Carillion’s Failures of Corporate Governance

Today’s report in the Observer concerning the scandalous failure of care at the Surgicare centre in Hertfordshire, run by the services group Carillion, makes somber reading. Three deaths of patients who had been admitted for routine treatment prompted an independent report before Christmas, as the Observer recounts:

the report also contained the admission that nurses dealing with the case at the privately run centre had needed a ventilator at 8.30am the day before the patient died, but “no machine was available”. That admission, along with the report’s further revelation that clinical medical records are missing and that the resident medical officer at the Surgicentre did not ask for a more senior doctor to attend to Ms Mansi as her health deteriorated, has provoked her brother, Michael, to demand the closure of the centre, which has been at the centre of a series of scandals over the past year.

The Carillion run unit had already been investigated over potential failings in the cases of six patients who suffered irreversible sight loss after treatment. There have been 21 serious clinical and patient information incidents since the clinic opened in September 2011. The clinic also lost the records of 8,500 ophthalmology outpatients last year, prompting local MP Stephen McPartland to back calls for Carillion to lose its licence.

Carillion is a giant company, with annual revenue of around £5 billion, employing about 45000 people around the globe. Significantly, it earns millions of pounds from offering facilities management services within the UK public sector.

The latest scandal must raise questions about Carillion’s low standards of corporate governance, mired as the company is in controversy about unlawful shakedowns and extortion from low paid Asian workers at a Swindon hospital, which has been obscured by years of cover ups, and now by victimization of the whistle-blowers who reported the scandal to management. The allegations of extortion by supervisors were known to Carillion management as long ago as 2007, and at Director level as long ago as 2009, but no effective investigation was undertaken and no action to protect the staff until the workers commenced strike action, in February 2012.

A company with strong ethical values, and a robust culture of effective management would have acted swiftly to identify the truth behind allegations of extortion by white supervisors from Asian staff. Instead Carillion conducted farcically flawed investigations in Swindon, where the victimized staff were too intimidated to give evidence, and where Carillion seemed to operate on the assumption that their white supervisors were inherently more truthful than their Asian staff. Anti-corruption recommendations made in 2010 were simply ignored by local management, who Carillion now acknowledge failed to implement them. Following support from the GMB union, ten members of staff finally did give evidence that they had been forced to give gold and other goods to their supervisors to secure their holiday approvals, shift changes and other work rights they were entitled to. In seeming contravention of the Public Interest Disclosure Act, Carillion has disciplined the whistle blowers; and Carillion further admitted to the Bristol Employment Tribunal in December that no disciplinary sanction has yet been issued to any supervisor.

It doesn’t even end there. Carillion has been up to its neck in the civil liberties scandal of blacklisting, where an unlawful register was maintained on behalf of construction companies, to share information with the aim of preventing workers who the companies disapproved of from gaining employment.

The Blacklist Support Group, run to help workers whose lives have been blighted by this scandal, report that the Information Commissioners Office specifically identified both Tarmac and Carillion as being subscribers to the Consulting Association, the organization that administered the unlawful blacklist. Carillion came into being after the demerger of Tarmac in 1999. Prior to this date Tarmac was a major subscriber to the Consulting Association blacklist. After 1999, Carillion carried on the same operations.

The Information Commissioners Office has also now released hundreds of pages of un-redacted blacklist files which highlight the role played by Carillion and a number of their subsidiaries in blacklisting. Crown House is only one of those firms identified. Schal International and SkyBlue Employment Agency (both wholly owned subsidiaries of Carillion) are also specifically identified in the blacklist files. John Mowlem Ltd – now trading as Carillion (JM) Ltd is also identified. So far there is evidence that 224 workers were blacklisted by Carillion.

The Consulting Association sales book, records and invoices show that Carillion itself was charged subscription fees, additional fees for checking names and charges for attending Consulting Association meetings between 1999 (when Carillion was set up) and 2008 (a few weeks before the Consulting Association was closed down). Between 1999 and 2006 alone, Carillion paid the Consulting Association £32,182.74 + VAT This is one of the highest amounts charged to any of the subscribing companies. Prior to 1999, Tarmac was being invoiced for these services. John Mowlem Limited now trading as Carillion (JM) Limited had a separate set of invoices and salesbook records.

Carillion was charged for attending numerous Consulting Association meetings in Scotland, the North West, London and the South East region and Woodstock throughout this period. Senior managers employed directly by Carillion were attending Consulting Association meetings as late as 2008.

The unredacted blacklist files and financial documents on many occasions identify the name or provide the initials of the senior managers who passed on information to the blacklist. This information supplied by Carillion continued to be used for blacklisting up until 2009.

For example, identified as the “Main Contact” for Carillion is LK – (Carillion’s HR Director, Liz Keates); also mentioned is JB – John Ball – Head of Human Resources at Carillion in 1999. John Blake a current senior manager for Carillion admitted collating information that appeared on a blacklist file and sending it to John Ball at Carillion Head Office whilst giving evidence during the Smith v Carillion Employment Tribunal in January 2012.

These claims about Carillion’s role in blacklisting have been put forward on numerous occasions in undisputed written witness statements and oral evidence at various Employment Tribunals. Much of the information was first exposed on Alan Wainwright’s online blog (ex-Director of Industrial Relations for Carillion who became a whistleblower)
If any of these facts were incorrect, Carillion have had every opportunity to refute them in court but have always declined to do so.

Yet, Carillion’s CEO, Richard Howson, now denies that Carillion have at any time participated in blacklisting of trade union members. In an attempt to protect the Carillion brand, he claims that the only part of the Carillion empire ever to have used the Consulting Association was a subsidiary called Crown House and that ended in 2004.

It seems to be further evidence of poor corporate governance that the CEO of the organization denies facts which Carillion has not sought to refute at Employment Tribunals, and some of which Carillion managers have themselves admitted in testimony. This suggests that Mr Howson should better inform himself before making public statements on blacklisting.

Carillion is a very major player in providing public services, running schools, hospitals, and council services paid for out of the public purse. For example its recent bid to run education services in Stafford would have been worth at least £700 million, and could have been worth £5bn over the project life. During the course of that bid, a senior officer from Stafford Council who had been involved in early stages of the procurement resigned from the council and took up employment with Carillion.

Hull City Council recently voted unanimously to review their procurement processes, to seek to exclude companies involved in the scandal of unlawful blacklisting. It is high time that private companies making profits from public services recognize that they need to match up to the ethical standards that the public expects.

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