Real Finance Monday 6th September
SEPTEMBER 2004 REAL FINANCE 29
“HONEST,
OPEN AND ROBUST” THAT’S WHAT EVERY FD SHOULD BE, RIGHT? NOT IN IAN
PERKIN’S
CASE.
HE’S JUST LOST AN APPEAL AGAINST HIS SACKING AS FD OF
ST
GEORGE’S HOSPITAL TRUST. THOSE QUALITIES COST HIM HIS JOB.
BY RICHARD YOUNG
“My
name is Ian Perkin and I told the truth about the fiddling of cancelled
operations at St
George’s hospital in October 2001 – and about the dire financial situation of that same hospital trust to
the external auditors PricewaterhouseCoopers in July 2002. As a result, on July 29, 2002, I was asked by
the chief executive to resign from my post as finance director. When I refused, I was subjected to an
internal disciplinary process which decided that I was to be dismissed after 33 years of continuous
service in the public sector despite the fact that in all that time there had never been a complaint
about
me...”
Ian
Perkin is surprisingly chirpy and relaxed when we visit his Worcester Park home.
For two
years
he’s been fighting a battle against his previous employers – a battle he’s
just lost. At an
appeal
hearing of the employment tribunal last month, it was decided that although
he’d been
right
to blow the whistle on bad management at St George’s Hospital Trust, he
wasn’t entitled to
get
his job back – or any financial compensation. That’s why he’s publishing a
book detailing his
experiences.
The title? Don’t blow the whistle. “If you work for large organisations, two
things
happen,”
he says. “On the day you’re fired, you’re on the outside. And some of the
people that know
what
has gone on still want to be part of the organisation. In my case, some of them
said, ‘if they can
get
rid of you, they can get rid of anybody’. Your power base has been completely
destroyed and all
the
staff are told not to give you any information.” Perkin was, by any measure,
an excellent FD.
He’d
joined St George’s in 1986 and was made FD in 1990. “I had nothing but
success,” he says. “For
example,
most hospitals that developed schemes under PFI spent millions of pounds in fees
because
they
virtually outsourced the funding. We didn’t. The cheapest project by far was
St George’s which
only
spent £161,000 on a £70m capital development. You would have thought I was
exactly the
kind
of FD that the NHS was screaming out for.” Perkin was given CIPFA’s Best
Practice
Employer
Award just months before he was asked to resign. And he was well-regarded within
the
trust,
too. In addition to his duties as FD, he was given control of IT, procurement
and legal services.
But then he made two crucial mistakes. The first was to take up the case of Kelly Goulding. She was an
information analyst who’d been told by the deputy chief executive of the trust to amend the number
of cancelled operations for the first week in October 2001 to zero. The real figure, according to the
system,
was 28. It wasn’t a one-off, either. Previous figures for cancelled ops had
also been amended. Goulding’s line manager, Wendy McCarthy, brought the issue
to Perkin as board member responsible for information. “She knew it was wrong
because [then health secretary Alan] Millburn was saying at the time
that
anyone caught fiddling cancelled operations will be given the sack,” says
Perkin. “But the guy
who
did it has now been promoted as chief executive to another NHS organisation.”
The
FD ordered a systems audit to see whether the deputy chief exec’s claim –
that the data wasn’t
robust
– was true. It wasn’t. Yet the upshot was that Perkin was derided for having
taken up the case of
a
junior whistleblower. The board discussed removing information management from
his remit.
Why
the feisty reaction? “They had failed to get the top, three-star, rating
thanks to the cancelled
operations
numbers,” says Perkin. “If we had not blown the whistle, St George’s would
have
reached the highest standard. You can imagine what that did for ambitious board
colleagues.
They
thought, ‘by uncovering this fiddle the bloody FD has stopped us from being
one of the
lead hospitals in the country’.” Perkin’s second mistake strikes at the very heart of the role of the FD.
