of unreturned phone calls and the fact that the
December 2003 Trustee’s meeting had been cancelled. He requested that the
Trustees “be brought fully up to date on all financial matters that concern the
Trustees”. His concerns effectively went unheard. These concerns continued
up to the cancellation of the June 2004 AAD which was done without
consultation with the Trustees.
56. Mr. Blagbrough also attached a letter from Clive Jones, dated 13 December
2001, as an appendix to his report.22 In it Clive Jones makes a number of
complaints about matters, which were taking place around that time. His
primary concern was that no Trustee was present in September 2001 when the
EC took a decision to sell off a significant proportion of the union’s portfolio.
There was another meeting on 14 November 2001 at which the broker was
instructed to sell off further shares but no Trustee was present at this meeting
either. My findings in relation to this allegation are:
57. A Trustee meeting took place around this time on 11 October 2001 at which it
was agreed that there be a planned review of the portfolio. The minutes of that
meeting show that it was agreed in the presence of three Trustees, the
President, the Finance Officer and two investment advisors from Charles
22 Appendix M.
ASLEF Report 29th June 2004 75 Report of Matthias Kelly Q.C.
Stanley that some shares be sold and some shares be kept. In particular it was
agreed to “sell the small companies over the next 6 weeks”. At the end of the
minutes it was further agreed that Martin Starr, the Finance Officer, “should
investigate different forms of investments and also how to dispose of shares”.
No dissention or concern about lack of consultation is contained in those
minutes.
58. Whatever the exact chronology of events it seems that during this period the
Trustees were reasonably well appraised of what was occurring regarding the
investments. However, it is also reasonable to conclude that decisions were
being taken quickly and in a fast changing market without always consulting
the Trustees first. In other words, on occasion it does seem likely that Trustees
became aware of decisions concerning investments after they had been taken.
59. However, in 2001, when these events were taking place there was no
requirement in the 2000 Rule Book for quarterly meetings with the President
and the General Secretary. It is clear that efforts were being made on behalf of
the General Secretary and the President to involve the Trustees in the events
that were taking place over and above what was required by the Rules, which
is to be contrasted with what had occurred previously. In addition, even the
new 2002 Rules, which were not in place at this time, do not envisage that
Trustees be present at EC meetings or any other meetings when financial or
investment decisions are actually “taken”. Rule 7.1 provides that at least one
Trustee shall be present ex-officio in EC meetings when “financial matters are
ASLEF Report 29th June 2004 76 Report of Matthias Kelly Q.C.
discussed”. It has also never been the case in the union that the Trustees have
to agree with or ratify any decision that is taken by the EC or the General
Secretary.
60. By the time the 2002 AAD came round it is clear that there was no residual
concern expressed by the Trustees23. Prior to that at the 2001 AAD the Trustee
report noted that the last year was “an extremely difficult and disappointing
year for our portfolio.” 2000 was the first full year that the portfolio was run
on a discretionary basis. The estimated fall of the portfolio was 21%, taken
against the FT index fall of 8%. The address of the Trustees to the 2003 AAD
gave the correct impression the Trustees regarded the actions over the
previous few years as being prudent and moving in the direction of adopting a
low risk strategy. All three Trustees were in fact delegates at the 2003 AAD24.
23 Martin Barter addressed the Conference in the following terms: ”As you are all aware, the last couple of years have been turbulent ones for stocks and shares. Last year was obviously no exception. In that period most other trades unions made massive loss on their investments. In late August/early September 2001 it was decided by the EC that we should sell the high risk shares in our portfolio and deposit the monies received with the Unity Bank for the future investment when the Stock Market improves. This proved a successful move as we sold most of the high risk shares in the first week of September. After the events of September 11 our remaining portfolio (after the initial hiccup) held steady in the weeks and months afterwards. Our then broker disagreed with our strategy but following events proved us right. As the shares that were sold lost a value of £650,000 after they were sold most of the remaining portfolio held on its own. Since then we have decided to appoint a new team of investment managers, Henderson Global Investors, to oversee the portfolio. The portfolio in future will be made up of blue chip companies, bonds and a cash deposit. We will, of course continue to support the Trade Union Managers portfolio which is currently valued at £396,788. The new investment managers have also been made fully aware of our wish for a total ethical policy. In line with an open government policy the President of the EC now attends Trustee’s meetings, and likewise Trustees are also becoming more involved in the financial day to day running, with the increase in contributions discussed at a Trustees meeting before it was put forward to the EC.” 24 Martin Barter addressed the conference in the following terms: “As reported in last year’s address, it has been a volatile time for the stock market and 2002 has been no different. Having sold the high risk shares of our portfolio in August/September 2001, which proved a very prudent move, it was decided to sell the rest of our portfolio due to the continued turbulent state of the stock market. Again, this decision proved to be the right move as the stock market has still struggled since 9/11. Monies from the sale of the remaining portfolio have been invested in low risk Government stock. We, as Trustees, along with the General Secretary and the EC, will continue with our low risk strategy with the Society’s assets. As a result of a rise in membership and prudent housekeeping, the society’s functions
ASLEF Report 29th June 2004 77 Report of Matthias Kelly Q.C.
61. Mr. Blagbrough says “EC circular 515 reported that the Trustees had endorsed
an EC Resolution when this was not the case.”25 This is not the case. The
complaint of the Trustee’s related not to the fact that the circular had not been
“endorsed” by them, but that they were not aware that the accounts had not
been certified. Nick Whitehead, who was a Trustee at the time in October
2003 (although John Robson signed the Trustee report he was not in fact a
Trustee when the circular was produced) said that on the day of the report and
Resolution 668/422 adopting the Interim Finance Report he met with the
General Secretary and in effect “approved the report” before it went to the EC.
62. Mr. Blagbrough also states that26: decisions of the Trustees on investments
have in the past been countermanded by the General Secretary and that despite
their responsibilities as set out in the Rule Book, they have been excluded
from decisions relating to management of the Union’s investments. The only
Trustee related documents he attached to his report are the letter from Clive
Jones, dated 13 December 2001 (referred to above) and a report from John
Usher, the Legal Officer, dated 22 March 2001. Nowhere in those documents
is the complaint made that “decisions of the Trustees on investments have in
the past been countermanded by the General Secretary”. No evidence has been
provided to us on that issue and none is contained in the Blagbrough report.
When we met Mr. Blagbrough we specifically asked him to provide us of solely on membership income, a position we have not been in for a number of years. Continuing with an open government policy, the President and Vice-president have attended Trustee’s meetings throughout last year” 25 Page 26 of the Report. 26 Page 26 of the Report.
ASLEF Report 29th June 2004 78 Report of Matthias Kelly Q.C.
evidence to support this assertion. He failed to do so.
63. Although the Blagbrough report says that Trustees have been excluded from
decisions relating to management of the Union’s investments, as discussed
earlier there was no rule that they had to be involved in any “decision” and, in
any event, what was happening in 2001 was a great improvement when
compared to what had gone on previously.
64. There is in fact no evidence that the Trustees ever objected to any decisions
taken in relation to investments or financial matters in 2001, 2002 or 2003.
They did not report any objection either in their meetings, or the meetings with
the EC, the President and the General Secretary or at the AAD’s.
ASLEF Report 29th June 2004 79 Report of Matthias Kelly Q.C.
Section 5
Severance Payments
1. On leaving office Mr Rix, according to Mr. Blagbrough, received a final
payment of £42,117. In fact Mr. Rix received £39,010.89 net, his union car, a
medal and his old lap top computer. The EC had before it a computer print out
showing the figures. In Mr. Rix’s case the sum shown is £38,990.68. Ms Dwight
received a final payment of £41,906, according to Mr. Blagbrough. In fact she
received £37,056.66 net, according to the computer print out before the EC at
the time. On the same occasion another member of staff, Mr. Gary Fabian, who
had worked in the Policy Department and had been away from work for quite
some time through ill health received a severance payment of £16,166.32. That
sum was also recorded on the same print out before the EC at the time. He was
in his 50’s.
2. Pursuant to his contract Mr Rix was entitled to four months of his annual
salary on leaving office. His annual salary was £66,000. That entitled him to
the sum of £22,000. He was also due wages for October 2003. In addition Mr
Rix was entitled to be paid for holiday leave, which he had not taken up. That
amounted to 64 days for the years 2002 and 2003. In 2002 he had not taken 31
days and in 2003, 33 days. He had, in fact, an entitlement to more holiday pay
dating back 1999. His leave that year was cancelled when the then Assistant
General Secretary, Mr. Tony West, had a heart attack and when the Ladbroke
crash occurred later that year. In 2000 he cancelled his holiday leave when the
ASLEF Report 29th June 2004 80 Report of Matthias Kelly Q.C.
Hatfield crash occurred. Those entitlements to leave were never taken up. Mr.
Rix waived his entitlement to that leave. The total of this is said to have
amounted to £38,990.68 as per the print out which was before the EC. Mr
Martin Starr in the finance office calculated the payment.
3. According to the minutes27, the Executive Committee, with all members28
present, by Resolution No 551/421 on 5th August 2003 voted to adopt the report
of the President on the arrangements for Mr. Rix leaving ASLEF. It was based
upon an oral report by the President to the Executive Committee, supported by a
computer print out, a file note detailing outstanding leave, and an outline of the
proposed benefits. The breakdown of the payment was set out in a letter dated
4th August, which outlined Mr. Rix’s entitlements. This was prepared in advance
of the EC meeting the following day. I have spoken to the President and the
Executive Committee. The President and the Executive Committee told me that
it was this Resolution, which authorised the payment of severance payments to
both Mr Rix and Ms Dwight. I accept this. It is regrettable that the Resolution
was in such a short format. However very many of the resolutions of the EC
have been, for historic reasons, recorded in such short format. I think it would
be highly desirable if resolutions were actually spelt out so that the clear
conclusion of the EC on any particular issue is apparent from its minutes.
However historically the Union has not done this. That has been the case
throughout the period of my investigation from the 1st January 1994. In fact it
27 Those minutes were not challenged at the subsequent EC meetings as being inaccurate. 28 Including the newly elected General Secretary Mr. Shaun Brady, who was a member of the EC.
ASLEF Report 29th June 2004 81 Report of Matthias Kelly Q.C.
was the practice of the Union for many years before them. In this report I make
recommendations to deal with that situation.
4. That print out has been produced to me. It is said to detail the methodology
that lead to the final payments made of Mr Rix and Ms Dwight. In fact that
document does not lend itself to easy analysis. It is difficult to see from that
document exactly how the final figures were arrived at. Because of this
difficulty I asked Mr. Rix to provide me with copies of his bank statements
detailing exactly what amount he received. He produced his bank statements,
which showed receipt of £39,010.89 or £20.21 more than the printout shows
as his entitlement. The difference is so small as to make no difference.
5. I have reached the conclusion on the basis of the evidence of the EC that
Resolution 551/421 was the authority for the payment. It was a resolution,
which was within the Executive’s powers. It is noteworthy that all members of
the Executive Committee were present at the time, according to the Minutes of
that Executive meeting. That included Mr Shaun Brady the current General
Secretary and the current Assistant General Secretary Mr Mick Blackburn. I
note that the preceding resolution (550/421) was seconded by Mr. Brady. The
resolution after (552/421) was proposed by Mr. Brady. He clearly was at the
meeting. The minutes also record when EC members left the meeting. For
example they record Mr. Wilkinson and Mr. Tyson leaving later to attend to
ASLEF business. The minutes do not record Mr. Brady or Mr. Blackburn
leaving. I, therefore, have some difficulty in accepting Mr Brady’s contention
ASLEF Report 29th June 2004 82 Report of Matthias Kelly Q.C.
that he knew nothing of this29. He certainly was recorded as being present at
the meeting and members of the EC have told me Mr. Brady voted in favour
of the resolution. The minutes record him as supporting the resolution. On the
face of the minutes I would have concluded that he was present and supported
the resolution, which covered Mr. Rix, Ms. Dwight and Mr. Fabian.
6. However, Mr. Blackburn informed me that there was a practice of the minutes
showing him (Mr. Blackburn) being present at Executive Committee meetings
when he was not. I found that surprising, because it is irregular. Mr.
Blackburn, however, did not. On 7th June 2004 I asked him about this. He told
me that it was common practice to show him present when he was not. It was
a process, he explained, which had developed over time and one which did not
concern him “so long as the EC did not overstep the mark”. No one else
asserted this as a practice. Mick Blackburn also made it clear to me that he did
not take issue with the severance payments, which were authorised by EC
Resolution 551/421. He said that, in his view Mr. Rix should be given 12
months severance pay, backdated, to accord with the arrangement, which now
applies to officers on leaving office. That was as a result of EC resolution
249/424 of 17th March 2004, effective from 1st April 2004.
7. In the light of this it may well be possible that neither Mr. Blackburn nor Mr.
Brady were actually in the room when the discussion took place and the
decision was made. In Mr. Brady’s case it is unlikely he was out of the room,
29 It is conceivable that he was out of the room at the time, though he has not said that to me.
ASLEF Report 29th June 2004 83 Report of Matthias Kelly Q.C.
as he is recorded as seconding the resolution before and proposing the one
after the resolution in question. Mr. Brady has never asserted to me that the
minutes were inaccurate in recording him as being there when he was not. He
did not claim that the practice mentioned by Mr. Blackburn occurred. I can
only conclude that there was a discussion and decision by the Executive
Committee, and it is possible that the Assistant General Secretary was out of
the room at the relevant time. It is likely that the General Secretary was
present at the relevant time. If the minutes are inaccurate as showing them
present when they were not, I have difficulty in understanding why, at the next
meeting of the Executive Committee they did not challenge the accuracy of
the minutes, which clearly show both as present. In my view these minutes are
accurate.
8. In any event the period of this Inquiry runs back to 1994. If I compare and
contrast the severance payment made to the former General Secretary Mr Lew
Adams, the payment to Mr Rix pales into insignificance. Pursuant to his
contract Mr Adams was entitled to a pension upon leaving office despite the
fact he had only been in office for four years. Mr. Adams exercised that
option. In the accounts for the year to the 31st July 2002 a reduction of
£600,000 is shown in the pension scheme. There is nothing irregular in this.
That sum, I was told, reflects the fact that the insurer of the pension fund,
Norwich Union, failed to advise the trustees that, following the retirement of
Mr Lew Adams an annuity had been purchased with the scheme’s assets to
provide for his future pension payment. The total cost to the Union of Mr Lew
ASLEF Report 29th June 2004 84 Report of Matthias Kelly Q.C.
Adam’s pension was £601,167. The cost of the annuity was £561,631. The
balance of the cost was a “claw back” by Norwich Union of the scheme bonus
that had vested on that amount (£561,631) before its error in failing to advise
the Union had been established. The annuity was bought in 2001.
9. The payments to Ms Dwight and Mr Rix, set beside this cost, pale into
insignificance. I do not criticise Mr Adams. He was contractually entitled to
this. However I do think it fair to point out that it was under the tenure of Mr
Rix that rule changes were introduced, which prevent a recurrence of this in
the case of future General Secretaries. Because it related to future General
Secretaries, and he was a serving General Secretary, this does not alter his
entitlement to a union pension. This issue has not yet been dealt with by the
union. On the face of it Mr. Rix is entitled to a union funded pension. To date
he has not claimed that entitlement.
10. In contrast, Mr. Brady, on leaving office is entitled to twelve months salary.
This amounts to £66,000. Mr. Rix’s payment was £38,990.68. Mr. Brady did
not volunteer this information. I discovered this by asking others. Although I
asked Mr Brady for a copy of his contract of employment on 8th April 2004,
7th May 2004, 17th May 2004, 24th May 2004 and on 1 June 2004 he did not
provide me with a copy. He failed to respond to the requests30.
30 Details of Mr. Brady’s failure to respond to invitations to meet with personnel from the Inquiry are set out in the section “cooperation”.
ASLEF Report 29th June 2004 85 Report of Matthias Kelly Q.C.
11. Severance payments are very common in many walks of life. It is quite
common for executives and indeed many employees when leaving their
employment for the employer to pay more that the statutory or contractual
minimum. In fact virtually every trade union in a redundancy situation seeks
to achieve that for its members. In the political world “severance” or
“readjustment” payments are made. When a Member of Parliament dies, is
defeated at an election or retires from Parliament he/she or his/her estate is
entitled to an allowance of one third of the sum of the staffing provision and
incidental expenses allowance in force at the time of cessation of membership.
In addition any Member of Parliament who ceases to be a Member of
Parliament following a General Election is entitled to a “resettlement grant” to
assist with the costs of adjusting to “non parliamentary life” the amount varies
between 50 and 100 per cent of the annual salary payable to a Member of
Parliament at the time of the dissolution. The exact percentage depends upon
the person’s age and length of service. I cite this by way of illustration.
Members of Parliament currently paid £56,358 per annum with up to £74,985
per annum as a staffing allowance.
12. The severance payment to Ms Dwight was, like that of Mr. Rix, lawful. She
had worked for the Union for some 19 years. The Executive Committee
decided by Resolution 551/421 to reward her long service to the Union. By
her contract she was entitled to notice and unpaid holiday leave. I find
nothing unusual in the arrangement that was reached with her. It is not simply
a matter of looking at the contract as Paul Blagbrough did. The matter of
ASLEF Report 29th June 2004 86 Report of Matthias Kelly Q.C.
custom and practice has also to be taken into account. In any event even if
one looks at the contract and takes account of her long service to the union her
severance payment is perfectly justified. I was told that Ms. Dwight’s
severance payment was calculated in precisely the same way as other long-
serving Office Managers. In any event it seems to me that it was perfectly
plain to the Executive Committee and to Mr Brady that severance payments
would have to be made. Mr Brady had made it perfectly plain that he did not
intend to continue with the services of Ms Dwight. I do not criticise him for
that. She was the partner of Mr Rix although that relationship had only
developed after she had been in post as the Office Manager. It would have
been surprising had she decided to remain. In those circumstances some form
of severance payment was inevitable.
13. I conclude that the payments made to both Mr Rix and Ms Dwight were:
• Sanctioned by the Executive Committee;
• Lawful; Both were entitled to receive the sums they did;
• The sums received by them pale into insignificance when compared
with the sum paid to previous outgoing General Secretaries;
• They are substantially less than what Mr. Brady is entitled to when
he eventually leaves office.
