TaxAdministrationVarney feels strain over smuggling case

Varney feels strain over smuggling case

Police investigation into an alcohol smuggling scam could prove embarrassing for HM Customs & Excise

As David Varney, executive chairman of the soon-to-be merged tax departments, made his first public appearance last week, he faced the escalation of what could amount to one of the most embarrassing episodes in the histories of either tax department.

Asked to confirm whether former Customs & Excise chairman, Sir Richard Broadbent, was being questioned by the Metropolitan Police in connection with an alleged alcohol smuggling case, Varney was forced to concede that he was.

The case Broadbent will be questioned over, and the fact that he is facing the procedure offers no evidence of any involvement or guilt, is the infamous London City Bond case from the mid-nineties.

London City Bond is one of the largest independent excise warehouses in the UK – but it was also the warehouse at the ‘centre of outward diversion frauds’.

The Treasury-commissioned Butterfield review from 2003 claims the full cost of the scam to government coffers will never be fully known, but that ‘at the very minimum the revenue lost £340m’.

The frauds involved diverting lorry loads of duty-free goods, which were meant for export, to the domestic market. In total, Customs identifies around 36 separate diversion frauds, where prosecutions are or were underway.

One of Varney’s first decisions after taking over was to suspend two other high-ranking officials in connection with the investigation. Last month he suspended Terry Byrne, director general of law enforcement at Customs, and head solicitor David Pickup.

In a letter to John McFall, chairman of the Treasury Select Committee and Labour MP, economic secretary to the Treasury, John Healy, informed both houses of Varney’s decision.

‘The seniority of these officers and the broad scope of their responsibilities make it impossible for them to remain in their posts pending investigation,’ said Healy. Again, he made it clear that ‘the term “under investigation” should not be taken to mean that charges will follow’.

It is not clear how long the police investigation will take or when the role of Sir Richard and the two senior Customs officials will be determined.

A Metropolitan Police spokeswoman would say only that it was ‘investigating certain allegations and trials. There have been no arrests and enquiries continue’.

Liberal Democrat MP and member of the Treasury Select Committee, Norman Lamb, has been following the case closely. He said in a statement last week that ‘this is a very serious matter and threatens to undermine the integrity of Customs’.

Facing a grilling by MPs last week, Varney was understandably cagey over the state of the investigation and simply confirmed that Sir Richard was to be questioned. ‘This is not a proof of guilt,’ said Varney.

While crisis may be too strong a word, the case and the effect on Customs’ reputation mean this is an embarrassing episode that Varney no doubt wishes would go away.

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