Rumours abound that the former Westminster auditor, John Magill of Deloitte & Touche, is planning an appeal to the House of Lords against my acquittal in the Appeal Court last month.
According to journalists, his lawyers are arguing that unless they contest this judgment they will be liable to pay my costs, on top of the costs they have already paid out to other cleared defendants. Apparently they think it’s worth risking another £1m in the Lords to reverse this verdict.
I am confident that the Appeal Court judgment will be upheld. What I cannot understand is the statutory authority for gambling with public money.
Westminster residents have already paid Mr Magill’s firm £3m for an investigation that has seen all the original 16 defendants cleared and which has now cost more than the home ownership policy it was supposed to be looking into.
This case is proving a watershed and not only in local government where it is triggering major changes to the audit system, including the scrapping of the surcharge penalty.
There are also wider lessons for the accountancy profession.
When it became clear that auditor was edging towards imposing a surcharge, I asked several Big Five firms to act for me. I was tremendously encouraged by their responses.
But within days the same firms were back on the phone. Apparently it was impossible for them to accept the challenge. One had been warned that it was unacceptable for them to act against an auditor when their own firm provided appointed auditors in other local authorities. Another firm feared they might be blacklisted for other public-sector work. Thank goodness my lawyers had more integrity.
Fortunately smaller firms, especially Chantrey Vellacott DFK, Robson Rhodes and BDO Stoy Hayward stepped in and performed magnificently.
Another lesson is credibility. Under the Woolf reforms, courts will appoint an independent expert to advise them on accountancy matters.
Implicit is the assumption that the expert will be right. Now look what happened in the Westminster case.
During the investigation the auditor told me he thought the loss was around £5m to £6m. In his provisional report in 1994, the total had jumped to more than £21m. When he sent me a final bill it was £31m.
In December 1997 the High Court reduced this by £4m to £27m. Last month, the Appeal Court slashed the same sum by a further £20m; arriving in a roundabout way to the same calculation as the city council’s own in-house finance team projected 12 years ago.
If accountancy firms are to retain credibility, surely it is not asking too much to expect that at least the basic calculations make sense to every party.
Dame Shirley Porter is former leader of Westminster city council.
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