ASLEF Report 29th June 2004 87 Report of Matthias Kelly Q.C.
Section 6
The Flat of the Former General Secretary and the
Accommodation of the Incoming General Secretary
1 When Mr. Rix left office as General Secretary he also vacated a flat belonging to
the union in which he had lived during his time in office31. On leaving he took
furniture with him. He is clear that what he took belonged to him. The Blagbrough
report of 15th March 200432 dealt this issue under the heading “Possible misuse of
Union assets”. In that, and other versions of the report, Mr. Blagbrough, in effect,
accused Mr Rix of having stolen union property. He bases this upon the fact that
he had not been able to find records in the finance department proving that the
furniture in question belonged to the Union. I find this startling. What Mr
Blagbrough has done is turn established legal principles on their head and, in
effect, level an accusation against Mr Rix of theft, which, in Mr Blagbrough’s
view should stand unless Mr Rix proves otherwise. That, to me, offends basic
legal principle as well as ordinary concepts of fairness. It reverses the burden of
proof.
2 I bear in mind that at that stage (15th March 2004) Mr Blagbrough had no
evidence as to what was or was not taken from the flat. It was not until the 25th
March 2004 that Mr Blagbrough had, via Penny Bygrave, obtained a letter from
31 Flat 8 at 7, Arkwright Road.
ASLEF Report 29th June 2004 88 Report of Matthias Kelly Q.C.
the caretaker of the General Secretary’s flat (Flat No. 8) listing what in fact had
been removed.
3 I bear in mind that the caretaker, Mr Denis Hartley, does not in the document he
gave to Ms Bygrave, accuse Mr Rix of having taken anything, which did not
belong to him. He merely lists those items, which remained in the flat after Mr
Rix had left and lists those, which had been removed. Mr Hartley told me he could
not say what, if anything in the flat, belonged to the union.
4 From this it is apparent that Mr Blagbrough, by the 15th March 2004, did not have
the evidence of the caretaker, certainly in direct or written form. It is therefore
somewhat difficult to understand on what evidential basis he proceeded. He had
not at that stage even spoken himself to the caretaker.
5 Mr Blagbrough makes the point that under the Union’s Rule Book, the Executive
Committee is required to provide the General Secretary with appropriate
accommodation. In the 2002 Rule Book, rule 5 (A) (1) (g) provides that “any
member on being elected to the position of General Secretary shall reside in a
place compatible with their duties and requirements of the post. Where necessary
such residence will be provided by the union, as determined by the Executive
Committee”. There was a similar rule in the 1999 rule book, which provided “any
member on being elected to the position of General Secretary or Assistant
General Secretary shall reside in a place compatible with his duties and
requirements. That where necessary such residence will be provided by the
ASLEF Report 29th June 2004 89 Report of Matthias Kelly Q.C.
Society as determined by the Executive Committee”33. The distinction is that in the
2002 rule the reference to the Assistant General Secretary has been removed. It is
notable that the rule permits the provision of accommodation rather than impose a
duty to do so. It does not say that the accommodation is or is not to be furnished
accommodation.
6 I have interviewed the caretaker of the premises. He told me that Penny Bygrave,
the Office Manager, raised the issue of the furnishings in the flat with him after
Mr Rix had left office. She asked him if he could recall what was in flat 8 when
Mr Rix was there. He told me that he, quite frankly, did not know what belonged
to Mr Rix nor what belonged to the Union. In any event, Ms. Bygrave did not ask
him what belonged to Mr Rix and what belonged to the Union. She merely asked
what Mr Rix had removed from the flat. He told me that Ms Bygrave solicited the
statement, which appears in the report of Mr Blagbrough of The 25th March 2004.
7 The caretaker told me that everything, which was in his own flat, was his, since he
had paid for it all. Mr Rix told me the same was true of the flat he occupied.
Furniture, which was in the flat when Mr. Rix moved in, was relocated to other
flats within the building. Over time he completely, at his own expense, re-
furnished the flat. There is no evidence to contradict this. I accept his account. He
gave it freely, frankly and without hesitation or prevarication.
33 See Rule 11(3), which was also contained in the 2000 Rule Book.
ASLEF Report 29th June 2004 90 Report of Matthias Kelly Q.C.
8 The caretaker also told me, and I accept, that when Ms. Bygrave caused him to
write a letter setting out what was taken from the flat she assured him that it was
to be treated as confidential. Of course it was subsequently handed to Mr
Blagbrough and used in his report. Mr. Hartley was never asked to waive the
confidentiality. Mr. Blagbrough told me that he was unaware that the statement
was confidential. It is regrettable that Ms. Bygrave did not pass this information to
Mr. Blagbrough when she passed the letter to him. Her failure to do so is
surprising.
9 I interviewed Ms Dwight, the former Office Manager, to establish whether she
could assist in determining what did or did not belong to the Union. She told me
that there was (and is) in existence, a file in a filing cabinet in GSP34, which
detailed what was bought for each of the flats. Despite all our efforts we have
been unable to locate that file. I have no doubt whatever that the file was there
when Ms Dwight and Mr Rix left office. Since then there has been a
reorganisation of the files carried out at the request of Ms Bygrave. She, for her
part, was unable to tell me with any certainty where specific files were in the
building, and appeared to be unsure what might be in them. She told me that she
was in the process of having the filing system re-organised, with many files
moved from their original location, particularly in GSP. However, she had not,
despite being in post eight months, managed to organise those self-same files in a
way in which enabled files to be readily located and/or identified.
34 GSP is the General Secretary’s private office.
ASLEF Report 29th June 2004 91 Report of Matthias Kelly Q.C.
10 I have no doubt whatever that the file did exist and probably still exists
somewhere in the building. I have no doubt that it has been moved as part of the
general re-organisation undertaken by Ms Bygrave.
11 Ms Dwight and Mr Rix both told me that the only things taken from the flat were
property, which belonged to them. For example, they had a light fitting in the
lounge, which they had bought, and they took it with them. In my view that is
acceptable, it was their property.
12 When I interviewed Mr Blagbrough I put it to him that his report was unfair to
Mr. Rix on this topic, was unbalanced, involved a reversal of the burden of proof
and involved him in making assertions of which he had absolutely no proof. His
reply was that he did not know what furniture belonged to the union and what to
Mr. Rix. He said he had, therefore, made assumptions. The main assumption was
that the flat must have been furnished. I cannot accept that as a fair approach. I
reject it.
13 Perhaps, spurred by my comments, Mr Blagbrough continued to “investigate” in
order to obtain “evidence”. In my view what he was engaged in was a process of
trying to find evidence to support a conclusion he had already reached. Mr
Blagbrough wrote to me on the 12th May 2004 with what he termed was further
“evidence”. The only people to whom he spoke to in this further chase for
evidence was Mr Lew Adams, the former General Secretary, and Mr Mick
Blackburn, the Assistant General Secretary. He applied the same methodology:
ASLEF Report 29th June 2004 92 Report of Matthias Kelly Q.C.
he, Mr. Blagbrough, would make the allegation and it was for Mr Rix to prove the
contrary. In my view this is unfair and contrary to legal principle. In my view his
conclusion is unsustainable and without reliable evidence.
14 Mr Blagbrough, in each of the versions of his report that I have seen, urged the
Executive Committee to instruct the General Secretary to seek legal advice as to
the recovery of the property. In my view the Executive Committee would be ill
advised to undertake such a course. Such legal action as might result, even
assuming any lawyer were to suggest that there was enough evidence to begin
proceedings, would be doomed to failure. I have no doubt whatever that any legal
action brought against Mr Rix would fail for the very simple reason that there is
little in the way of reliable evidence to support it.
15 I accept the evidence of Mr Rix, Mr Hartley and Ms Dwight. There is no
evidence that the items taken from the flat ever belonged to anyone other than Mr.
Rix. I conclude that the property taken from Flat 8 belonged to Mr Rix and he was
entitled to take it.
16 Mr Rix bought property for the flat using his Union credit card. However that
money was repaid through deductions from his pay and expenses and also by way
of a loan, which he repaid. I accept his account. On his monthly pay statements a
deduction is shown for a loan that Mr Rix had from the Union. I note that Mr
Blagbrough did not ask Mr Rix what that loan was for. In fact he never spoke to
ASLEF Report 29th June 2004 93 Report of Matthias Kelly Q.C.
Mr. Rix or Ms. Dwight. Moreover he did not ask the Union’s then finance officer
Mr Martin Starr what it was for.
17 Mr. Rix told me, and I accept, that the loan was for, inter alia, furniture. I
conclude that furniture was bought for the flat using Mr. Rix’s union issued credit
card. However, he repaid those sums over time through deductions from his
salary, expenses and through repayment of the loan. The transaction was honest
and above board and is documented. I conclude that the property belongs to Mr
Rix. I regard this particular episode as unfortunate. In this episode Mr Blagbrough
would have benefited by speaking to Mr. Rix to establish what his version was.
The allegations, which are without substance, have been used, by some members
within the union, in attempts to discredit the previous General Secretary.
ASLEF Report 29th June 2004 94 Report of Matthias Kelly Q.C.
Section 7
Information Technology Concerns and the Issue of Paralogic
1. Ten years ago, when Lew Adams was General Secretary of the union a small
company, Harris Information Technology, supplied the union with some PC’s.
Adam Plant worked for that company as an engineer. He dealt with George
Venus, who, at that time ran the finance department of the union. Debbie
Dwight worked in administration. Another company supported the IT network
in Arkwright Road. Four years later the union decided to upgrade its system
(save for the union’s membership server) to a Microsoft platform. The project
went out to open tender. George Venus managed the process. A company
called Dan Network Solutions tendered and were chosen. They undertook the
upgrade and provided hardware and software support. Adam Plant by then had
moved to Dan Network Solutions but had no involvement with the union. One
year later he began to deal with the union’s account with the company, when
he moved to the company’s sales department.
2. By 2002 Dan Network Solutions was bought by its management. It was re-
named Paragon Communications. Adam Plant continued to work in sales for
the company, managing a variety of its customer accounts, including ASLEF.
Paragon Communications, however, went into receivership in late 2002.
Paralogic Networks Ltd (“PNL”), under the leadership of Mr Steve Elliott,
bought the assets and liabilities of Paragon Communications from the receiver,
ASLEF Report 29th June 2004 95 Report of Matthias Kelly Q.C.
which included its contractual support commitments. It took on many of
Paragon Communications’ staff and most of its support staff. It is a separate
company from Paralogic Ltd. Paralogic Ltd, as opposed to Paralogic Networks
Ltd (“PNL”), is a company whose main activity is data storage and
management. Paralogic Networks Ltd (“PNL”) was formed to take over the
assets and liabilities of Paragon Communications35. From the 23rd October
2002 the service and support obligations of Paragon to the union were
discharged by Paralogic Networks Ltd (“PNL”), employing staff who had,
until then worked for Paragon. In this there were obvious attractions for the
union, not least, of which was continuity and the fact that no extra additional
expenditure was involved.
3. PNL continued to supply the union with various computers, printers and
software. They provided the union with IT support. It was only when Ms
Dwight became office manager in 1999 that she had direct dealings with Mr.
Plant. Early in 2003 the union and PNL entered into negotiations for a new
contract. A fresh contract was entered into on 10th March 2003. It was
effective from 1st March 2003. The contract lists the machines to be supported.
It is noticeable that many were, in IT terms, very old. Thirty-two of the
machines identified in that contract date from the Dan era. The agreement was
for five years. This is not a particularly long or unusual contract. For PNL the
commercial advantage was having a commitment from the union as a
customer. For the union it had the advantage of a lower price and a service
35 See the letter of 23rd October 2002 at Appendix 6.
ASLEF Report 29th June 2004 96 Report of Matthias Kelly Q.C.
provider who knew its IT system and likely problems. Increases in the service
charge were limited to the retail price index. The price for the service
delivered was competitive. The union did not loose out in this contract, in my
view. This view is shared by Mr. Peter Sommer, an IT specialist I retained to
assist on IT aspects of this Inquiry36.
4. There is no evidence that the dealings between the union and PNL were other
than open and above board. There is no evidence that the relationship and
dealings of Debbie Dwight and Adam Plant were anything other than proper
and professional. Mr. Blagbrough, in his report, at page 2137 wrote, “It is
believed that there is a long-term personal relationship between Ms Dwight,
the former Head Office Manager, and Adam Plant, a director of Paralogic”.
Firstly it is clear that Mr. Blagbrough is relying here on something less than
fact by his use of the word “believed”. Secondly there is a clear implied (if not
express) suggestion that the relationship was such as to cause Ms Dwight to
behave in a way, which was to the union’s detriment. I have found no
evidence that this was so. In fact no one gave us any indication to the
contrary38. Mr. Blagbrough did make it clear to me that he did not intend to
imply any impropriety. I accept that. He later told me that in his report he was
not implying impropriety. He said, “ I meant as friendship – with nothing
improper”. It is a matter of regret that Mr. Blagbrough did not ask Debbie
Dwight or Adam Plant about it.
36 See his report at Appendix 9. 37 The draft of 15th March 2004. 38 Mr Plant is in fact not a director, but a “Sales Consultant.”
ASLEF Report 29th June 2004 97 Report of Matthias Kelly Q.C.
5. In the period 20th October 2003 to 10th February 2004 when the General
Secretary, Mr. Brady, summarily dismissed them, PNL played a helpful and
positive role. PNL’s contract with the union did not require them to engage in
“information retrieval”. Nor does the contract require PNL, as an IT support
company, to ensure that back-up tapes were made and were available. The
duty to ensure that the server is backed up rests firmly upon the client, in this
case the union39. The Office Manager acknowledged, in a memo to Shaun
Brady, that the back up of IT files was “not explicit” in the job description of
the deputy to the Finance Officer40. In fact it is not mentioned at all. The same
is true of Martin Starr’s job description. However, as a matter of practice, it
was the finance department who normally carried out the task of backing up
the data on the server onto tape. Backup was achieved by placing a tape in the
server and the IT service company remotely activating the backup onto the
tape.
6. At the request of Penny Bygrave, PNL took on this task on the 24th October
200341. It was PNL who analysed the back-up tapes, in the first instance, and
found them to be blank. They did not have to do so. They did so as a gesture
of goodwill. Mr Blagbrough says, in his report of 15/3/04, that there were
39 See clause 6 of the terms and conditions of the contract, Appendix 7. 40 This post is held by Minaxi (Mina) Chavda who has been on sick leave since Wednesday 22nd October 2003. She attended an “investigatory” interview in December 2003. She has been suspended ever since. 41 Ms Bygrave in a memo to Mr. Brady dated 24/10/03 informed him that PNL had taken on the task as of 23/10/03 and that arrangement would continue “until further notice.”
ASLEF Report 29th June 2004 98 Report of Matthias Kelly Q.C.
only three possible explanations for the failure to ensure that data from the
server was “backed up” on tape. The first, he says, is that the server was never
backed up and the tapes were never, therefore, used. The second possible
explanation he advances is that the tapes had been systematically wiped clean
to erase all records held on them and the third explanation he advances is that
the tapes had been removed and replaced by new blank tapes. In that report he
concluded, “it is believed that the tapes were systematically wiped clean.”
7. There is no evidence contained within the report to justify that conclusion or
“belief”. When I interviewed Mr. Blagbrough he told me that he based it upon
a report he had from The CAS Network. I deal elsewhere in this report with
that report. The fact is that the tapes were not backed up. The staff who
undertook the task were suffering from stress and then were off work ill. The
new Office Manager failed to check to ensure that there was any back up of
data for three days. A pragmatic and simple answer lay in contacting PNL
and/or simply buying new back up tapes. The tapes in question cost £29.00
each42.
8. Mr. Blagbrough, in his report, says that there was no back-up effected to the
central server between the 13th and 28th October 2003. In a memo to Shaun
Brady on 24th October 2003, Penny Bygrave records that Adam Plant told her
on the 23rd October 2003 that the server had not been backed up since 14th
October. According to that memo PNL undertook the back up from 23rd
42 DTL 40/80GB (C5141F)
ASLEF Report 29th June 2004 99 Report of Matthias Kelly Q.C.
October 2003. The report from PNL clearly states that the failure to back up
the data was on 16th, 17th, 20th, 21st and 22nd October 2003. This does not
support the assertion in Mr. Blagbrough’s report that “from 13th to 28th
October 2003- the equivalent of 10 backup tapes- there was no successful
back-ups of the union server.” Their contemporaneous report, which I found in
the Office Manager’s office after her suspension, clearly show that there was
no back up on the 16th, 17th, 20th, 21st and 22nd October. In short, on five days.
The office Manager’s Memo to Shaun Brady states that backup was being
undertaken by PNL “as of 23 October”. CAS, in their report said, “From 13th
to 28th October 2003 there appear to have been no successful back ups of
data.” Mr. Ward, from CAS, reasserted this to me when I saw him. However, I
have not been provided with any thing other than assertion on this issue.
However, I do have contemporaneous documents, including Ms. Bygrave’s
memo to Mr. Brady. In the event it may not matter as no additional data is
alleged to have been lost in the extended period. Had there been the allegedly
longer period of failure there is no reason, in my view, why the Office
Manager or her deputy, could not have arranged for back ups to be made. The
tapes themselves cost approximately £29 so the excuse that the tapes were in a
locked safe is a weak one. I conclude that there was a failure to back up data
on five days. I do not, therefore, agree that there was no back up from 13th
until 28th October 2003.
9. How this failure to back up the data came about is another matter. We simply
cannot say why the tapes were blank. It may well be, and I think it is more
ASLEF Report 29th June 2004 100 Report of Matthias Kelly Q.C.
probable, that there was simply a failure to carry out the back-up operation.
