THE spectre of fraud has been raised at the tram inquiry after a senior lawyer admitted councillors were given false information about the risks just before signing the multi-million pound contract.
The inquiry into the botched construction of the £776 million line heard that changes to the contract were negotiated by tram firm TIE in the months before the deal was signed in May, 2008. These changes opened the council up to demands for more money from contractors and TIE’s lawyer Andrew Fitchie was concerned about the increased risk to the public purse.
However, when councillors were briefed as they weighed up the decision whether or not to sign on the dotted line, these concerns were omitted and councillors were told there had been no change to the risks involved.
Mr Fitchie acknowledged that some sections of the reports presented to the council at the time did not reflect the true picture of the risk built into contract drawn up wit the consortium building Edinburgh’s new tramline.
And he admitted he had knowingly allowed the false information to be given to the council shortly before the contract was signed.
Mr Fitchie, who was seconded to TIE from law firm DLA Piper and was paid a £50,000 bonus for his work, told the tram inquiry chaired by Lord Hardie that he had given TIE advice on how provisions negotiated in Schedule Part 4 of the contract would allow the contractors to demand more money when there were changes.
Nevertheless the reports to the council claimed that in broad terms there had been no shift in risk since the final business case in October 2007.
Mr Fitchie recalled a meeting - immediately after he had met TIE chief executive Willie Gallagher about his bonus - when he said he had repeated the advice.
He said: “Present at the meeting were Steven Bell, Geoff Gilbert, Jim McEwan, Denis Murray and possibly Graeme Bisset. They didn’t like the advice I was giving.
“And I must stress the individuals receiving that advice in TIE had been the people who were negotiating Schedule Part 4 on their own all the way through this period from January 2008 until effective close-out in March.”
Inquiry counsel Jonathan Lake QC asked him: “Going back to May 2008 then you would have been aware that they were knowingly providing false information to the council?”
Mr Fitchie said: “I would hesitate to go as strong as that. I agree the information in these reports was deficient.”
Lord Hardie intervened and said: “It’s more than deficient, it wasn’t accurate, it wasn’t true, so it was false.”
Mr Fitchie agreed.
Mr Lake said: “You hesitate there because you know the legal significance of knowingly providing false information to someone, don’t you? It amounts to fraud doesn’t it?
“And you were aware of that in May 2008, you were aware that’s what was happening?”
Mr Fitchie said he had allowed the information to go to the council.
Lord Hardie said: “Does it not follow that you knowingly permitted this to be submitted to the council in the knowledge it was false.”
Mr Fitchie said: “Yes.”
But later in the day, cross-examined by Roddy Dunlop QC, for DLA Piper, Mr Fitchie changed his stance.
Mr Dunlop highlighted sections of the same report, which listed elements of risk retained by the public sector under the contract.
One section said: “TIE/city council will bear any incremental construction programme cost consequences of [design company] SDS failure to deliver design outputs in a timely and sufficient manner to the consenting or approving authority.”
Mr Dunlop asked him: “Looking at these other aspects, do you retain the view that the document is, read as a whole, misleading?”
Mr Fitchie replied: “No, I don’t and I’m sorry for it. I made a hasty judgement being shown the extracts and shown the document in the way I was earlier.”
Mr Fitchie also claimed that the council was in any case aware of the implications of the contract. He said: “The council may not have liked what they were hearing about Schedule Part 4 and the idea of risk being assumed by the council or TIE. They knew of it.”
The inquiry, now in its sixth week of public hearings, was told the previous day that Mr Fitchie had accepted the £50,000 personal bonus approved by the TIE board and thought he had clearance to do so, but later had to hand the money back.
Questioned about it again, Mr Fitchie said: “There was a disagreement between me and my firm as to whether I had had clearance to take the bonus, and after scrutiny and internal inquiry, the firm took the bonus back. There was some confusion about this within the firm, but ultimately the decision was this was not allowable and I needed to pay the bonus back to the firm.”
He said he understood DLA had then written saying “We have this money, it needs to be reimbursed, how would you like that to happen?” but the council had not responded.
Roy Martin QC, for the council, said Mr Fitchie told the inquiry he had not been closely involved in the crucial Schedule Part 4 of the contract, which had been a “critical factor” in the project’s rising costs.
Mr Martin said: “My question is a simple one: why were you worth the bonus?”
Mr Fitchie said: “If you worked in the project finance world, and you’ve worked on this project, there are many, many, many other things going on in terms of advice, involvement, engagement, making yourself available to the council to explain what is going on.
“I’m an extremely dedicated person, and the reason that the bonus was there was not exclusively for Schedule Part 4. I worked very, very, very hard on this project for a long time.”
Mr Martin said the payment of the bonus was not consistent with his claim to have played only a limited part in Schedule Part 4.
“I have to put to you that you are not telling the truth. You had a full part, seconded to TIE, in frequent contact with the officers of TIE, fully aware of the evolving drafts and developments in the contract, and frankly, it’s not credible that you did not play a full part.”
Mr Fitchie replied: “I disagree with you, and I have given my evidence on that point. I have nothing further to add on that.”
In his written evidence, Mr Fitchie said he had limited involvement in Schedule Part 4 because TIE had not been happy that legal firm Pinsent Masons had taken the lead role for the contractors and TIE had requested future discussions on it took place without lawyers being present.
Mr Fitchie told the inquiry that it had been clear to him before the contract was signed that the contractors Bilfinger Berger were going to “use the contract aggressively”.
He said: “My experience told me from working in Germany for a major civil engineering contractor for five years that this contract would be engineered by a set of quantity surveyors looking for claims, and that is exactly what happened.”
Inquiry counsel Mr Lake asked Mr Fitchie his reaction when TIE lost adjudications over disputes about bridges at Carrick Knowe and Gogarburn went against TIE.
He said: “I was disappointed, but I had never been and I was not unduly impressed with the quality of expert evidence put forward on TIE’s case.