He had become increasingly worried about the financial state of the trust. The centrally set budget for
2002/03 required cost savings of £4.5m, a figure Perkin felt was not achievable. Some capex
allocations were already being used to cover recurring expenses in an attempt to hit the target. But
when the FD raised the problem early in 2002, chief exec Ian Hamilton did nothing. Things came to a
head in the early summer of 2002. “As an FD of a public sector body, I had to attend a meeting every
month to put up the finance report,” says Perkin. “I had told the external auditor that the organisation
and there was no disagreement with that fact. But if you express that view, as an FD you are on a
one-way ticket. If you put your head over the parapet and say the organisation is heading into a
financial problem, you know you’re going to be thrown out.” The problem wasn’t only that St George’s
management seemed more concerned about not rocking the boat than maintaining infrastructure (the
capex diversion had an impact on hospital facilities). The entire NHS funding system, in Perkin’s view,
was at fault. He gives two examples. First, the NHS calculated efficiency by the cost per consultant
visit. So if a hospital directed a patient to the right consultant who gave the right treatment first time
at a cost of £6,000, it appeared less efficient than a hospital that passed a patient round four consultants
with treatment that ended up costing £20,000 (average cost: £5,000). Second, trust salaries were rated
by the employment conditions in the local area. St George’s, in Tooting, is in a relatively low-wage
area. But if you’re in a less salubrious area, you actually have to pay more to attract skilled hospital
staff – doctors, nurses, technicians and managers – not less. Perkin didn’t help matters by voicing these
concerns at a conference of FDs in the presence of the service’s own finance chief, Richard Douglas,
just days before he was asked to resign. “When I pointed out the nonsense of all these things, it made
me a marked man,” he says. But the speech at the NHS FDs’ conference wasn’t what cost Perkin his
job. “In terms of the financial situation at St George’s, my discussions were with the external auditor,”
he says. “I felt I was entitled to have a full and frank discussion with my auditor and, in fact, two days
after they said they wanted me to resign, I phoned him and recorded our conversation. I got him on
tape saying, ‘the trouble is, you are too honest, open and robust’. For the auditor to be telling the FD
of the sixth largest NHS organisation in the country that, it must mean that they want dishonest,
secretive and weak finance directors!” And so it was that Perkin was asked to step aside (see box How
the FD was removed). The thing is, this could happen to any of you. As FD, you’re much more likely to
unearth problems that vested interests would rather see hushed up than any other director. In Perkin’s
case, it was “adjustments” to ensure better ratings for the hospital and minimal embarrassment for the
government. In your organisation, it might be meeting market expectations or a need to get a deal
away. “I was being asked to compromise my professional integrity,” says Perkin. “That’s the point. If
you’re
FD of an organisation, there are lots of issues which are confidential. You have
to protect that
confidentiality.
But a point is reached where people ask you to compromise your profession by
lying
deliberately.
When you are in breach of a legal duty, it is at that point that you have to do
something.”
The
net result? Two failed tribunal hearings. “I don’t suppose I’ve really
come to terms with the
result
myself yet,” says Perkin. “It just seems extraordinary. The judge in the
Appeal Court said
last
week that my integrity was intact and there were no problems with me being a
finance director.
But he said I made comments about my board colleagues that I could not at the time have known were
true because they were only proved eight months later after an investigation. But I knew it was true
because I was there!” One of the big problems for whistleblowers is that their stories can start to
sound like conspiracy theories. Perkin’s certainly does. Local management fiddle the figures to help
both themselves and the government look good. Then the establishment appeals system upholds their
decision to oust the trouble-maker. The former FD demurs. “I don’t think it’s a conspiracy of people all
sitting down beforehand,” he says. “But [tribunal chairman] John Warren did a lot of work with the
NHS when he was a lawyer. For all I know, he’s still got contacts on a senior level within the NHS and
they are up on the golf course on Sunday saying, ‘well this guy would be very plausible in court but he
is very bad for us if he was to win’.” Neither Real Finance nor Perkin are suggesting that actually
happened, incidentally. More likely is that the culture of the NHS – and perhaps of the public sector
more generally – has become one of, to use Perkin’s own phrase, “silent pressure” on staff to conform.
“I don’t think there is any place for a truly commercially orientated FD in the NHS because it is not
what they want,” he says. “They want ‘yes men’ who are ‘on message’ and do as they are told.”
Targets must be met, and if they’re not, either change the target or fiddle the numbers – pure
anathema to an FD who is trained and professionally obliged to find out and report what’s really
happening.
The problem isn’t isolated. According to shadow health spokesman Dr Liam Fox,
speaking
in Parliament last year, “A former [NHS] chief executive... said: ‘It was always my understanding, and
that
of my colleagues, that certain of the targets were what are euphemistically
described as
P45
targets... if a particular target wasn’t delivered, it was absolutely a
sackable offence.”
Perkin
has been contacted by several people – including other NHS FDs – with
similar stories.
“They’ve
said to me, ‘we wish we had stood up like you’,” he says. “But, for
example, one FD was
in
his late forties and had children, a large mortgage and he just couldn’t take
the risk. I was lucky
in
that I was not completely dependent on them for my income. I had an insurance
policy which
covered
the legal fees and I’d also remained a trade unionist, so [the GMB] funded the
appeal.”
It’s
not just FDs in the public sector facing this problem. “Another FD from a
large computer
company
got in touch,” says Perkin. “He lost his case as well. He’d blown the
whistle on his chief
exec.
But the chairman of his company had supported the CEO and the board had come
round.