This is not the only occasion on which there has been a failure to achieve a
back up of data on the server. The server failed to back up on 18th and 19th
December 2003. The explanation for this is recorded in a file note in the
General Secretary’s office (GSP) as “the tape being prematurely ejected after
the backup commenced wed 17th at 20.00”. The same file note records that
“the backup of the 17th was terminated by restarting the server – today 22nd
December 2003.” At the request of Penny Bygrave43, PNL took on this task on
the 23rd October 200344. It was PNL who analysed the back-up tapes, in the
first instance, and found them to be blank. They provided a written report to
the office of the General Secretary dated 24th November 2004 on this issue
amongst other IT issues. That told the union when there was a failure to back
up the data. It also told the union that the backs up tapes were “either new or
blank as no evidence of a back up were (sic) found on the tapes.”
10. PNL provided a managed service for ASLEF. They provided a network
engineer on site on a daily or weekly basis. This arrangement suits clients who
are either not big enough to employ their own IT manager or who don’t want
to. Prior to March 2003 Debbie Dwight managed the IT operations and called
upon PNL, for example, to prepare new work stations, set up remote users,
resolve software issues or carry out new installations. At this time PNL,
usually when called, and otherwise at regular intervals, undertook routine
43 Office manager. 44 Ms Bygrave in a memo to Mr. Brady dated 24/10/03 informed him that Paralogic had taken on the task as of 23/10/03 and that arrangement would continue “until further notice.”
ASLEF Report 29th June 2004 101 Report of Matthias Kelly Q.C.
maintenance. The chargeable calls averaged one every two to three weeks. A
new weekly managed service commenced on the 5th August 2003. PNL
provided a weekly half day visit to manage IT operations and resolve
workstation issues previously undertaken by Debbie Dwight. As it was known
that Debbie Dwight was leaving this was, in my view, a sensible arrangement.
She initiated it. She did so to minimize IT problems when Mr. Brady took
over. She was anxious to ensure that there was full IT support available to the
union. In so doing she behaved responsibly, in my view.
11. Usually a list of tasks would be supplied to the visiting engineer such as a
machine failing to boot up. Users were also able to e-mail faults directly to the
engineer prior to his visit to the offices. The sort of things the engineer from
PNL did when at Arkwright Road included moving machines, setting up new
users, resolving print problems and managing anti-virus software. Whilst there
the engineer would sort out any problems which had arisen. In their report of
24th November 2003 PNL set out the visits their engineer had made. I was not
supplied with the documents by the office of the General Secretary. I was told
they could not easily be found. After the suspension of Mr. Brady, Mr.
Blackburn, Ms. Bygrave and Ms. Atkinson I went to the office myself and was
able to locate the relevant paper work within minutes. I had been unable to do
so before as Ms. Bygrave and Ms. Atkinson occupied it. One file I found there
related solely to PNL and included handwritten notes of all visits by PNL
between July 2003 and November 2003. It also included reports from the PNL
engineer in respect of each visit. Every visit was justified.
ASLEF Report 29th June 2004 102 Report of Matthias Kelly Q.C.
12. When the issue of the deleted files arose, PNL themselves attempted to
recover the deleted files. They did not have to. They were not contractually
bound to do so. They had played no part in deleting files. They (PNL) were
asked by Penny Bygrave to assist in an attempt to recover the files. They
readily did so. They advised the union to bring in “Vogon”, a firm who are
recognised and respected as specialists in data recovery, to assist. The union,
in the form of Ms. Bygrave and the General Secretary do not appear to have
taken up that suggestion. Despite repeated invitations to show me any report
that was commissioned and received from a specialist data recovery firm I still
have not received any. I draw the inference that no such firm was instructed.
Instead they went to The CAS Network (CAS), on the recommendation of
Paul Blagbrough. CAS now provide IT services to the union. In my view
Paralogic recommending Vogan is totally inconsistent with their being
implicated in any way in any dubious dealings with the union’s IT system. I
cannot see why they would have recommended involving Vogon, a company
with which they had no connection, if they had anything to hide. I cannot see
any basis on which any other conclusion could be reached.
13. Mr Blagbrough came to the conclusion that “erasing directories therefore
requires some specialist understanding”. I cannot agree. Mr. Paul Sommer,
an independent forensic IT consultant whom I engaged to assist me with
matters of information technology, advised me that running a de-
fragmentation programme can do the same thing. The running of such a
ASLEF Report 29th June 2004 103 Report of Matthias Kelly Q.C.
programme in not unusual. Many people run such programmes on their own
PC’s. Indeed CAS acknowledge that the running of such a programme has this
effect in their report to Mr. Blagbrough when they say “that the deleted files
where (sic) expunged from the file allocation table on the server, either using
a specific and relatively sophisticated utility….and/or using a more readily
available utility like windows Defrag.45” Mr. Blagbrough “conjectured” 46
that the successful erasure of directories and the “systematic and thorough
approach adopted to achieve that end would not have been possible without
specialist advice and support.” I do not accept that “conjecture” has any place
in such an exercise. A review must operate on evidence, not conjecture. Any
member of the union would be appalled if they he/she was to be judged on the
basis of conjecture.
14. In that passage Mr Blagbrough impugned the integrity of PNL. They were the
only people on the scene at the time who had specialist knowledge. Any fair
minded reader of what is written in the Blagbrough report would come to the
conclusion that Paralogic were complicit in the deletion of files and the
destruction of back-up data. I regard that as indefensible without compelling
evidence. There is none. Apart from anything else it lays open the maker of
that allegation to legal action. It is immensely damaging to the commercial
interests and reputation of PNL.
45 CAS Network report, page 3, undated. 46 His word. My emphasis.
ASLEF Report 29th June 2004 104 Report of Matthias Kelly Q.C.
15. Mr Blagbrough went on to deal specifically with Paralogic47 as a company.
Under the heading “Paralogic” at page 47 of his report he says, “the missing
directories appear to have been deleted deliberately and therefore some
technical and sophisticated methods were used to remove any evidence of the
directories’ existence or their deletion. Such methods are unlikely to have
been used without outside technical assistance.”
16. On its own that would certainly lead the reader to point the finger at PNL.
However, Mr Blagbrough goes on to say “there is no evidence that this
support was provided by personnel from Paralogic but the circumstances-
relationships, intensity of presence on site at the crucial time, knowledge,
access to the system etc, do cause concern.” On 2nd June 2004 Mr. Blagbrough
told me that he was suspicious that an individual, who he did not want to
name, from PNL was involved in the deletion of files. That, too, is
unacceptable. Firstly it is mere suspicion and secondly, there is no evidence to
support it. If there is any evidence, no one has provided it to me. I reject an
approach based on suspicion without evidence.
17. I regard this as unacceptable and defamatory of Paralogic Ltd and Paralogic
Networks Ltd. There is no evidential support for it. I think it was unwise of Mr
Blagbrough to have reached that conclusion or even written such words
without compelling evidence in support. He went on, in his report, to say that
Paralogic “have at the very least been grossly negligent in their failure to
47 In referring to “Paralogic” I take him to mean Paralogic Networks Ltd, whom I term “PNL”.
ASLEF Report 29th June 2004 105 Report of Matthias Kelly Q.C.
ensure adequate Internet security. In their transfer of the fire wall protection
from the old server to the new server in February 2003, they left one modem
port unprotected.48” This is not unusual. Far from having a sinister motive it
is common practice to enable the IT support company to have access remotely
to the system in order that they can ensure that the system continues to
function effectively. It was through this port that backup was achieved and
how PNL were able to assist the union in ensuring that the data on the server
was backed up from 23rd October.
18. In my view Paralogic Ltd and Paralogic Networks Ltd (PNL) are due an
unreserved public apology from the union together with a public
acknowledgment from the union that they (both Paralogic companies and their
staff) have not engaged in any nefarious, illegal or incompetent activity.
Whether Mr. Blagbrough offers them an apology is a matter for him.
19. PNL’s contract required them to increase their support visits from 5th August
2003. Ms. Dwight, in arranging this regime of closer skilled IT support for the
union, was trying to ensure that there was proper IT support in place when she
left her employment with the union and the new General Secretary took over.
PNL were required to attend the office more often when the new General
Secretary took over. They did so. PNL told us that Julie Atkinson and Penny
Bygrave had limited IT knowledge. I agree with that view. Penny Bygrave
48 He appears to rely on the CAS Network report for this.
ASLEF Report 29th June 2004 106 Report of Matthias Kelly Q.C.
told us that she had limited IT skills. PNL were, at that stage, undertaking
tasks, according to PNL which Debbie Dwight would have undertaken herself.
20. Shortly after the change of management at the union it was reported to the
engineer that Penny Bygrave had looked in the folder “my recent documents”
on Debbie Dwight’s PC. There were shortcuts to files in that folder. When
Penny Bygrave tried to access those files the files could not be found. The
engineer was asked to look. He could not access the file either. The engineer
asked to see the back up tapes. He was told they were in the safe and it was
locked. The person who had the keys was off sick. PNL examined the back up
log, which was on the server. This is how the whole issue of the deleted files
and the failure to back up the tapes came about. It is a supreme irony that it
was PNL who received so much of the blame when they did what they could
to assist. It was Adam Plant from PNL who suggested looking at the server,
which had been replaced in February 2003, to compare the files on it to the
files on the server then in use in order to see what was no longer on the current
server. That is how the list of nine deleted directories was established: at
PNL’s suggestion and through their work. It is, in my view, incompatible with
PNL being involved in deleting files. It was they who recovered the files up to
February 2003. It was PNL who restored access to the personal electronic mail
boxes of Mick Rix and Debbie Dwight for the new management, who,
apparently wanted access to the mail boxes of Mick Rix and Debbie Dwight.
ASLEF Report 29th June 2004 107 Report of Matthias Kelly Q.C.
21. Julie Atkinson, who works in the General Secretary’s office, wanted to access
password protected files used by Debbie Dwight. These were “word” and
“excel” files. She spoke to PNL’s engineer when he was on site. He explained
that he could load a tool called Advanced Password Recovery Program
(“APRP”). She told him to load it. He did. It was loaded on 25th November
2003. He told her how to operate it. On 2nd June 2004 we found in her office,
after she had been suspended, a file marked “Deleted data reports and faxes”.
In that file were instructions entitled “How to use password recovery program
on server”. Those instructions, together with the PNL job sheet are attached in
Appendix 8.
22. Mr. Blagbrough in his report49 said, “it is not clear why ASLEF needed this
software and ASLEF’s current senior management was not aware of its
existence on the server”. I cannot accept that they were unaware. They were
aware it was installed. They had it installed. Julie Atkinson asked for it to be
loaded. Julie Atkinson signed PNL’s job sheet50, which clearly said it had been
loaded. They stood by while this “offence” was related in the Blagbrough
report and the loading of the software was being attributed to the previous
senior management. I find that unacceptable. In my view Mr. Blagbrough
should have been told by the senior management that it was at their request it
was installed. Instead nothing was said and PNL got the blame.
49 15th March 2004, page 46. 50 The job sheet, dated 25/11/03, is at Appendix 8.
ASLEF Report 29th June 2004 108 Report of Matthias Kelly Q.C.
23. On the morning of 10th February 2004 Adam Plant was summoned by Penny
Bygrave to attend at Arkwright Road. He arrived in the company of Steve
Elliott, a director of PNL. They met the General Secretary Mr. Brady. A litany
of complaints was raised about PNL. The complaints included a lack of IT
security, the presence of a “Trojan” and the inefficiency of the system. The
union’s management wanted, in effect a very high level of security but were
unwilling to pay what it would cost. To re-use a well known phrase, Mr.
Brady wanted “a Rolls Royce on Ford money”. Mr. Brady told PNL that the
union had lost confidence in the company. Ms Bygrave repeated this view to
me when I saw her. With that he summarily terminated their contract. In my
view he was not justified in so doing.
24. Following that meeting Mr. Brady wrote to PNL by letter dated 27th February,
franked on 2nd March and received by PNL on 3rd March 2004. I do not know
why there was this delay. I have seen an earlier much longer draft of this
letter, which was not sent. That implies to me that a decision had been taken
by Mr. Brady prior to the meeting of 10th February 2004 to dismiss PNL. That
is borne out by Mr. Blagbrough who told me he knew, at the time, that there
would be “an exposure” to Paralogic if they were sacked. By this he meant the
union would probably be in breach of contract. He told me he advised the
General Secretary of this. He further told me that Mr. Brady nevertheless
“took the decision to terminate them”. On this basis Mr. Brady deliberately
took a decision to terminate the contract of PNL, knowing it would probably
ASLEF Report 29th June 2004 109 Report of Matthias Kelly Q.C.
cost the union a substantial amount of money for breach of contract, if PNL
sued the union.
25. PNL told me that they were deeply shocked by the Blagbrough report and
their subsequent treatment by the Union. I understand and sympathise with
this view. Their solicitors sent a letter before action, dated 17th March 2004, to
the union indicating a clear intention to sue. It contained a rebuttal of the
various allegations made against PNL. The matter is still ongoing between
solicitors for the union and PNL.
26. In my view the union has treated PNL unfairly and the union unjustifiably
breached their contract when they were dismissed. Serious allegations have
been made against them when there is little credible evidence to support the
assertions. Penny Bygrave told me, frankly, that she had “lost confidence” in
PNL because they were “not pro-active”. I find little to support that view,
objectively. She told me that from 20th October 2003 there was an atmosphere
of “heightened paranoia” in the office. I agree that such an atmosphere seems,
regrettably, to have existed. It was in such an atmosphere that this sorry saga
developed and as a result of which PNL was summarily dismissed by Mr.
Brady.
27. It is my view that Paralogic Ltd and PNL, as companies are due a public
acknowledgment from the union that they (Paralogic Ltd and PNL) have not
engaged in any nefarious, illegal or incompetent activity. In my view PNL
ASLEF Report 29th June 2004 110 Report of Matthias Kelly Q.C.
have been treated unfairly by the Union and their contract was unjustifiably
breached by the Union when they were dismissed by the General Secretary.
Serious allegations have been made against them when there is little credible
evidence to support the assertions some of which can, at best, be described as
“wild”. Tim Ward of CAS told me on 18th June 2004 that there was a belief
that the union’s server was being attacked by the CIA and MI5. As Penny
Bygrave told me on 7th June 2004 “there was a heightened sense of paranoia
at the time about Paralogic”. Mr. Tim Ward used the word “paranoid” when I
saw him on 18th June 2004 to describe the mind set in GSP at the time. In my
view “paranoia” is a good description of the mind set in the union under Mr.
Brady’s leadership at that time. That mind set led Ms. Byrave to access the e-
mail boxes of staff members. In interview on 7th June 2004, this exchange took
place:
M Kelly: “Did you access people’s e-mail accounts?”
P Bygrave: “Yes. Those of Pam Tatlow, Martin Starr, Marian
Kearney and Peter Olech. No others to my knowledge. They had
given notice and told that they had worked “against us” to obstruct
things. In any event the policy was that e-mails should not be for
personal use and so I interpreted that as allowing me access to their
accounts.”
ASLEF Report 29th June 2004 111 Report of Matthias Kelly Q.C.
28. This sorry saga is based on a lack of trust and hysteria. It began when the then
acting office manager could not find files shown in the recycle bin of Debbie
Dwight’s PC. It continued with a belief that people outside the office were
attacking the union’s IT system. It culminated in PNL being sacked. That
same mind set, hysteria and unlimited levels of distrust continues today with
the new regime under Mr. Brady intent on proving that the former regime
were the “bad guys”. It is totally destructive of the union and is, in my view,
contrary to the best interests of the membership of the union.
ASLEF Report 29th June 2004 112 Report of Matthias Kelly Q.C.
Section 8
The deletion of files:
1. There have been suggestions in the past51 that the deletion of 9 files from the
server at Arkwright Road was “systematic” “deliberate” and “would not have
been possible without specialist advice and support”.52
2. This is another example of reversing the burden of proof. It assumes the worst
possible motives. Mr. Blagbrough says in his draft report “It is not possible to
state categorically that their deletion was not to conceal wrong doing.” I
reject this approach. I fail to see how Mr Blagbrough can start from the
proposition that the deletion must have been to conceal wrongdoing. Apart
from anything else it is a highly risky position to take in law. If Mr
Blagbrough were called upon to justify this in a court of law I doubt very
much if he could. There simply is no evidence of wrongdoing. I therefore fail
to understand how he can advance a proposition, which does not have a shred
of evidence to support it.
3. I am in no doubt that files were deleted. Debbie Dwight told me, quite openly
and frankly that she did in fact delete files. The files, which she deleted, were
she said, personal files held in a folder marked “Debbie”. In my view the files
were not of enormous significance.
51 Blagbrough report of 15th March 2004, pages 44 and 45. 52 See the Blagbrough Report of 15th March 2004.
ASLEF Report 29th June 2004 113 Report of Matthias Kelly Q.C.
4. Ms. Bygrave and Mr. Blackburn made much of the absence of a file called
“Annual Conference 2003”. The annual assembly of delegates, of course,
takes place each year. The Annual Assembly of Delegates was usually
organised by Debbie Dwight. However, in 2003 the Sian Cartwright in the
policy Department took on most of the organization. She still works in Head
Office. The 2003 AAD was, therefore, not the sole responsibility of Debbie
Dwight. In any event the AAD is a comparatively small conference. It does
not require a particularly significant organisational effort to ensure that it
functions smoothly. The practice is well rehearsed and known. The hotel was
booked. It was a simple matter of contacting the hotel in order to obtain
details of the booking. I don’t regard that step as being difficult to take. That
in fact is what was done. Mr. Blagbrough reached the view that inexperienced
staff in GSP would have had difficulty in organising a conference for 2004
without this file. I question the wisdom of having “inexperienced staff”
organising the conference. It seems to me that the Policy Department could
well have been entrusted to organise the 2004 conference as it had the
technical aspects of the 2003 conference53. In any event if “templates” were
needed they were available from the 2002 conference. It does not require a
great deal of imagination, in my view, to apply those. In my view there was a
great deal of “hype” concerning the deletion of this file. I have no doubt that
its deletion was regarded by Ms Dwight as insignificant. I can well see why.
