Disgraced Severn bosses still earn a mint

By Simon Fluendy for MailOnline
Updated:

 

As he prepared to retire, Severn Trent Water boss Brian Duckworth penned a poignant farewell email.

No action: Former managing director Brian Duckworth

'I'm afraid these are my last jottings,' he said. 'I will not miss board meetings and the way they have become driven by the requirements of corporate governance issues. I will not miss preparing business plans because they get in the way of running a business. And I suspect that Ofwat reads only a small proportion of what we submit.'

Only later, following a series of reports in Financial Mail, was it revealed just how much contempt Duckworth had for the regulator. Ofwat and the Serious Fraud Office found that for years under Duckworth's control Severn Trent Water lied to Ofwat about how it was performing and used the figures to justify inflated bills.

Customers were ripped off to the tune of £42m by cover-ups about bad debt and other shortfalls. Severn Trent is now gradually repaying the sum to bill payers. The company was last week fined an additional £35.8m by Ofwat for repeatedly misleading it over leakage data. It also pleaded guilty to two cases of fraud under the 1991 Water Industries Act.

Last week it emerged that the total cost to Severn Trent shareholders for this protracted debacle will easily top £100m.

The company faces a further date in the Crown Court next month when a judge will set yet another fine.

After that Ofwat will come back to the original set of accusations revealed by Financial Mail and whistleblower David Donnelly, and set a new refund to customers.

But despite last week's disgrace, the gravy train rolls on for former Severn Trent directors.

The company was chaired until 2004 by Sir David Arculus, still a director of O2 and Pearson - the publisher of the Financial Times - even though he was forced to stand aside as incoming president of the Confederation of British Industry following Financial Mail's early revelations.

The chief executive was Robert Walker, who moved swiftly on to the top job at WH Smith in 2005.

And managing director Duckworth, awarded an OBE in June 2004 for 'services to the water industry', continues to sit on the boards of listed firms.

Amazingly John Banyard, director of asset management and also awarded an OBE, has gone on to become a member of the board of Scotland's Water Industry Commission - Ofwat's equivalent north of the border.

Investigators from the Serious Fraud Office's 'E' Division found the case against Severn Trent clear cut and straightforward. Under lawyer Neil Gamble and investigator Mark Thompson the investigation into the complex way figures for leakage are put together by water firms became simple in the light of smoking-gun emails.

Messages from Duckworth, Banyard and finance and regulatory director Mark Wilson to technicians responsible for preparing data for Ofwat gave clear instructions that the 'right answers' should emerge no matter what the real data might suggest.

Legal sources and individuals closely involved with the case say SFO officials believed they had sufficient evidence to charge all three individuals with knowingly providing false figures to Ofwat, but it was decided that the public interest would be better served by penalising the entire company.

'This is the first time a company has ever been charged with fraud, the first prosecution under the Water Industry Act provisions - and possibly the last, as Ofwat now has its own powers to fine companies,' said one source.

All three departed from Severn Trent in quick succession as Colin Matthews replaced Robert Walker as chief executive. Duckworth resigned in June 2004 but, astonishingly, was kept on as a consultant to help prepare yet more regulatory filings.

He continues to be a director of three listed companies. House builder Redrow still pays him £43,000 a year - until last July he was considered fit to be chairman of Redrow's audit committee. He is senior non-executive director at Novera Energy, where he chairs the remuneration and nominations committees and is on the audit committee. He also chairs the remuneration committee at engineering consultants White Young Green.

City coverage and share tips

This is Money carries breaking City news throughout the day. Bookmark Companies & Markets and try these markets links...

Newspaper graphic and pen

Until last November he was paid £39,000 a year as non-executive director at Avon Rubber.

At one stage he was slated to become chairman of debt management consultancy XKO, now Revenue Assurance Services, but the company decided not to appoint him after he was named by Financial Mail as a person of interest in the SFO inquiry.

John Banyard seems to have left corporate life. But his new role as a Scottish regulator remains unchallenged. A spokesman for the Water Industry Commission for Scotland declined to comment on his post as a water industry regulator.

Mark Wilson is no longer the director of any company but has done consulting work for up to to £2,000 a day, notably at Sea Containers, the former owner of the Orient Express railway and top-notch hotels.

Wilson's spokesman told Financial Mail: 'Following the company's investigation into the leakage story, he was in fact promoted to group finance director. In July 2005 it was announced that by mutual consent that he would leave.'

Duckworth's lawyers deny that he is culpable and Banyard did not reply to attempts to contact him.

Severn Trent is looking into whether it should take action against former senior managers to make an insurance claim for some of the £14m it has already set aside for its legal bills.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

Most watched Money videos

{"status":"error","code":"499","payload":"Asset id not found: readcomments comments with assetId=1629874, assetTypeId=1"}