They had said the same thing about him – that he was trouble-maker.” In an environment where
corporate governance regulations are tight and the penalties for transgression severe, not to speak out
if you uncover wrongdoing is unthinkable. But to speak up is to risk being seen, like Perkin, as “not a
team player”. “What I think is awful for FDs is it sends a very worrying message: you’re damned if you
do and you’re damned if you don’t,” says Perkin. What a choice.
WHERE
NEXT...
www.nhsexpose.co.uk
Ian’s exhaustive web site on his case
http://tinyurl.com/645LK
Department of Health’s whistleblower charter
ianperkin@blueyonder.co.uk
For details on Ian’s book, due in December
THE
DAY THE FD WAS REMOVED
“I
had no idea what was going to take place. We’d gone down to Center Parcs
for
a week’s holiday. Then when I was driving back into work on the Monday, my
secretary
phoned me on my mobile and said ‘you’re not to come into the office,
the
chief exec wants you to go up and see him straight away.’
“I
thought since I’d been off for a week there might have been a bit of a
financial
crisis
or something. I went up to the CEO’s office, not thinking there was
anything
wrong. But he had Colin Watts, the HR director, there. I said to him, ‘is this
a
quickie, I’ve got a really busy day – I’m seeing the auditors and KPMG’.
And he
said
‘you’re not seeing anyone, I’ve cancelled your appointments.’
“I
said, ‘this must be serious’. Colin Watts replied, ‘we want to talk to you
as old friends’ and it was
then
that I felt this was not going to be simple. They told me I’d been outspoken
in my comments about
what
was going on in the NHS and at St George’s and that I’d offended people at a
senior level. The
upshot of it was that they wanted me to resign. He said, ‘if you agree to go, we’ll say you are being
seconded to a special project at NHS headquarters for six months – but you don’t need to come in. You
can stay at home and do what you want. Find yourself a job outside the NHS and we will all part
friends.’ “Something goes in the pit of your stomach at that point. It takes hold of you for a moment.
But I said, ‘I have done nothing wrong. Why should I do that?’ And Colin Watts said, ‘well if you decide
to
fight it we will make sure you will never work anywhere ever again’.”
“FOR
FDS IT‘S A WORRYING MESSAGE: YOU’RE
DAMNED IF YOU DO, DAMNED IF YOU DON’T”
WHY
WHISTLEBLOWING MATTERS
Public
Concern at Work is a whistleblowers’ charity. It offers advice
if
you think you should speak up or if a whistleblower comes to you as FD
and
will help your company comply with whistleblowing legislation.
A
whistleblower isn’t a “grass”. They provide an early warning that can
alert
their colleagues, employers or the public to danger or illegality before
it’s
too late. Whistleblowing can save lives, jobs, money and reputations.
Encourage
staff to blow the whistle. It’s good risk management if
employees
are confident they can raise concerns without suffering comeback.
If
they stay silent where there’s a threat to your business, the cost
can be huge – fines, compensation, higher insurance premiums, damaged
reputation,
regulatory investigation, lost jobs, and even lost lives.
Anonymous
whistleblowing is discouraged.
[1]
It’s harder to investigate if people can’t ask follow-up questions.
[1]
It’s harder to get protection under the law.
[1]
It can lead people suspect the whistleblower is being malicious.
Few
whistleblowers get fired. Most cases where a problem is raised
and
then fixed go unreported. Many people speak up without thinking of
themselves
as “whistleblowers” and their concerns are properly addressed.
Whistleblowers
have legal protection. Almost all employees (except
those
in the armed forces, intelligence services, volunteers and the selfemployed)
are
protected by the Public Interest Disclosure Act 1998 (PIDA).
Gagging
clauses in employment contracts and severance agreements are
void insofar as they conflict with PIDA protection. PIDA protection can also
apply
in many cases where the worker is covered by the Official Secrets Act.
Have
a whistleblowing policy. It works as a statement of your organisation’s
commitment
to good governance and a guide for employees on
how
to raise a concern responsibly. Your policy on whistleblowing should
also
be different from that on grievances. The distinction between whistleblowing
and
grievances has been set out in the Employment Act 2002.
From
October 2004, there can be additional and serious risks if you do
not
make the difference clear to staff. The ICAEW has produced a guide
for
audit committees of listed companies on how to meet the whistleblowing
requirements
of the Combined Code on Corporate Governance.
If
a whistleblower raises a concern with you, there are a number
of
things you should bear in mind:
[1] Thank the worker, even if their concern proves to be mistaken.
[1]
Remember there are two sides to every story.
[1]
Respect a whistleblower’s concerns about their own position or career.
[1]
Report back to the worker about the outcome of any enquiry and any
remedial
action you propose to take.
[1]
Emphasise to managers and workers that victimising people who raise
genuine
concerns is a disciplinary offence.
[1]
Remember: you may have to explain later how you handled the concern.
Public Concern at Work’s free, confidential helpline is 020 7404 6609, www.pcaw.co.uk
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