There is no reason to assume that there was anything of major significance in
53 Sian Cartwright in policy took on the organization of AAD 2003 and did so from scratch.
ASLEF Report 29th June 2004 114 Report of Matthias Kelly Q.C.
that folder which was deleted. I asked Sian Cartwright whether anyone asked
her about the files for the 2003 AAD. She told me that no one did. I find that
startling. There was nothing to stop Mr. Blackburn, Mr. Brady, Ms. Bygrave
nor Ms. Atkinson going to Ms. Cartwright and asking for assistance. Instead
they, in my view, decided to make the most of the deletion of these electronic
files. I asked Ms. Cartwright if she had any files relating to it. She told me she
did and that they had been taken to GSP. She also gave me copies of the
electronic files she had on her computer.
5. The files which were deleted by Debbie Dwight were are follows:
(1) Amendments 2002
(2) Debbie
(3) Hardship Fund
(4) Honorary Fund
(5) Hotel
(6) New Branch
(7) PDF
(8) TIFS
(9) XMAS
6. I have been provided with a copy of the files up to February 2003 and a copy
of the files, which Debbie Dwight made on disc prior to deleting them from
ASLEF Report 29th June 2004 115 Report of Matthias Kelly Q.C.
ASLEF’s system. To convey an idea of what was in those deleted files I go
through each in turn:
7. The file “Amendments 2002” contains, for example, a proposed amendment
from Bishop Stortford relating to item 76 of the Agenda of the AAD in 2002
and a change of wording in clause 32.1(c). All of this, in any event, is
recorded in the verbatim record of the conference. Another relates to
proposed amendments from Brighton. I cannot conclude that any of this is of
particular significance since all of the material contained within it is available
elsewhere, for example, in terms of the agenda and the report from the
conference itself.
8. The file marked “Debbie” contained records of the proceedings at the 1996,
1997, 1998 and 2000 Annual Assembly of Delegates. These cannot be said to
be irreplaceable, since this material is published and readily available in hard
copy. It also contains the 2002 rulebook, which she typed. That too is readily
available.
9. The file “Hardship Fund” contained routine pieces of correspondence such as,
for example, a letter explaining the refusal of a claim and letters recording a
decision to allow a claim.
10. The file marked “Honorary Fund” contained one letter which was a template
inviting a member for a presentation.
ASLEF Report 29th June 2004 116 Report of Matthias Kelly Q.C.
11. The file marked “Hotel” contained one letter confirming a hotel booking for
the General Secretary
12. The file marked “New Branch” contained one letter to a District Secretary
conveying an EC resolution. Again I do not see how that could conceivably
be said to impede the operation of the Union.
13. The file marked “PDF” relates to files held in Acrobat Reader form and
consists of the minutes of the Executive Committee meeting. All of those are
available already in hard copy within the Society as well as being available to
every member. Indeed I have a copy.
14. The file marked “TIFS” contains nothing more than a series of graphics,
which, amongst other things, includes the Union’s logo. It also contains the
draft of the Union’s Annual Report and Financial Statements for the year
2001. Again that is freely available.
15. As for the folder marked “XMAS” this is no more than a Christmas card list
for the Union. The same was available for the previous year.
16. Mr. Blackburn the Assistant General Secretary told me on 7 April 2004 that
the records in relation to the AAD 2003 were missing. He said that this made
it difficult to organize the 2003 Conference. Ms Bygrave on the 26th April
ASLEF Report 29th June 2004 117 Report of Matthias Kelly Q.C.
2004 told me that the delegate file for the AAD 2003 was missing and that
hampered her preparation of the AAD 2004. Mr Blagbrough in his report of
25th March 2004 wrote: “The AAD is a comparatively small conference but a
significant organizational effort is required to ensure it functions smoothly.
There is a clear annual timetable and routine dealing with delegates, the
conference hotel and a host of suppliers. The preparatory timetable, the list of
“things to do” and the standard correspondence with suppliers was deleted”.
He never spoke to Bev Quist or Sian Cartwright.
17. However, on the 24th May 2004 I went to the General Secretary’s office with
Ms Bev Quist54. We looked in one cupboard, and within seconds were able to
locate the file “Delegates AAD 2003”, which hitherto had been said to be
impossible to find. We were able to, within a further couple of seconds, locate
two further files in the same cupboard, which had hitherto also been said to be
impossible to locate. There are now relatively few files in that particular
cupboard. Ms Quist told me, and I accept, that formerly there were many
more. Ms. Bygrave told me she had the files re-organized since taking up her
duties. Neither Ms Bygrave nor Ms. Atkinson mentioned the existence of
these files to me when I previously visited their office to talk about missing
files. I have come to the conclusion that neither Ms. Bygrave nor Ms. Julie
Atkinson can have looked very far nor hard for the files, if they looked at all.
If they did look they can’t have engaged in an extensive search. If they didn’t
look I find it appalling that they insisted that the deletion of the electronic files
54 She previously worked in the General Secretary’s office. No one ever asked her for assistance in locating files or anything else said to be missing.
ASLEF Report 29th June 2004 118 Report of Matthias Kelly Q.C.
for the AAD 2003 hampered their organization of the 2004 conference. This
was an example of a readiness to assume the worst of the previous
administration when, in fact, it shows that those who succeeded them were
unable, for reasons I can’t understand, prepared to familiarize themselves with
the contents of the building, particularly the General Secretary’s office and all
too ready to assume when something wasn’t immediately to hand that it must
have been destroyed. That is not in the best interests of the union. I am
surprised that no one in the General Secretary’s office called on Bev Quist to
assist. She had worked there for years and was likely to know where things
were filed. This is despite Bev Quist having offered to give such help. Because
she was “identified” with the previous administration her offer of help was
never taken up. At best it shows poor organisational and managerial skills.
18. There was also a file deleted called “Bev”. That again was correspondence
generated by Beverley Quist, which is available elsewhere. It contained
nothing of any financial significance or import. The sort of files it contained
related to correspondence in relation to applications for membership being
filed on the correct form.
19. Another file called “Alex” was deleted. It contained extension lists for
telephone numbers at the head office. I cannot attribute any significance to
this, as that document is widely available to all employees within the head
office. Yet another example of a file, which was deleted, is one, which has a
ASLEF Report 29th June 2004 119 Report of Matthias Kelly Q.C.
template for visitor passes to the head quarters building. Again this is widely
available elsewhere within the building.
20. I conclude that these files were deleted. They did not contain anything, which
was incapable of replication.55 Above all there was no sinister motive for their
deletion. Ms Dwight was open and honest and immediately explained what
she did. I accept her evidence as to what happened. I reject the approach of
Mr Blagbrough on this issue. It is an exaggeration to say, as one early draft of
Mr. Brady’s letter to PNL of 27th February 2004 did, “the union suffered a
near catastrophic loss of data in October in the period before and, without us
being aware of it, in the first few days after I took up office”. No doubt that is
what Mr. Brady was advised the position was. However, the reality was much
less dramatic. The hysteria, which has surrounded this issue, is, in my view,
without justification or foundation. It has done nothing but damage to the
reputation of the Union. In addition three IT experts have been retained in
order to try to reconstitute this data simply because of the hype, which was
associated with the initial allegation. That in itself has cost the Union
significant amounts of money and is, in my view, deeply regrettable.
21. This whole saga in respect of deleted files began when Penny Bygrave, as the
newly appointed as Office Manager, went to a folder marked “recent
documents” on a computer operated by Debbie Dwight and found that the
55 Sian Cartwright told me that when she worked on the organisation of the 2003AAD she was not able to obtain any real assistance from looking at the documents, which had been produced for the 2002 AAD.
ASLEF Report 29th June 2004 120 Report of Matthias Kelly Q.C.
shortcut did not lead to the documents. Ms. Bygrave on her own admission has
very poor IT skills. There then followed what I can only describe as an
hysterical process. It led to was the sacking of PNL56 as the Union’s IT
consultants, the laying open of the Union to a potentially successful claim for
damages by Paralogic Ltd and PNL. It led to the Union being made to look
ridiculous in the public eye. After extensive IT investigations we are left with
a finding that nothing of any particular operational significance was in fact
deleted and certainly nothing, which was incapable of replication.
22. I am puzzled as to why CAS did not interpret its instructions to recover the
lost folders – apparently at the time thought to be particularly valuable and
irreplaceable – to see if copies of them did not exist elsewhere on other
computers on the ASLEF network. I also notice an email from Adam Plant of
Paralogic to Julie Atkinson dated 17 November, before CAS’s overnight
investigations on 3 December, saying: “I have had a conversation with Pravin
today, we upgraded the old server back in 2002 and we may be able to recover
the data from the directories up to that point.” Moreover there were many
other PCs on ASLEF’s premises.
23. PNL, themselves attempted to recover the deleted files. They did not delete
those files. They were asked by Penny Bygrave to assist. They did. They even
advised the union to bring in a firm called Vogon, recognised data recovery
specialists, to assist. The union, in the form of Ms. Bygrave and the General
56 Despite the fact Paralogic, at the Union’s request, did all they could to retrieve the files, even though that was not a task they were originally engaged to undertake, nor one they professed to be skilled in.
ASLEF Report 29th June 2004 121 Report of Matthias Kelly Q.C.
secretary did not. Instead they went to CAS Networks, who now provide IT
services to the union. In my view PNL recommending Vogan is totally
inconsistent with their being implicated in any way in any dubious dealings
with the union’s IT system. They would not have recommended involving
Vogon, if they had anything to hide.
24. I commissioned MD5, a firm of forensic IT specialist to prepare a report for
me. It appears as Appendix 10. Had a similar firm being instructed in October
2003, the files could have been recovered in full and the entire sorry saga
ended. The “saga” of the deleted files has, in my view, been used for factional
advantage.
25. MD5 conclude at page 8 of their report that in total 64,334 files and folders
were deleted from the hard drive of Debbie Dwight’s PC from 23 July 2003
onwards. However, it is important to note that of those 64,334 some 43,827
files and folders were deleted on 12 November 2003. This was after Debbie
Dwight had left the employment of ASLEF. It was also after Paralogic had
confirmed that directories were missing on 10 November 2003.
26. It must therefore be the case that although CAS found that files had been
deleted when they conducted their inquiry on 3 December 2003 over two
thirds of the files or folders which they found to have been deleted on Debbie
Dwight’s PC could not have been deleted by her. They were deleted someone
else, most probably in the knowledge that allegations had already been made
ASLEF Report 29th June 2004 122 Report of Matthias Kelly Q.C.
about deletions by Debbie Dwight. The identity of that person and the purpose
behind the deletions on 12 November 2003 are unknown. It is neither
proportionate nor productive to spend more time inquiring further into this
matter. Suffice to say that the deletions by Debbie Dwight, although unwise
were not harmful to the operation of the Union. In any event, the deletions
which were discovered by The CAS Network on 3 December 2003,
commissioned by Mr Blagbrough and Mr. Brady, included some 43,827 files
or folders out of a total number of deletions of 64,334 which could not have
been deleted by Debbie Dwight as she was not working at ASLEF at that time
and had not been doing so for over two months and had no access to the PC
involved. I find as a fact that the vast majority of the file deletions uncovered
by CAS and confirmed by MD5 were not carried out by Debbie Dwight.
ASLEF Report 29th June 2004 123 Report of Matthias Kelly Q.C.
Section 9
The existence of a Password Recovery Programme on the server
and the “Trojan” bug:
The existence of a Password Recovery Programme on the server
1. Julie Atkinson in the General Secretary’s office wanted to access
password protected files used by Debbie Dwight. These were “word” and
“excel” files. She spoke to PNL’s engineer when he was on site. He explained
that he could load a tool called Advanced Password Recovery Program
(“APRP”). She told him to load it. He did. He told her how to operate it. On
2nd June 2004 we found in her office, after she had been suspended, a file
marked “Deleted data reports and faxes”. In that file were instructions entitled
“How to use password recovery program on server”57.
2. The file note in the file in GSP (the General Secretary’s office) which
records instructions to staff in that office on the use the password recovery
software suggests a desire to access everything they could associated with the
previous General Secretary. In the report of Paul Blagbrough the existence of
such software is recorded, but he reported that “Aslef’s current senior
management was not aware of its existence on the server”. I cannot accept
that. They instructed Paralogic to install it and possessed instructions as to
57 Appendix 8.
ASLEF Report 29th June 2004 124 Report of Matthias Kelly Q.C.
how to operate it. I note that CAS who reported to Mr. Blagbrough are
recorded by him as saying:
“We would suggest that there can be no good or legitimate reason
for the software to have been installed and we can only conclude
that it was installed without due care and attention to Aslef’s needs
or it was deliberately and specifically installed to provide
unauthorised access to confidential data”
3. It was installed at the express request of Julie Atkinson on 25th
November 2003 by an engineer from PNL. The “job sheet “ is at appendix 8.
She wanted to access a password protected “word” document and an “excel”
file, also password protected. Why she could not just ask Debbie Dwight what
the password was I don’t know.
4. I have concluded that this software was installed on the IT server at the
express request of the office of the General Secretary (Julie Atkinson) after
Mr. Brady assumed office. I suspect its installation was part and parcel of an
atmosphere of paranoia that took hold. It was not installed by or on behalf of
Mr Rix. It was installed under Mr. Brady’s stewardship.
The “Trojan”:
27. As for the so-called “Trojan” these are bugs, which frequently enter onto any
network. Even with the best security they are still present. In this case, for
ASLEF Report 29th June 2004 125 Report of Matthias Kelly Q.C.
some inexplicable reason, all of this has been elevated to an art form. The fact
that a Trojan existed on the system is, to my mind, of no particular
significance. It only becomes significant if one operates in an atmosphere of
paranoia or hysteria. There has been a great readiness to assume the worst of
the preceding General Secretary and assume the worst of the existing staff. In
my view this is a recipe for disaster. In addition there is no justification for it.
28. CAS reported that this “bug” was present on the server. It was said by CAS
that its presence “may be a coincidence or part of the set of incidents currently
being investigated by ASLEF.” Again this is feeding paranoia. They were of
the view that it demonstrated the absence of security. I think it shows the
security worked. The anti virus software picked it up. In other words the
software put on by PNL was doing its job.
29. In summary the accusations about poor security were weak. As Peter Sommer
records in his report at Appendix 9, “as described to me, during their
investigations CAS staff saw on-screen notice saying that the server had been
infected. That would be consistent with virus/Trojan detection software
working properly and notifying the computer owner that it had found
something”. Against specific questioning on this issue, CAS said that the
Trojan had not been deployed – which suggests that the virus/Trojan detection
software had reacted simply to the presence of the signature of the Trojan.
Later the CAS report refers to the carrying out of “network scans” –
essentially an automated way of seeing if the server had any unexpected open
ASLEF Report 29th June 2004 126 Report of Matthias Kelly Q.C.
ports through which access might be achieved (which is exactly what a Trojan
does). But the scan revealed that there were no such unexpected open ports.
30. Based on information currently available, I conclude that the arrival of the
Trojan was random and that the existing detection software worked properly.
However this observation should in no way deter ASLEF staff and their
current IT advisors from satisfying themselves that up-to-date virus and Trojan
detection methods are always in place
ASLEF Report 29th June 2004 127 Report of Matthias Kelly Q.C.
Section 10
The General Secretary, the Executive Committee and relations
with the staff
1. Mr. Brady, in my view, has had a long-standing distaste for Mr. Rix. What it
was about originally is unclear. What is clear is that neither man has much
time for the other. In my view both men have the best interests of the union at
heart. However, there has been what I can only describe as “convulsions” in
the union in recent months. Allegations have been freely thrown around, often
with little or no evidence. For example, it was common gossip in the union
that large sums of money had gone missing and the industrial dispute with the
staff was deliberately engineered. Mr. Brady made the latter allegation in a
letter to staff on 29th December 2003. I have not been supplied with any
evidence to support such allegations. I reject both allegations.
2. It is a matter of regret that the union has looked foolish, if not ridiculous, in
recent months. In my view it is startling that Mr. Brady had in his desk a
picture of Mr. Rix done up as a target58. Written on it is the following: “1
round .22 ammunition at 25 yards”. I have been unable to establish what, if
any, explanation Mr. Brady might have in relation to this as he has failed to
meet with me. Mr. Rix was sufficiently worried to go to the police about this
matter.
58 See appendix 11.
ASLEF Report 29th June 2004 128 Report of Matthias Kelly Q.C.
3. The General Secretary was involved in a fight with the President on Thursday
20th May 2004 at which the Assistant General Secretary and three staff
members were present. This was a public relations disaster for the union. Mr.
Brady, in giving interviews to the national media, made matters worse. Mr.
Samways wisely declined to comment to the press as to what happened. Mr.
Brady appears to have no appreciation of how his utterances can damage the
union. Others, who have already reported to the Executive Committee, have
investigated this incident. I make no comment on their report.
4. It is plain that there has been tension between the Executive Committee and
the General Secretary. I have found the Executive Committee to be co-
operative in my dealings with them. When asked, they produced what the
inquiry team sought, if it was within their possession. The General Secretary
and the Assistant General Secretary have expressed their hostility to any
Inquiry. On 6th April 2004 when I met the Executive Committee the General
Secretary walked out of the room, after a short period, but returned some five
minutes later when the Assistant General Secretary went to fetch him. He
refused the Legal Officer permission to provide me with a copy of the
Blagbrough report. I was provided with a copy, without its annexes by the
then President, Martin Samways, on 5th April 2004.
5. When interviewed by me on 6th April 2004 the General Secretary refused to
distance himself from the Trueaslef.com web site, saying what appeared there
was true. It had carried a series of posts critical of the decision to establish the
ASLEF Report 29th June 2004 129 Report of Matthias Kelly Q.C.
Inquiry and alleging bias on my part. Later that morning the GS apologised to
me for his behaviour and said that he did not question my impartiality. He told
me “there is a political battle as to who is “top dog”; me or Martin Samways
and the EC”. I was surprised by his comment as it suggested to me that he
cared little about the destructive effect such a struggle was having on the
union. I reminded him that the Executive Committee governed the union and
the General Secretary was akin to a permanent secretary in the civil service. In
short he was a full time officer and the Executive Committee were the political
masters. He disagreed.
6. The fact is that the rule 6.3 (i) of the union’s rules requires the General
Secretary to refrain from criticism of the Executive Committee. Rule 6.2 (a)
(ix) of the rule book requires the General Secretary to ensure that the decisions
of the Executive Committee are implemented. Mr. Brady has, consistently
flouted these rules. That behaviour has done much to damage the union and
introduce a destructive public “slanging match”. Mr. Brady has not hesitated
to publish his concerns as, for example when he told the BBC on 16th April
2004 and The Times on 5th June 2004 that he could “not even buy a jar of
coffee” without Executive Committee approval. On the 16th April 2004 the
BBC's Labour Affairs Correspondent, Stephen Cape, said Shaun Brady
described his time at the union as:
"like being under house arrest". "He could not even order an extra jar of
coffee without a vote”. "He had less power than the office cleaner and
ASLEF Report 29th June 2004 130 Report of Matthias Kelly Q.C.
complained that he had been harassed and victimised, warning there could
be a case for constructive dismissal."
7. Those comments are, in my view, unhelpful to the union and, in any event, are
an exaggeration. For example, for the month of April 2004 Mr. Brady spent a
total of £1,144.34 on his ASLEF credit card. In December 2003 he withdrew
£6,288.13 on the union’s credit card. It is a very large sum of money to
withdraw. I do not know what, if any explanation Mr. Brady has for this as he
has failed to meet with me. There may well be a perfectly acceptable
explanation or there may not be. I don’t know.
8. Mr. Brady’s comments to the BBC contrast sharply with an earlier view of
his. He spoke to the BBC on 11th February 2004. According to the BBC report
of that day Mr. Brady “denies that Aslef's ruling committee is dominated by
Rix's people”. Mr. Brady added: "No. The executive committee are lay
membership - eight of them selected from all political spheres, eight districts."
The dispute with staff:
9. On 29th December 2003 Mr. Brady sent a letter to all staff headed “TO ALL
GMB MEMBERS WORKING AT ASLEF HEAD OFFICE”. This was in
response to a statutory notice under the Trade Union &Labour Relations Act
1992 (“TULRA”) served on the 22nd December 2003 advising the union of the
ASLEF Report 29th June 2004 131 Report of Matthias Kelly Q.C.
GMB’s intention to ballot staff at ASLEF in respect of industrial action. The
General Secretary’s letter said that the union might challenge the notice in
Court. He went on to allege that staffing changes in his office, at the time he
took office, were “with the express intention of causing disruption and a
dispute situation, indeed the former GS is minuted as instructing your rep
exactly how to manufacture such a dispute”. I invited Mr. Brady to provide
these minutes, which he claims, exist. He has not done so. In that letter he
threatened to “de-recognise” the GMB and that he would “have no further
dealings with any GMB Representatives, full time or otherwise”. The letter59
further threatened to cancel all annual leave for the duration of the dispute. He
openly expressed his intention to engage in a witch-hunt with the words
“during the first 8 weeks of the dispute should any evidence of “Gross
Misconduct” be discovered regarding any employee’s previous actions, that
employee will be dismissed forthwith”. It is plain to me that there was a desire
to “get” staff members who were thought of by the General Secretary as
“disloyal” to him. He further made plain his intention to dismiss any staff
member who participated in the dispute after the statutory 8 weeks had passed:
“After 8 weeks and 1 day (of the first strike day) all staff who have
participated in the dispute will be dismissed”. This letter showed a very
aggressive approach. It has been described to me as being like the actions of a
bull in a china shop. I agree. One member of staff told me that the actions of
Mr. Brady turned his job from the “best job I ever had to the worst job I have
had.”
59 A copy is at Appendix 12.
ASLEF Report 29th June 2004 132 Report of Matthias Kelly Q.C.
10. The letter of 29th December 2003 was withdrawn after he met with the GMB
at a meeting brokered by the TUC at the TUC’s offices on the 9th January
2004. The GS withdrew the letter by way of a further letter to all staff at head
office dated 23rd January 2004. In that letter he expressed his “deep concerns
and regret for any distress the contents of the letter may have caused” to the
staff. This was, in my view, an unfortunate incident that was caused by the
General Secretary’s lack of management skills, his readiness to act before
being in possession of all the facts and his tendency to unnecessary
aggression. His treatment of the staff has been poor. I doubt that any member
of the union would accept an employer behaving in this way towards him or
her. Yet that is how Mr. Brady choose to treat the union’s own staff. At the
very least it must seriously compromise him if he were to complain of
aggressive management tactics on behalf of any group of union members.
11. I would record that the recent turmoil in the union has resulted in staff being
suspended on occasions. Suspensions are, of course, often necessary.
However, when there are suspensions it is important that the issue giving rise
to the suspension is determined as quickly as possible. In the case of Mina
Chavda, she has been on sick leave since Wednesday 22nd October 2003. She
attended an “investigatory” interview in December 2003. She was suspended
at that interview. She has been suspended ever since. This is a wholly
unacceptable delay. Martin Starr has also been suspended. He was suspended
when he attended a “return to work” interview on 14th April 2004. Shaun
ASLEF Report 29th June 2004 133 Report of Matthias Kelly Q.C.
Brady authorised the invoking of disciplinary procedure as long ago as 24th
October 2003. On that occasion he wrote on a memo “please use stage (3) of
procedure agreement, discipline (4)”. It cannot be a sensible use of the union’s
assets to have staff suspended for so long. The matter was taken up by Mr.
Keith Norman, the acting General Secretary with a view to having the issue
resolved in an acceptable time frame. I make no comment on the merits of any
disciplinary charge(s). I merely make the point that delay of this order in
resolution is unacceptable.
The Appointment of a New Office Manager.
12. The circumstances surrounding the recruitment of Penny Bygrave as office
manager are a cause of concern. Those circumstances contributed to
deteriorating industrial relations within the office.
13. A circular was sent around the office on 20th October 2003 at 11.43 am, from
the Assistant General Secretary, at the request of the new General Secretary,
seeking temporary volunteers to staff the office of the General Secretary.
That, in itself, was understandable. However, the staff representative from the
GMB pointed out that many people were in fact absent from the building on
the day and therefore would not have seen the notice. Penny Bygrave, who
worked in the Industrial Relations section and Martin Starr from the finance
department were the only two applicants for the temporary post.
ASLEF Report 29th June 2004 134 Report of Matthias Kelly Q.C.
14. The e-mail on the 20th October 2003 was at 11.43 am. After lunch Mr Starr
was approached by Mr Blackburn who told him that the panel were now ready
to interview him. Mr Starr went into the General Secretary’s office and, on
being asked, said that he had no objection to Mr Blackburn being present at
the interview. This had arisen because Ms. Bygrave is Mr. Blackburn’s
partner. The interview lasted 10 minutes. The same panel, less Mr Blackburn,
then interviewed Penny Bygrave. The appointing panel did not include Mick
Blackburn, the Assistant General Secretary. Subsequently the General
Secretary Mr Brady informed the staff that Penny Bygrave had been appointed
to the position.
15. The assistant General Secretary, in my view, unwisely, interviewed Mr Starr
but did not, to his credit, interview Ms Bygrave. He did not interview her
because he had a clear conflict of interest. However, it placed him in a
difficult position in having participated in an interview but thereafter playing
no part in the process. In my view, those with a conflict of interest should not
participate in any way in the recruitment process. It is not enough to declare a
conflict of interest and then participate. There should be no participation in
the process at all in such circumstances.
16. Paul Clyndes, H&S Officer subsequently applied for the job. He expressed
concerns about the make up of the panel, including, as it did Julie Atkinson.
She had been working with Penny Bygrave and he felt that gave Penny
Bygrave an advantage. He handed a letter containing his objections to the
ASLEF Report 29th June 2004 135 Report of Matthias Kelly Q.C.
General Secretary who dismissed the objections out of hand. In my view Mr.
Brady handled Mr. Clyndes’ concerns poorly and displayed a poor, if not
cavalier, management style.
17. This appointment set in train a series of events that led to a threat of industrial
action by the staff. Those events are dealt with above. The ensuing events
were unnecessary and wholly avoidable. Mr. Brady, as General Secretary must
take the blame for this saga.
ASLEF Report 29th June 2004 136 Report of Matthias Kelly Q.C.
Section 11
The Handover from Mick Rix to Shaun Brady and Delay in
Taking Office.
1. Mick Rix was elected General Secretary in 1998. On 5th May 1998 the
Electoral Reform Society’s Ballot Services Company informed the then
Executive of ASLEF that 3,357 votes had been cast for Lew Adams and 4,558
votes had been cast for Mick Rix. On the 6th May 1998 Lew Adams issued a
circular to all branches (Circular No. 168/198) informing all branches of the
results. The Executive Committee met on 21/5/98 and by resolution decided
that Mick Rix should take up his duties as General Secretary on the 10th
January 1999. There was, thus, a prolonged gap between the election of Mr
Rix and his assuming office. When the current Assistant General Secretary
was elected in 2000 there was also a delay, albeit a much shorter one. He was
elected on the 5th October 2000. He took up office60 on the 1st January 2001.
2. Shaun Brady defeated Mick Rix on 17th July 2003 for the position of General
Secretary. Mr. Brady polled 4,475 votes and Mr. Rix polled 3,299 votes. The
result was announced on that date. It was not until the 20th of October 200361
that Mr Brady took up office as General Secretary. However he had, in the
meanwhile, continued to serve as a member of the EC and in that capacity
60 Pursuant to EC Resolution No. 826/410 61 Three months as opposed to the seven months when Rix replaced Adams.
ASLEF Report 29th June 2004 137 Report of Matthias Kelly Q.C.
attended regularly at Arkwright Road. Mr. Blackburn told me that he met with
Mr. Brady on 19th October 2003 and showed him around the building. That
was courteous and sensible.
3. It seems to me that after the election of a new General Secretary there will
inevitably be a delay before he or she can take up office. This is because the
General Secretary may well be someone who, up until that point, has been
employed by a train company and would not, therefore, be in a position to
assume office immediately. It seems to me that there should be a protocol
devised which should be binding upon outgoing and incoming General
Secretaries. That protocol might include the following:
• The incoming General Secretary will be invited to Arkwright Road at
the first convenient and available date.
• Upon arrival at Arkwright Road the incoming General Secretary
should be met by the outgoing General Secretary and the serving
Assistant General Secretary who should take it upon themselves to
introduce the new General Secretary to each member of staff. If
necessary all members of staff can be assembled at relatively short
notice and the new General Secretary introduced.
• The outgoing General Secretary or the Assistant General Secretary
should then take the new General Secretary around to each individual
ASLEF Report 29th June 2004 138 Report of Matthias Kelly Q.C.
department within the building so that he/she can meet all of the
individuals personally and see what each department does.
• The incoming General Secretary should immediately be provided
with a list of all contact numbers for members of staff, and a
description of what each member of staff does.
• The new General Secretary should prepare a written document which
sets out what changes if any he/she would seek to make upon taking
up office, particularly in terms of staffing matters. That should then
be provided to the staff representative and to the President of the EC.
This should be done before any handover of office so that no one is
taken by surprise.
• It is incumbent on any incoming General Secretary to familiarize
himself with the office, its routine and practices, the staff, any
imminent staff changes or moves prior to assuming office.
• There should be a duty placed upon both the incoming and outgoing
General Secretaries to meet and co-operate in an orderly hand-over
of office.
ASLEF Report 29th June 2004 139 Report of Matthias Kelly Q.C.
• In any event, the union President, as the senior elected officer should
ensure that the incoming General Secretary makes himself familiar
with the office, finances and staff.
• By virtue of the Union’s rule 6.2 (a) (xv) the General Secretary is
responsible for the running of the office. Such changes as he seeks
to make in the running of the office should be facilitated by the EC
as a general rule unless there is some compelling reason why that
should not happen, such as finances and/or good managerial practice.
4. The protocol might further provide that for a period of one month prior to his
assuming office the incoming General Secretary should “shadow” the
outgoing General Secretary so that he is familiar with the procedure and tasks
involved. I accept that tensions within the union are so high, at present, that
this is not presently an option. I hope that it will, in due course, be possible.
ASLEF Report 29th June 2004 140 Report of Matthias Kelly Q.C.
Section 12
Governance
The structure of government of the Union:
AAD
1. Ever since its establishment in 1881 the Society’s supreme governing body
has been the Annual Assembly of Delegates (“AAD”) from each branch. The
assembly of delegates has always had power to alter amend or rescind the
rules or add new ones, provided certain procedural requirements are met.
2. The point as to the supremacy of the AAD is clear from Rule 14(a) where it is
said in terms: “ASLEF shall be under the control of the parliament body the
annual assembly of delegates.”
Decision to delay the AAD 2004.
3. By rule 14 (b) the AAD “shall meet in May or June of each year”. This year
that was not possible. The reality is that the union is in turmoil. This
investigation was underway, there had been the barbeque incident and an
Acting General Secretary was appointed as well as the Vice President having
to take over as Acting President. The General Secretary and President were
both suspended. It would have been inevitable that had the AAD taken place
as scheduled it would have had to be adjourned. When the AAD does take
place delegates will be able to discuss this report and the many issues
ASLEF Report 29th June 2004 141 Report of Matthias Kelly Q.C.
involving the union, without having to guess as to what might or might not be
said in this report.
Trustees:
4. I have already dealt with the trustees in a separate section. Their role is
covered by section 12 of the Trade Union and Labour Relations
(Consolidation) Act 1992: “All property belonging to a trade union shall be
vested in trustees in trust for it”. The reason for the existence of the trustees is
that, in law, the trade union does not have a corporate “personality62” or
corporate status63 such as, for example, a limited company. It is a method of
owning assets. The general law imposes certain duties upon the trustees, such
as, for example, the duty to conserve and manage the assets of the Union
under the general direction of the Executive Committee.
The Executive Committee
5. Between conferences the running of the union is vested in the Executive
Committee (“EC”). That consists of eight members elected for three years.
Before anyone can be elected a member they must have had five years
consecutive membership of the Union. The EC is the body, which runs the
Union on a day-to-day basis. It elects, from amongst its members, a President
and Vice President each year. It is specifically provided by the Rules (7.3(c))
62 See Section 10 TULRA 1992. A trade union can make contracts and is capable of suing and being sued in its own name: section 10 (1) (a) & (b) of TULRA 1992. 63 Section 10 (2) TULRA 1992. It cannot be registered as a company nor as a friendly society nor as an industrial and provident society: section 10 (3) of TULRA 1992.
ASLEF Report 29th June 2004 142 Report of Matthias Kelly Q.C.
that “the Executive Committee shall exercise full control over the funds of
ASLEF in strict accordance with these rules and shall have the power to
appoint a special audit.” It is the Executive, which has control over the funds
and assets of the Union.
6. The Executive Committee (EC) is the governing body of the union. The
General Secretary (GS) operates under instruction of the EC. The EC, itself is
accountable to the Annual Assembly of Delegates (AAD), and the general
membership through elections. Members hold office for three years64 and
represent a district, which in turn has branches. A member of the EC may not
hold any office in their branch, save the office of branch secretary or assistant
branch secretary65. An EC member may not, at the same time, hold a fulltime
officer post or the post of Company Councillor. A member of the union must
have been a member for five consecutive years before he or she is eligible for
election. The EC is presided over by a President who is elected from amongst
the EC members on an annual basis. That is the effect of rule 7.3 (a).
7. Decisions of the EC are recorded on pro-forma sheet, which enables the
decision to be recorded. This has been a long standing practice. The pro-forma
does not require the detail of the decision to be recorded. The EC decisions are
then transcribed and published in book form, which is available to branches.
Many decisions are merely recorded as “The report be noted and the General
64 See rule 5.A.2 (a). 65 See rule 5.A.2. (f).
ASLEF Report 29th June 2004 143 Report of Matthias Kelly Q.C.
Secretary instructed to carry out policy in line with discussion”66. I do not
doubt that in such instances there was a full and, no doubt, detailed discussion.
However, that is not apparent from the minutes. As a method of recoding
decisions it seems to be to be lacking. It does not convey the substance of the
decision. It conveys nothing to any one who was not present. I do not suggest
that the substance or detail of the discussion should be recorded. Indeed I think
there are very good reasons why the substance of the discussion should not be
recoded in the minutes. For example, it is the EC, by rule 7.3(q) who have the
exclusive power to “inaugurate proposed industrial action”. I do not think that,
in such a case, the detail or substance of the discussion should be recorded in
the minutes. However, I do think that the decision taken should be recorded.
On some other decisions the EC have recorded the substance of the decision.
For example EC resolution 374/420 records that the EC decided that the
managing Director of LUL should be advised that failure to resolve the
outstanding issues would result in an industrial dispute. That conveys the
substance to the reader.
8. I recommend that the substance of EC decisions be fully recorded in the
minutes. I should make clear that the “shorthand” recording of decisions67 is
not a recent practice. It seems to me to have existed for generations and to my
knowledge is common in other unions. However, I believe the time has come
to move on and make the minutes transparent, not least in the interests of the
membership.
66 See EC resolution 376/420, selected as a random sample. 67 “Policy in line with discussion”.
ASLEF Report 29th June 2004 144 Report of Matthias Kelly Q.C.
9. The EC has co-operated fully with this Inquiry. The Inquiry was, of course,
established by the EC. However, I should record the fact that the EC answered
questions, which on occasions were uncomfortable for the individual
member(s) concerned. I think that is to their credit. I would encourage the EC,
as a body, to visit districts on a regular basis. In my view one visit by the EC
to each of the districts once a year would be reasonable. Such visits aid
communication and encourage transparency. There may well be times in that
the operational needs of the union prevent such a programme of visits, but
those should be exceptional.
10. I recommend that the policy of claiming travel expenses by EC members and,
indeed everyone else68, should be re-examined. I believe it would be better if
only travel expenses reasonably and actually incurred were reimbursed. I
know that this has already been debated by the AAD and the existing practise
endorsed. Nevertheless, in my view, higher attendance allowances to reflect
true loss of earnings would be preferable to the existing system. I recommend
that the existing rates of attendance allowances for EC members be reviewed
with a view to ensuring that those allowances truly reflect the loss of earnings
of the EC members as a body. Under the present system some EC members
loose more in earnings by attending EC meetings than others. Some loose less.
A rate should be fixed which is a fair compromise. In addition only certified
travel expenses, reasonably and actually incurred, supported by a receipt,
68 I include every officer and employee of the union.
ASLEF Report 29th June 2004 145 Report of Matthias Kelly Q.C.
should be paid. The President of the EC should be tasked with the
responsibility of certifying the expense claim. The member concerned should
make the claim on a form similar to the pro-forma attached to this report,
present it to the President together with the supporting receipts and the
President should certify it as reasonable, if it is in order and the form then be
sent with the supporting documentation to the Finance Department for
payment. That will create a clear and accountable document trail. Where there
is no receipt there should not be payment.
11. Recommendations in relation to the EC:
• Expenses should be claimed on a pro-foma. An example is attached
to Appendix 5
• Minutes should clearly show what decision has been taken. Minutes
should, save in cases of sensitivity, show the basis of the decision
• A trustee should be invited, as a non voting member, to attend EC
meetings
• The EC should be represented at meetings of the trustees
• EC members should, after their election, be provided with some
training to assist them in dealing with financial matters
• The EC would be assisted by the formation of a finance committee or
group, which should include the trustees.
ASLEF Report 29th June 2004 146 Report of Matthias Kelly Q.C.
The Office of General Secretary:
12. By virtue of 7.3(j) the General Secretary is answerable to and must act in
accordance with the instructions of the Executive Committee:
“The Executive Committee shall give instructions to the General Secretary
in relation to the duties of that post and shall have the power to appoint
assistants in the office when required, who shall act under the control of
the General Secretary and the Executive Committee.”
13. Contrary to popular perception it is not the General Secretary who is “in
charge” of the Union. It is the Executive Committee. This is made plain by
6.2(a) of the Union’s Rule Book where it is said “The General Secretary shall
be under the control of and obey all orders of the Executive Committee - -“.
His duty, amongst other things, is to attend all meetings of the Executive
Committee and ensure that decisions of that Committee are implemented. The
need for a clear chain of command and the distinct desire to ensure that the
General Secretary remains totally loyal to the Executive is emphasised by
Rule 6.3(i) which prohibits the General Secretary from writing “any circular
letter or other document” or taking part “in any meeting to oppose the
Executive Committee” or in any way acting “in opposition to their wishes.”
14. The General Secretary is responsible for and has sole charge of the ASLEF
head office. All staff in the building answer to him and it is his duty to ensure
ASLEF Report 29th June 2004 147 Report of Matthias Kelly Q.C.
that the office runs smoothly. He is also the lead spokesperson and main
ASLEF point of contact. Rule 6.2(a) (ii) directs him to “at all times uphold
the authority of and carry out the instructions of the Executive Committee.” I
do not accept that Mr. Brady has complied with this rule.
ASLEF Report 29th June 2004 148 Report of Matthias Kelly Q.C.
Section 13
The Blagbrough Report
Methodology of the Report
1. Mr Paul Blagbrough was asked by the General Secretary of ASLEF, Mr Shaun
Brady, to undertake a review of the financial affairs and administration of
ASLEF. I attach as Appendix 2 his written terms of reference. Those came
from the General Secretary and not the Executive Committee. The Executive
Committee was not consulted by Mr. Brady. Mr Blagbrough told me that he
himself drafted the terms of engagement and the General Secretary Mr Brady
confirmed the instructions to him by an e-mail dated 21st November 200369.
2. Mr Blagbrough told me that head previously worked in the city and had been
the Labour party’s Director of Finance between 1993 and 1997. He said that
he now ran his own consultancy company and was Vice Chairman of Trade
Union Fund Managers70.During the course of his review Mr Blagbrough spoke
to Mr Brady, Mr Blackburn, the Union’s Assistant General Secretary, Ms
Atkinson who works in the General Secretary’s office, Penny Bygrave who is
the Office Manager at Arkwright Road and works in the office of the General
Secretary. He says that he tried to speak to Mr Samways, the President of the
Executive Committee but without success. He did not speak to any other
69 The e-mail is at Appendix 13. 70 ASLEF had money invested with them. As at 2/1/02 the fund was valued at £400,556. As at 8/5/03 the fund, without withdrawals had decreased to £286,160.
ASLEF Report 29th June 2004 149 Report of Matthias Kelly Q.C.
members of staff. Neither did he speak to Mr. Rix nor Ms. Dwight. After I had
begun my Inquiry Mr. Blagbrough spoke to Mr. Lew Adams, the former
General Secretary of the union. Mr Blagbrough told me that he also spoke to
the auditors, the Pension Fund Managers, and the Investment Managers,
former managers of the Union’s investments such as Mr Harris St John, a
property consultant, Mr Hugh Spellard and CAS Network who currently
provide IT services to ASLEF. He also told me that he spoke to Nick Herd
who until very recently managed the finance office ASLEF. He later71 told me
he spoke to the Trustees72.
3. Mr Blagbrough, in fact, prepared several different drafts of his report. The
report which was presented to the Union’s Executive Committee on the 26th
March 2004 was at least the third version. I have, so far, been able to identify
the following versions:
• A report in January which the General Secretary put before the EC,
• A Draft report dated 15th March 200473,
• A Draft report dated 25th March 2004, with appendices attached.
4. Mr Blagbrough’s report of 15th March 2004 was marked “confidential” and
was not intended for publication. It was published when Mr. Steve Trumm,
without consent, took it from Arkwright Road. Mr. Blagbrough was rightly
71 On 24th May 2004. 72 He undertook to supply me with the dates of those meetings, but to date I have not been given those dates. 73 It was this report, which was taken from the Head Office and copied to the Mail on Sunday.
ASLEF Report 29th June 2004 150 Report of Matthias Kelly Q.C.
and understandably upset at this turn of events. He told me that his report of
that date had been presented to the EC so that it “could be checked for
accuracy” and also in order that he might be given explanations from the
individual involved. He later told me that the purpose of presenting it to the
EC was to obtain “clarification”, check its contents for accuracy and “to draw
out any errors there may have been in its contents”. However, I am unable to
understand how he hoped to obtain explanations or clarification from people
he did not interview and whom he had no plans to interview. I do accept that
Mr. Blagbrough played no part whatsoever in the wider publication of his
report. He was upset that it was removed from the building and published in
the way it was. It was not a “final” or concluded report.
5. Mr Blagbrough, frankly, told me that whilst he did not believe there were
inaccuracies in the report he was unable to say that all of it was accurate. He
readily acknowledged that there were factual and evidential problems with his
report and that in preparing it he had to make a number of assumptions and
from those assumptions draw conclusions.
6. I have grave reservations about the report. Paul Blagbrough, himself, told me
that he merely had compiled a series of conclusions many of which were
based upon assumptions. A lawyer might describe the document as a very
early draft or provisional report, which needed to be subjected to extensive
amendment and revision. However, when asked, by me, whether he would
alter any of his conclusions in the light of what was said to him by those
ASLEF Report 29th June 2004 151 Report of Matthias Kelly Q.C.
criticized he told me that he would not. I find this surprising. His answer
suggested that he had by then shut his mind to any answers or explanations,
which he might have been given. By way of contrast to this he was at pains to
ensure that what he said to me was accurately recorded and he had advance
notice of any criticisms I might make of him. I gladly afforded him an
opportunity to respond to my preliminary views and provided him with a copy
of the notes of our interviews with him.
Information Technology and the Deletion of Files
7. One of the issues raised in the document prepared by Mr Blagbrough dated
25th March 2004 is the information technology system (“IT” system) and the
deletion of files at Arkwright Road. I have dealt with this in detail elsewhere
in this report74. I accept that in reporting on these issues he relied upon the
report of CAS. I do not accept the criticism of Paralogic was justified. Mr.
Blagbrough, unfortunately failed to obtain Paralogic’s account or ask them for
explanations. His failure to make clear the very positive and helpful role
played by PNL seems to me to be unfortunate. He knew or ought to have
known that Julie Atkinson in the General Secretary’s office was in contact
with Adam Plant from PNL. She had been in e-mail correspondence with Mr.
Plant from PNL. The relevant e-mail was kept in a file marked “Deleted data
reports and faxes Paralogic”, which we found in GSP after the suspension of
74 See section on “Information Technology and the issue of Paralogic”.
ASLEF Report 29th June 2004 152 Report of Matthias Kelly Q.C.
Ms Bygrave and Ms. Atkinson. It would have been a simple task to contact
PNL and seek their version of events. He did not do so.
8. Mr. Blagbrough in his report75 says that “it is not clear why ASLEF needed
this software and ASLEF’s current senior management was not aware of its
existence on the server”. I have dealt with this issue in “Information
Technology concerns and the issue of Paralogic”. In short the relevant
software was loaded on the express instructions of Julie Atkinson in Mr.
Brady’s office on 25th November 2003. “Senior management” were aware of
its existence on the server. It was installed after Mr. Rix left office. “Senior
management” failed to inform Mr. Blagbrough of this. They did not tell him
what they had done. They should have told him. However, he could have
asked PNL when it was installed and on whose instructions. He did not ask.
Had he asked PNL he would have learnt, as we did when it was installed and
at whose request it was installed. That failure to ask the people concerned is a
recurring theme in Mr. Blagbrough’s report. He simply put the assertion in his
report, adding that “senior management” were unaware of its existence. That
implies he asked “senior management” about it. “Senior management” even
had, in their office instructions on how to use the software. The Office
Manager Ms. Bygrave, denied that PNL were authorised by the “post Rix
management” to install Password recovery software. On 7th June 2004 I asked
Ms. Bygrave about this:
75 15th March 2004, page 46.
ASLEF Report 29th June 2004 153 Report of Matthias Kelly Q.C.
M Kelly: “Did you ask them to put Advanced Password Recovery
on the system for you?”
P Bygrave: “No. We asked them to try and locate the files, I do not
know what they installed or did not install to complete this task.”
M Kelly: “We have been told that they installed this after 20
October 2003. We were told that Julie Atkinson asked them to
install it.”
P Bygrave: “We asked them to try and access the files – but we did
not know what they did to try and access them. We did not know
that we needed the extra software. It depends on your definition of
“install”. We needed something to allow us to try and access the
documents. We had a debate about passwords with Paralogic – but
the issue was that we needed to try and retrieve the documents.”
M Kelly: “We are told that Julie Atkinson asked him to do it – and
that is how the program got onto the server.”
P Bygrave: “Pravin said that he could get the passwords but that it
would take some time to do it – that is all.”
M Kelly: “We were told that he was asked to do it.”
ASLEF Report 29th June 2004 154 Report of Matthias Kelly Q.C.
P Bygrave: “Julie Atkinson was in charge of IT at the time – if she
felt that it was required then it would be done. I knew that Pravin
was trying to recover documents but not know what he was using
to do it. My IT skills are very minimal.”
9. At best, this was disingenuous on Ms. Bygrave’s part. It was installed on 25th
November 2003 on the instructions of her deputy Julie Atkinson.
10. Mr Blagbrough says that access to the back-up tapes was denied. That is, in
my view, an over dramatised way to present it. The tapes were held in
fireproof safes. Martin Starr, the Finance Officer, who was responsible for
backing-up the data was, at the time on sick leave76. He was the person with
the keys to the safes. His assistant Mina Chavda also had keys to the safe. She
also was absent from work as she was ill. According to Mr. Blagbrough, the
Assistant General Secretary eventually went to see Mina, the assistant to the
Finance Manager, and collected the keys from her. Mr Blackburn told me that
he and the General Secretary both went to collect the keys in a taxi. It is
unclear why they both had to go. Mr Blackburn described Mina as “a small,
shy and softly spoken woman”. She readily gave them the keys even though
she was at home ill.
76 He went on sick leave on 24th October 2003. He is currently still off work pending a disciplinary interview.
ASLEF Report 29th June 2004 155 Report of Matthias Kelly Q.C.
11. I cannot accept Mr Blagbrough’s assertion that “access to the back-up tapes
was denied”. It was not. In any event the tapes could and should have been
replaced. They cost approximately £29 each. I can’t accept that the union was
in peril because access could not be got to tapes, which were so easily and
cheaply replaced. This is an example of exaggeration and “hype”. I bear in
mind that Ms. Bygrave told me that, at this time “there was there was a
heightened sense of paranoia at the time about Paralogic77”
12. When Mina was asked for the keys she handed them over. It is true that it was
not possible to have access to the tapes but that was because the key holders
were off sick. The tapes were capable of being easily and cheaply replaced. It
doesn’t seem to have occurred to anyone from the General Secretary down, to
ask if other tapes could be used or those in the safe replaced. In my view the
union was, at this time, gripped by a “witch hunt” mentality. There was
nothing to prevent the Office Manager sending someone to collect the keys
from either Mina Chadva or Martin Starr. Martin Starr, the same day, sent the
keys by courier to the Union’s offices. Martin Starr claims to have been
bombarded by calls from the union on his mobile while he was off sick. Mr.
Blackburn has confirmed that account. He told me that the union made
“dozens of calls” to Mr. Starr’s mobile phone and that Mr. Starr had said that
he would regard it as bullying and harassment, if anyone from the union called
to his house. In the circumstances I do not find that surprising. He was away
from work suffering from stress and depression and was being subjected to
77 Interview of 7th June 2004.
ASLEF Report 29th June 2004 156 Report of Matthias Kelly Q.C.
repeated phone calls from head office. A more effective way to obtain the keys
might have been to deliver a polite letter asking for the keys and suggesting a
time when someone would call to collect them or inviting Mr. Starr to return
the keys by courier, as he ultimately did on his own initiative.
13. Mr Blagbrough came to the conclusion that “erasing directories therefore
requires some specialist understanding”. I cannot agree. Mr. Paul Summer,
an independent forensic IT consultant advises me that running a de-
fragmentation programme can do the same thing. The running of such a
programme in not unusual. Many people run such programmes on their own
PC’s. Indeed CAS acknowledge that the running of such a programme has this
effect in their report to Mr. Blagbrough when they say “that the deleted files
where (sic) expunged from the file allocation table on the server, either using
a specific and relatively sophisticated utility….and/or using a more readily
available utility like windows Defrag.78” Mr. Blagbrough then goes on to say
“it may be conjectured 79 that the successful erasure of directories and the
systematic and thorough approach adopted to achieve that end would not have
been possible without specialist advice and support.” I do not accept that
“conjecture” has any place in such an exercise. A review must operate on
evidence, not conjecture. Any member of the Union would be appalled if they
he/she was to be judged on the basis of “conjecture”.
78 See the CAS Network report, page 3, undated. 79 My emphasis.
ASLEF Report 29th June 2004 157 Report of Matthias Kelly Q.C.
14. In that passage Mr Blagbrough, so far as I can establish, without justification,
has impugned the integrity of PNL. They were the only people on the scene at
the time who had specialist knowledge. Any fair minded reader of what is
written in the Blagbrough report would come to the conclusion that PNL were
complicit in the deletion of files and the destruction of back-up data. I regard
that as an outrageous proposition and indefensible without compelling
evidence. There is none. Apart from anything else it lays open the maker of
that allegation to legal action. It is immensely damaging to the commercial
interests and reputation of PNL. It is all the more worrying that it was made
by Mr Blagbrough without reliable evidence, of which I am aware, to support
it.
15. Mr. Blagbrough, in his report, at page 2180 goes on to say that “it is believed
that there is a long-term personal relationship between Ms Dwight, the former
Head Office manager, and Adam Plant, a director of Paralogic”. Firstly it is
clear that Mr. Blagbrough is relying here on something less than fact by his
use of the word “believed”. Secondly there is a clear suggestion that the
relationship was not just a business one. Read in that way it is intended to raise
the spectre of “favourable” treatment for PNL and Mr. Plant, in particular. He
used it as a reason to point the finger of blame at PNL over the “deleted files”
issue. To have written this and then published it to the intended recipients of
the Draft report was, in my view unwise. There is no evidence that any
impropriety took place. Mr. Blagbrough did make it clear to me that he did not
80 The draft of 25th March 2004.
ASLEF Report 29th June 2004 158 Report of Matthias Kelly Q.C.
intend to imply any impropriety. I accept that. In my view it was an unwise
formulation of words. Both told me, and I accept, that they had a purely
working business relationship. Neither PNL nor Adam Plant made any gain at
the Union’s expense. PNL provided a service to the union and they were paid
for it. The dealings were all open.
16. MD5 conclude at page 8 of their report that in total 64,334 files and folders
were deleted from the hard drive of Debbie Dwight’s PC from 23 July 2003
onwards. However, it is important to note that of those 64,334 some 43,827
files and folders were deleted on 12 November 2003. This was after Debbie
Dwight had left the employment of ASLEF. It was also after Paralogic had
confirmed that directories were missing on 10 November 2003.
17. It must therefore be the case that although CAS found that files had been
deleted when they conducted their inquiry on 3 December 2003 over two
thirds of the files or folders which they found to have been deleted on Debbie
Dwight’s PC could not have been deleted by her. The identity of that person
and the purpose behind the deletions on 12 November 2003 are unknown. It is
neither proportionate nor productive to spend time inquiring further into this
matter. Suffice to say that the deletions by Debbie Dwight, although unwise
were not harmful to the operation of the Union. In any event, the deletions
which were discovered by The CAS Network on 3 December 2003,
commissioned by Mr Blagbrough, included some 43,827 files or folders out of
a total number of deletions of 64,334 which could not have been deleted by
ASLEF Report 29th June 2004 159 Report of Matthias Kelly Q.C.
Debbie Dwight as she was not working at ASLEF at that time and had not
been doing so for over two months and had no access to the PC involved. I
find as a fact that the vast majority of the file deletions uncovered by CAS and
confirmed by MD5 were not carried out by Debbie Dwight.
Allegations of theft:
18. When Mr. Rix left office as General Secretary he also vacated a flat belonging
to the union in which he had lived during his time in office81. On leaving he
took furniture with him. He is clear that what he took belonged to him. The
Blagbrough report of 15th March 200482 dealt this issue under the heading
“Possible misuse of Union assets”. In that, and other versions of the report,
Mr. Blagbrough, in effect, accused Mr Rix of having stolen union property.
He bases this upon the fact that he had not been able to find records in the
finance department proving that the furniture in question belonged to the
Union. I find this startling. What Mr Blagbrough has done is turn established
legal principles on their head and, in effect, level an accusation against Mr Rix
of theft, which, in Mr Blagbrough’s view should stand unless Mr Rix proves
otherwise. That, to me, offends basic legal principle as well as ordinary
concepts of fairness. It completely reverses the burden of proof.
19. I bear in mind that at that stage (15th March 2004) Mr Blagbrough had no
evidence as to what was or was not taken from the flat. It was not until the
25th March 2004 that Mr Blagbrough had, via Penny Bygrave, obtained a letter
81 Flat 8 at 7, Arkwright Road.
ASLEF Report 29th June 2004 160 Report of Matthias Kelly Q.C.
from the caretaker of the General Secretary’s flat (Flat No. 8) listing what in
fact had been removed. It follows that on 15th March 2004 he could not have
had that statement to rely upon.
20. I have interviewed the caretaker of the premises. He told me that Penny
Bygrave, the Office Manager, raised the issue of the furnishings in the flat
with him after Mr Rix had left office. She asked him if he could recall what
was in flat 8 when Mr Rix was there. He told me that he, quite frankly, did
not know what belonged to Mr Rix and what belonged to the Union. In any
event, Ms. Bygrave did not ask him what belonged to Mr Rix and what
belonged to the Union. She merely asked what Mr Rix had removed from the
flat. He told me that the statement was solicited by Ms Bygrave.
21. The caretaker told me that everything, which was in his own flat, was his,
since he had paid for it all. Mr Rix told me the same was true of the flat he
occupied. Furniture, which was in the flat when Mr. Rix moved in, was
relocated to other flats within the building. Over time he completely, at his
own expense, re-furnished the flat. There is no evidence to contradict this. I
accept his account. It was given by him freely, frankly and without hesitation
or prevarication.
22. When I interviewed Mr Blagbrough I put it to him that his report was unfair to
Mr. Rix on this topic, was unbalanced, involved a reversal of the burden of
proof and involved him in making assertions of which he had absolutely no
ASLEF Report 29th June 2004 161 Report of Matthias Kelly Q.C.
proof. His reply was that he did not know what furniture belonged to the union
and what to Mr. Rix. He said he had, therefore, made assumptions. The main
assumption was that the flat must have been furnished. I cannot accept that
this is a fair approach. I reject it.
23. There is no evidence that the items taken from the flat ever belonged to
anyone other than Mr. Rix. I conclude that the property taken from Flat 8
belonged to Mr Rix and he was entitled to take it.
Severance Payments
24. One of the allegations made by Mr Blagbrough, though not by anyone else to
me, was that severance payments made to Mick Rix and Debbie Dwight were
illegitimate. The issue is dealt with under the heading “possible misuse of
union assets”. According to the minutes83, the Executive Committee, with all
members84 present, by Resolution No 551/421 on 5th August 2003 voted to
adopt the report of the President on the arrangements for Mr. Rix leaving
ASLEF. The President and the Executive Committee have told me that it was
this Resolution, which authorised the payment of severance payments to both
Mr Rix and Ms Dwight. I conclude that 551/421 was the authority for the
severance payments.
25. The payments made to both Mr Rix and Ms Dwight were:
83 Those minutes were not subsequently challenged at the subsequent EC meetings as being inaccurate. 84 Including the newly elected General Secretary Mr. Shaun Brady, who was a member of the EC.
ASLEF Report 29th June 2004 162 Report of Matthias Kelly Q.C.
i. Sanctioned by the Executive Committee;
ii. Lawful;
iii. Both were entitled to receive the sums they did;
26. The sums received by them pale into insignificance when compared with the
sum paid to previous outgoing General Secretaries. They are substantially less
than what Mr. Brady is entitled to when he eventually leaves office.
Finances
27. Mr. Blagbrough also dealt with the Union’s finances. In another part of this
report we deal with finances. In compiling his report Mr. Blagbrough did not
speak to Mr. Starr nor to Ms. Chadva. That failure is regrettable because it led
to an account, which was one sided, in that Mr. Starr was criticized without an
opportunity to tell his side of the story.
28. Mr Blagbrough confirmed to me that he, at the end of his review, was of the
view that there was no evidence of any serious financial impropriety thrown
up by his investigations. I share that view.
ASLEF Report 29th June 2004 163 Report of Matthias Kelly Q.C.
29. I asked Mr. Gooch directly about the comment in the Blagbrough report that
“the Union’s financial administration was in a “shambolic” state with no
meaningful accounting records kept from January 2003”. He disagreed that the
accounts were “shambolic” but did say that they were “disorganised" in the
latter part of 2003. When I further inquired about the impact this had on the
finances and management of the union he replied that in the short term it
would make their audit process longer than it usually would be, but in the long
term there was no impact at all.
30. Blagbrough was of the opinion that the “union has operated a structural
deficit” and has not “managed its asset base adequately”85. The forensic
accountants deployed by me disagreed. The union has net current assets (i.e.
funds that can be converted into cash quickly) of £1,156,762 on top of its
investments and property portfolio. This represents significant amounts, which
are not tied up in long-term balances such as investments and property.
31. This is despite the fact that there has been a decrease in General Funds in 2003
due to the exceptional costs of the Southall and Cullen enquiries. The draft
2003 accounts disclose total funds of £5,390,347 of which £4,449,018 relates
to General Funds, which represent a significant fund value.
85 See page 5 of the Blagbrough Report.
ASLEF Report 29th June 2004 164 Report of Matthias Kelly Q.C.
32. Another allegation by Blagbrough is that the “EC has failed to address
effectively its long term structural deficit….within its administration,
particularly the Finance Departments and to ensure adequate oversight of the
activities of the General Secretary particularly in the period following his
defeat in the Union elections. 86” Blagbrough also raises the concern that from
1997 –2002 there was an operating deficit for 4 of the 6 years.87 Although the
statement that there were losses for 4 of the 6 years from 1997 – 2002 is
factually correct, the 4 years of losses amount to £276,617 and the surpluses
amount to £1,006,751. These results are inclusive of investment related
income and gains and losses, which is appropriate. In other words, there was a
surplus of over £700,000 over this period.
33. If the method of accounting is synchronised so that like can be compared with
like the figures from 1997 – 200288 are:
• 1997: £492,153 surplus
• 1998: [£74,518] deficit
• 1999: £518,008 surplus
86 Page 6 and 7 of his report. 87 Page 8 of his report. 88 See Appendix II of the Smith & Williamson Report.
ASLEF Report 29th June 2004 165 Report of Matthias Kelly Q.C.
• 2000: £155,425 surplus
• 2001: £95,182 surplus
• 2002: [£217,004] deficit
34. Therefore for the period considered by Mr. Blagbrough there is a deficit for
two as opposed to four of the six years. Overall there is a surplus of £969,246.
35. I have concluded therefore that there is no long-term structural deficit, if by
this Blagbrough is implying that it is not possible for the union to make a
surplus. In the years from 1997 to 2002 the total funds of the union increased
from £5,042,552 to £5,844,930, an increase of £802,378.
36. As to the allegation that there was “No effective mechanism either for
prioritising expenditure or controlling it”89 he fails to note the references to
financial management and planning found made at the AAD’s. Chris Bennett
does not accept that there can have been no effective mechanism of
prioritising or controlling expenditure and believes that if this had been the
case it would have been addressed by the auditors.
89 See page 5.
ASLEF Report 29th June 2004 166 Report of Matthias Kelly Q.C.
37. The total and general funds of the union have increased significantly over the
period 1997 – 2002. Given this fact Chris Bennett disagrees with the
accusation that assets have not been managed adequately90. Over the period
1997 – 2002 the union has managed to convert its investment base from
relatively risky equities to low risk gilts and as a result of this exercise has
realised investment gains of £2,019,164. The 1997 accounts show that the
union held quoted net investments at cost of £1,961,037. At the end of 2002
the union had investments at cost of £1,325,055. During the same period cash
at bank has increased from £106,631 to £1,523,526 as a direct result of the
investment transactions. Given that in the same period a large number of
investors were showing significant investment losses the union appears to
have managed investments “extremely well” according to Chris Bennett.
38. Since the 2003 draft accounts have now been produced the assertion by Mr.
Blagbrough that the “management accounts (produced by the auditors) were
based on poor information and are of little value91” can be assessed with the
benefit of hindsight. The August 2003 non-certified management accounts
disclose an Operating Surplus of £199,944, before investment gains of
£294,691 and a transfer to the Westbrow fund of £179,617. The draft accounts
for 2003 disclose an Operating Deficit of £546,051 before investment gains of
£274,691. The transfer to the Westbrow fund of £179,617 is included within
the Operating Result in these accounts and so the deficit to December of
£546,051 should be compared to a surplus of £20,327 (£199,944 – £179,617)
90 See page 5. 91 Page 13.
ASLEF Report 29th June 2004 167 Report of Matthias Kelly Q.C.
to August. These figures do not take account of the levelling of the playing
field approach, which has been adopted by Smith & Williamson.
39. However, the operating deficit of £586,378 in the period September –
December 2003 is explained by a decrease in subs over August 2003 which
pro-rated amounts to £139,048, and increase in salaries over August 2003
which pro-rated amounts to £182,977 and an increase in inter-fund transfers of
some £214,764. This amounts to £536,789. In addition, after the Operating
Deficit the 2003 accounts have been charged with the costs of the Southall and
Cullen enquiries of £429,984. In total general funds have been charged with
£701,341 in the year to December 2003. No mention is made of the Southall
and Cullen enquiry costs in the August management accounts.
40. If the level playing field is introduced into the calculation of the figures the
deficit for 2003 reduces substantially. Taking all the funds together which
eliminates the effect of inter-fund transfers, the result for 2003 is a deficit of
£129,298.
41. On the basis of the above Chris Bennett does not agree that the management
accounts prepared by the auditors were of limited value. In any event, Nigel
Gooch was of the opinion at the time the non-certified accounts were produced
they represented a “fair reflection of the financial state of the union”.
ASLEF Report 29th June 2004 168 Report of Matthias Kelly Q.C.
Trustees
42. Mr. Blagbrough also said that the Trustees received little information on the
financial state of the union92. The Trustees were divided on this issue.
However, all the Trustees were extremely concerned that since October 2003
to the end of April 2004 there had been no meetings at all with both the
General Secretary and the President contrary to Rule 9.1(d). Things had
undoubtedly got worse. The Trustees had no idea what the financial position
of the union was. John Robson said that since he became a Trustee in
December 2003 he was continually asking for information on the financial
state of the union but had received nothing.
43. Mr. Blagbrough also attached a letter from Clive Jones, dated 13 December
2001, as an appendix to his report. In it Clive Jones makes a number of
complaints about matters, which were taking place around that time. His
primary concern was that no Trustee was present in September 2001 when the
EC took a decision to sell off a significant proportion of the union’s portfolio.
A Trustee meeting took place around this time on 11 October 2001 at which it
was agreed that there be a planned review of the portfolio. The minutes of that
meeting show that it was agreed in the presence of three Trustees, the
President, the Finance Officer and two investment advisors from Charles
Stanley that some shares be sold and some shares be kept. In particular it was
agreed to “sell the small companies over the next 6 weeks”. At the end of the
92 Page 26 of his report.
ASLEF Report 29th June 2004 169 Report of Matthias Kelly Q.C.
minutes it was further agreed that Martin Starr, the Finance Officer, “should
investigate different forms of investments and also how to dispose of shares”.
No dissension or concern about lack of consultation is contained in those
minutes.
44. Whatever the exact chronology of events it seems that during this period the
Trustees were reasonably well appraised of what was occurring regarding the
investments. However, it is also reasonable to conclude that decisions were
being taken quickly and in a fast changing market without always consulting
the Trustees first. In other words, on occasion it does seem likely that Trustees
became aware of decisions concerning investments after they had been taken.
45. However, in 2001, when these events were taking place there was no
requirement in the 2000 Rule Book for quarterly meetings with the President
and the General Secretary. It is clear that efforts were being made on behalf of
the General Secretary and the President to involve the Trustees in the events
that were taking place over and above what was required by the Rules, which
is to be contrasted with what had occurred previously. In addition, even the
new 2002 Rules, which were not in place at this time, do not envisage that
Trustees be present at EC meetings or any other meetings when financial or
investment decisions are actually “taken”. Rule 7.1 provides that at least one
Trustee shall be present ex-officio in EC meetings when “financial matters are
discussed”. It has also never been the case in the union that the Trustees have
to agree with or ratify any decision that is taken by the EC or the General
ASLEF Report 29th June 2004 170 Report of Matthias Kelly Q.C.
Secretary.
46. By the time the 2002 AAD came round it is clear that there was no residual
concern expressed by the Trustees. Prior to that at the 2001 AAD the Trustee
report noted that the last year was “an extremely difficult and disappointing
year for our portfolio.” 2000 was the first full year that the portfolio was run
on a discretionary basis. The estimated fall of the portfolio was 21%, taken
against the FT index fall of 8%. The address of the Trustees to the 2003 AAD
gave the correct impression the Trustees regarded the actions over the
previous few years as being prudent and moving in the direction of adopting a
low risk strategy. All three Trustees were in fact delegates at the 2003 AAD.
47. Mr. Blagbrough says “EC circular 515 reported that the Trustees had endorsed
an EC Resolution when this was not the case.”93 This is not the case. The
complaint of the Trustee’s related not to the fact that the circular had not been
“endorsed” by them, but that they were not aware that the accounts had not
been certified.
48. Mr. Blagbrough also states that94: “Decisions of the Trustees on investments
have in the past been countermanded by the General Secretary” and “Despite
their responsibilities as set out in the Rule Book, they have been excluded
from decisions relating to management of the Union’s investments”.
93 94 Page 26 of his Report.
ASLEF Report 29th June 2004 171 Report of Matthias Kelly Q.C.
49. The only Trustee related documents he attached to his report are the letter
from Clive Jones, dated 13 December 2001 (referred to above) and a report
from John Usher, the Legal Officer, dated 22 March 2001. Nowhere in those
documents is the complaint made that “decisions of the Trustees on
investments have in the past been countermanded by the General Secretary”.
No evidence has been provided to me on that issue and none is contained in
the Blagbrough report. When I met Mr. Blagbrough I specifically asked him to
provide me with evidence of this assertion. He failed to do so.
50. Although the Blagbrough report says that Trustees have been excluded from
decisions relating to management of the Union’s investments, as discussed
earlier there was no rule that they had to be involved in any “decision” and, in
any event, what was happening in 2001 was a great improvement when
compared to what had gone on previously.
51. There is in fact no evidence that the Trustees ever objected to any decisions
taken in relation to investments or financial matters in 2001, 2002 or 2003.
They did not report any objection either in their meetings, or the meetings with
the EC, the President and the General Secretary or at the AAD’s.
ASLEF Report 29th June 2004 172 Report of Matthias Kelly Q.C.
Section 14
Miscellaneous issues
Allegations of theft:
1. In the ASLEF web site members forum it has been said that there is a “slush
fund “ at the union’s head office and it is “being used to pay £600 per month
child support of a senior ASLEF officer.”95 There is no evidence at all of such
a fund ever having existed nor of such payments ever having been made at the
expense of the union. I regard such allegations as malicious. There is not a
shred of evidence in support. The victim in this is Andy Reed, the national
organizer. Trueaslef.com, published remarks made by Mr. Brady at a branch
meeting in Cambridge. He, unwisely, said at that meeting that the state of the
union’s bookkeeping was poor when he took office. He went on to say that the
Child support payments of a senior member was recorded under expenditure
for tea and coffee. His remarks were unwise. He ought to have appreciated
that those remarks would be reported and the reputation of the officer
concerned damaged. Trueaslef. Com were unwise to publish them. The degree
of exaggeration and “hype” prevalent in the union is such that, in my view, it
was inevitable that the story would grow and be enhanced. That is what
happened. Because of that and the private hurt it has caused to many I must
deal with it.
95 Posted on 11th January 2004 at 06.45am as a copy of an e-mail said, by the person who posted it, to have come from the webmaster of the trueaslef.com website.
ASLEF Report 29th June 2004 173 Report of Matthias Kelly Q.C.
2. Mr. Reed has children. He is divorced. He pays child maintenance. The
payments are deducted from his salary. It is shown on his payslip as a
deduction. I regard it as a sad reflection on the current level of malice within
the union that this scandalous allegation has to be dealt with, as it is a private
and personal matter. However, there are those amongst the union membership
who do not shy away from distortion and indeed lies. They have made it
necessary for me to address the issue. I make it clear that there is not a shred
of evidence to support such an allegation.
Subscriptions and Finances:
3. The subscription to the union has not been raised since 2001. The rules
provide that it shall be set at 1% of the ordinary members headline salary96.
The current annual subscription is approximately £5 per week or £260 per
annum. Since privatisation and as a result of successful wage negotiations
members pay has improved. Incomes have gone up, but the income level is not
consistent, varying across the various operating companies. Where costs to the
union are rising but subscription rates are static there, inevitably, will come a
time when annual deficits will grow larger. Whilst a keen eye must be kept on
costs, services to members should be maintained. There has been reluctance in
the union to raise subscriptions, I believe, because of an appreciation that
increases are politically unpopular. Nevertheless members will object if any
deficit arises in the long term or effective service delivery is adversely
96 4.9 (b) of the current rules. Different arrangements apply to retired members and I make no recommendation in their case.
ASLEF Report 29th June 2004 174 Report of Matthias Kelly Q.C.
affected. I recommend that consideration be given to increasing the
subscription level to the level of 1% prescribed by the rules.
The General Secretary’s car
4. The new General Secretary, Mr. Brady, upon taking up office arranged for the
union to buy him a new Volvo car. The union has an arrangement with Rover
cars whereby union members get a discount of up to 26% on new rover cars.
The General Secretary did not avail himself of this arrangement. I have been
unable to establish what Mr. Brady’s explanation or account is as he has failed
to meet with me. In the circumstances I can only conclude that it was
inappropriate for him not to have availed himself of the discount arrangement
with Rover Cars. It is an arrangement advertised on the union website
www.aslef.org.uk.
False reference:
5. I have concerns about an incident concerning the Assistant General Secretary.
A relative of Mr. Mick Blackburn did a few weeks work experience in the
union’s office in 2000. The relative was there for two periods of a few weeks
at a time. There is no criticism of that. Indeed those for whom he worked liked
him and would, in any event, have given him a reference had they been asked.
Mr. Blackburn’s relative applied for a job with a firm of solicitors. To limit
damage to Mr Blackburn’s relative and avoid embarrassment to the firm
concerned I shall not name them in this report. A reference was written for
him. It is dated 18th November 2003. It is a forgery It is written on what
purports to be ASLEF notepaper. It carries the union’s logo. It identifies the
ASLEF Report 29th June 2004 175 Report of Matthias Kelly Q.C.
General Secretary as Shaun Brady and the Assistant General Secretary as T
West, not Mr. Blackburn. It says he began work for ASLEF in September
2002. He did not. He undertook work experience in the summer of 2000. It
implies that between September 2002 and November 2003 he worked for
ASLEF. He did not. The letter is signed T West. Mr West did not sign it. This
is simply dishonest. I have shown the letter to Mr. West. He has confirmed
that the signature on the letter is not his. My view of Mr. West is that he is an
honest and reasonable man who has served the union well. He is a respected
figure in the union world. It is disgraceful that his name should be used in this
way and his signature forged.
6. The reference was faxed to the prospective employer on the afternoon 18th
November, according to the fax date stamp on the letter. On that same
afternoon Mr. Blackburn’s relative sent an e-mail to Julie Atkinson, the
assistant office manager in ASLEF’s head office as follows: “Thank you for
that, and I am looking forward to starting on Monday! I will see you again
soon.” Julie Atkinson replied to that later that afternoon. Her e-mail was as
follows: “I know you will do well, however next time you come up Dave says
now you are working drinks are on you. Let us know how it goes”. I have been
unable to establish Julie Atkinson’s account or explanation as she has refused
my request to meet with her. In the circumstances the evidence so far raises a
prima facia case for her to answer. The evidence so far suggests she had some
role in this matter. The Assistant General Secretary denied all knowledge of it.
To my surprise he told me that it was “not necessarily dishonest as usual to
ASLEF Report 29th June 2004 176 Report of Matthias Kelly Q.C.
embellish references” and said, “we write many references for staff which are
not strictly true.” I find that statement astonishing. I do not accept that he
knew nothing of it and had no hand in the incident. However, I do accept that
he probably did not personally prepare it.
Websites:
7. In my view postings on the union’s website must be closely supervised. It
would be sensible if the web site were supervised, with the Webmaster having
clear instructions to immediately remove any potentially libellous material as
soon as it is posted. The webmaster should then suspend the person who made
the posting from any further postings until the matter has been clarified, by
which I mean that the truth or otherwise of the allegation is determined. Where
the allegations are shown to be false, the union should discipline the person
posting. The website must not be used to peddle lies and unsubstantiated
rumour. In the case of True Aslef.com it has published material taken
unlawfully from the head office. The Union ought to take legal action to have
it closed down. This is not a case of censorship. It is a case of insisting on
responsibility in publication. No responsible newspaper would publish
unsubstantiated allegations of wrongdoing. If it did it would expect to have to
defend itself in court and its editor would be likely to resign.
8. The publication of rumour, gossip and innuendo is, in my view damaging to
the union. It makes the union and its members a laughing stock in the wider
union movement and amongst the public.
ASLEF Report 29th June 2004 177 Report of Matthias Kelly Q.C.
Steve Trumm:
9. Steve Trumm (Cambridge Branch) was suspended from holding office on 10
July 2003 pending “investigation into a number of serious irregularities that
contravene the ASLEF rulebook and other issues of a legal nature”97 The
accusations included “outrageous, untrue and libellous remarks against
ASLEF, its Executive Committee, Officers and other officials” and “direct
interference in a democratic election process out-with rule”.
10. However, there was a lack of detail in the allegations that were set out in the
letter to Mr. Trumm. For example, he was also accused of “handling of stolen
ASLEF documents” without any indication of what the documents were or
when they were said to have been taken.
11. There followed a number of letters sent by Mr. Trumm, the essence of which
was to complain about the fact that he had yet to “receive any kind of
information as to the details of the charges” and that ASLEF had “not…seen
fit to respond to the requests that [he] made for information.”98
12. On 27 September 2003 Mr. Trumm went to see his Bob Russell, his local MP.
There followed a letter from Mr. Russell to Mr. Trumm, dated 1 October
2003, saying that he had “written to the Assistant General Secretary of ASLEF
to request that he responds to the various letters which you have written to the
union over the past three months. ”
97 Letter from Mick Rix received by Mr. Trumm on 10 July 2003. 98 Mr. Trumm, sent letters on 21 July 2003 and 29 August 2003.
ASLEF Report 29th June 2004 178 Report of Matthias Kelly Q.C.
13. Eventually, on 3 October 2003 Mr. Trumm received a letter from Thompsons
solicitors, which was written in compliance with the pre-action protocol for
defamation claims. That letter set out specific allegations of defamation but
did not address all the original allegations set out in the letter received by Mr.
Trumm on 10 July 2003.
14. After further correspondence, Mr. Trumm wrote to Shaun Brady on 24 March
2004 pointing out that Rule 17.2(b) states that the investigation of any
complaint should be undertaken “expeditiously.” Part of the reason why the
Rules dictate an expeditious investigation is that “suspension from holding
office during a disciplinary instigation is not to be regarded as a
punishment”99.
15. Then on 28 January 2004 Shaun Brady wrote to Mr. Russell saying, “I must
advise you that Mr. Trumm is being investigated under the ASLEF
disciplinary procedures and that this matter is in the hands of our lawyers for
taking legal action”.
16. There followed a letter, dated 10 March 2003 (presumably it must be 10
March 2004 as it had been six months since his first visit), from Mr. Russell to
Mr. Trumm saying “I find it astonishing that six months has elapsed since you
came to my Advice Bureau to seek my help. Is your situation something which
ASLEF Report 29th June 2004 179 Report of Matthias Kelly Q.C.
perhaps we could interest “The Mail on Sunday”? I have a contact there.” Mr.
Trumm Told Rohan Pirani, my junior, that he did not contact Mr. Russell to
follow up this suggestion.
17. By Resolution 316/424 Mr. Trumm was further banned “from attending any
ASLEF forum except Bro Trumm’s own branch” on 26 March 2004. In that
same resolution the General Secretary was “instructed to carry out the
discipline procedure against Bro S Trumm”.
18. It was not until June 2004 that documentation was sent to Mr. Trumm dealing
with the impending disciplinary hearing. Irrespective of the merits of any
disciplinary case against Mr. Trumm it is unsatisfactory that it took so long to
investigate and convene a hearing and that Mr. Trumm was not initially
furnished with the details of the allegations against him.
ASLEF Report 29th June 2004 180 Report of Matthias Kelly Q.C.
Section 15
Recommendations
1. I recognise that the union belongs to the members and not to any officer or
body. Officers are in post to serve the membership. I recommend steps be
taken to increase transparency, democracy and accountability in the union and
the interaction of its officials with the membership.
Financial Management
2. It is of course a vital aspect of good financial management that an organisation
should not spend more than it can afford but in “not for profit” organisations
and in members’ organisations, in particular, this should not necessarily mean
that only receipts in a year should be spent. It is permissible to plan to spend
previously accumulated balances on funds in such a way that the interests of
members are served without jeopardising the future financial health of the
organisation. Chris Bennett of Smith and Williamson has made a number of
recommendations in his report for the improvement of financial administration
and administration of investments. I endorse all those recommendations
(3.33). The recommendations of Smith & Williamson are:
1. The information provided by the monthly subscription report
should be used to produce an accurate debtor figure for the
ASLEF Report 29th June 2004 181 Report of Matthias Kelly Q.C.
accounts and to produce a list of those members who should be
chased for their subscriptions.
2. That invoices are raised for rental income so that underpayments
could be identified quickly and chased and any debtor figure would
already be calculated.
3. Before goods are despatched the finance department is contacted to
determine if the customer is a good credit risk. If this is not the
case goods should only be despatch when payment has been
received.
4. Unpaid debts are chased on a regular basis.
5. The list of sales ledger balances should be reviewed and signed off
by the General Secretary or the Executive Committee on a monthly
basis to indicate acceptance of those balances outstanding.
6. Large sales that amount to more than say, £1,000 should be
approved by Finance Manager or the General Secretary prior to
issue.
ASLEF Report 29th June 2004 182 Report of Matthias Kelly Q.C.
7. Two people should be present when the post is opened and one
person should list the cheques received. Cheques received in this
way should be banked more frequently than once a week.
8. All expense claim forms are reviewed and authorised by an
appropriate person.
9. The responsibility for reviewing credit card transactions should be
that of an appropriate line manager or executive officer and not that
of the finance department. There should then be checks to ensure
that this review occurs.
10. Since NH was appointed, suppliers have been contacted to
determine amounts owing or overpaid. This process should be
resolved as quickly as possible to be able to clear the debit balances
off the ledger. Thereafter purchase ledger balances should be
reconciled to supplier statements on a monthly basis.
11. Cheques above a certain value, say £5,000, should be
countersigned by a member of the Executive Committee.
12. The list of purchase ledger balances should be reviewed and signed
off by the General Secretary or the Executive Committee on a
monthly basis to indicate acceptance of those balances outstanding.
ASLEF Report 29th June 2004 183 Report of Matthias Kelly Q.C.
13. A reconciliation of income due and income received from branches
should be performed to ensure that branches are only paid 1.25% of
subscriptions actually paid.
14. There should be a uniform procedure for the operation of Branch
accounts. I recommend that branches should submit expense claims
annually, together with their annual statement. These expense
claims should also be authorised by the District Secretary once they
have been agreed to receipts and invoices.
15. The level of branch bank balances is monitored regularly and that
unspent funds should not be permitted to accumulate.
16. To control fully and monitor fixed assets, to calculate depreciation
correctly and to correctly account for disposals a detailed register
of fixed assets should be compiled.
17. A formal banking policy is determined and applied. This should be
prepared in conjunction with the union’s bankers to ensure that the
best return on funds available can be obtained. This policy should
also contain details on how often bank reconciliations should be
prepared.
ASLEF Report 29th June 2004 184 Report of Matthias Kelly Q.C.
18. Budgets be prepared on an annual basis and are reviewed and
agreed by the Executive Committee. These budgets should be
compared on an ongoing basis with the management accounts
produced during the year.
19. Management accounts be prepared on a monthly basis and
reviewed by the General Secretary. These accounts should be
presented to the Executive Committee at least at their meetings
under rule 7.1(a).
20. A Financial Procedures Manual is drafted as a matter of urgency.
21. A backup tape is located off-site at least weekly or monthly.
3. In addition, I make the further recommendation (3.46) that an independent and
appropriately qualified person, who has not had previous involvement with the
Union, be employed for the specific and discrete purpose of carrying out the
tasks and implementing changes listed below:
• To codify and update the financial procedures of the Union in line with
the recommendations made by Smith & Williamson.
• Establish clear reporting lines for the Finance Department, the General
Secretary, the EC and the Trustees on matters relating to finance and
investments.
ASLEF Report 29th June 2004 185 Report of Matthias Kelly Q.C.
• Devise a uniform procedure for the claiming of expenses by members
and officers. That procedure should provide that all expense claims be
signed off (approved) by a designated person, be supported by
appropriate documentation and be accompanied by the relevant
documentary evidence when submitted for payment.
Trustees
4. I make the following recommendations (4.53) in relation to the Trustees of the
Union:
• The Trustees be given an induction and training so they are able to
carry out their duties in an informed manner.
• The Rules be further clarified so that Trustees and the EC are aware
of when they should attend EC meetings.
• The quarterly meetings between the Trustees, the General Sectary
and the President be re-commenced as a soon a possible.
• Investment managers and banks be requested to send monthly
statements of investments direct to the Trustees.
• Consideration be given to the setting up of a Finance Committee. I
would suggest that such a committee be composed of the Trustees,
the President or Vice President or in the event of the President or
ASLEF Report 29th June 2004 186 Report of Matthias Kelly Q.C.
Vice President being unable to attend a member of the EC nominated
by the President and the General Secretary and the finance manager
be in attendance. The EC should continue to have ultimate control
over the finances of the union, as it is the body charged with making
the strategic decisions for the union. If such a committee is not
established then the EC must send a representative, who may be the
President or Vice President, to every meeting of the Trustees.
• I further suggest that one Trustee is invited to attend each EC without
having any voting rights. This or something similar would provide
the necessary linkage.
Information technology
5. In my view Paralogic Ltd and Paralogic Networks Ltd (PNL) are due an
unreserved public apology from the Union together with a public
acknowledgment from the Union that they (both Paralogic companies and
their staff) have not engaged in any nefarious, illegal or incompetent activity
(7.27).
Recruitment
6. In my view, those with a conflict of interest should not participate in any way
in the recruitment process. It is not enough to declare a conflict of interest and
ASLEF Report 29th June 2004 187 Report of Matthias Kelly Q.C.
then participate. There should be no participation in the process at all in such
circumstances (10.15).
The Hand-Over Process
7. It seems to me that there should be a protocol devised which should be binding
upon outgoing and incoming General Secretaries (11.3). That protocol might
include the following:
• The incoming General Secretary will be invited to Arkwright Road
at the first convenient and available date.
• Upon arrival at Arkwright Road the incoming General Secretary
should be met by the outgoing General Secretary and the serving
Assistant General Secretary who should take it upon themselves to
introduce the new General Secretary to each member of staff. If
necessary all members of staff can be assembled at relatively short
notice and the new General Secretary introduced.
• The outgoing General Secretary or the Assistant General Secretary
should then take the new General Secretary around to each
individual department within the building so that he/she can meet all
of the individuals personally and see what each department does.
ASLEF Report 29th June 2004 188 Report of Matthias Kelly Q.C.
• The incoming General Secretary should immediately be provided
with a list of all contact numbers for members of staff, and a
description of what each member of staff does.
• The new General Secretary should prepare a written document
which sets out what changes if any he/she would seek to make upon
taking up office, particularly in terms of staffing matters. That
should then be provided to the staff representative and to the
President of the EC. This should be done before any handover of
office so that no one is taken by surprise.
• It is incumbent on any incoming General Secretary to familiarize
himself with the office, its routine and practices, the staff, any
imminent staff changes or moves prior to assuming office.
• There should be a duty placed upon both the incoming and outgoing
General Secretaries to meet and co-operate in an orderly hand-over
of office.
• In any event, the union President, as the senior elected officer
should ensure that the incoming General Secretary makes himself
familiar with the office, finances and staff.
ASLEF Report 29th June 2004 189 Report of Matthias Kelly Q.C.
• By virtue of the Union’s rule 6.2 (a) (xv) the General Secretary is
responsible for the running of the office. Such changes as he seeks
to make in the running of the office should be facilitated by the EC
as a general rule unless there is some compelling reason why that
should not happen, such as finances and/or good managerial
practice.
• The protocol might further provide that for a period of one month
prior to his assuming office the incoming General Secretary should
“shadow” the outgoing General Secretary so that he is familiar with
the procedure and tasks involved. I accept that tensions within the
union are so high, at present, that this is not presently an option. I
hope that it will, in due course, be possible.
Executive Committee
8. I make the following recommendations in relation to the Executive
Committee:
• Minutes should clearly show what decision has been taken (12.7).
• Minutes should, save in cases of sensitivity, show the basis of the
decision (12.8).
ASLEF Report 29th June 2004 190 Report of Matthias Kelly Q.C.
• Expenses should be claimed on a pro-forma (12.10). An example is
attached to Appendix 5, the Smith & Williamson Report as
Appendix VII of that report).
• A Trustee should be invited, as a non-voting member, to attend EC
meetings (4.53 and 12.11).
• The EC should be represented at meetings of the trustees (4.53 and
12.11).
• EC members should, after their election, be provided with some
training to assist them in dealing with financial matters (12.11)
• The EC would be assisted by the formation of a finance committee
or group, which should include the Trustees (4.53 and 12.11).
• I recommend that the policy of claiming travel expenses by EC
members and, indeed everyone else100, should be re-examined. I
believe it would be better if only travel expenses reasonably and
actually incurred were reimbursed. I know that this has already been
debated by the AAD and the existing practise endorsed.
Nevertheless, in my view, higher attendance allowances to reflect
true loss of earnings would be preferable to the existing system. I
recommend that the existing rates of attendance allowances for EC
members be reviewed with a view to ensuring that those allowances
truly reflect the loss of earnings of the EC members as a body
(12.10).
100 I include every officer and employee of the union.
ASLEF Report 29th June 2004 191 Report of Matthias Kelly Q.C.
Subscriptions
9. Whilst a keen eye must be kept on costs, services to members should be
maintained. There has been reluctance in the union to raise subscriptions, I
believe, because of an appreciation that increases are politically unpopular.
Nevertheless members will object if any deficit arises in the long term or
effective service delivery is adversely affected. I recommend that
consideration is given to increasing the subscription level to the level of 1%
prescribed by the rules (14.3).
Websites
10. In my view postings on the union’s website must be closely supervised. It
would be sensible if the web site were supervised, with the Webmaster having
clear instructions to immediately remove any potentially libellous material as
soon as it is posted. The webmaster should then suspend the person who made
the posting from any further postings until the matter has been clarified, by
which I mean that the truth or otherwise of the allegation is determined. Where
the allegations are shown to be false, the union should discipline the person
posting. The website must not be used to peddle lies and unsubstantiated
rumour.
ASLEF Report 29th June 2004 192 Report of Matthias Kelly Q.C.
11. In the case of Trueaslef.com it has published material taken unlawfully from
the head office. The Union ought to take legal action to have it closed down.
This is not a case of censorship. It is a case of insisting on responsibility in
publication. No responsible newspaper would publish unsubstantiated
allegations of wrongdoing. If it did it would expect to have to defend itself in
court and its editor would be likely to resign.
Matthias Kelly Q.C.
Old Square Chambers,
1 Verulam Buildings,
Gray’s Inn,
London WC1 R 5LQ
29th June 2004
ASLEF Report 29th June 2004 193