MPs call Qinetiq sellout execs 'profiteers' - no, really?
Cutlasses, parrots retrospectively seen as clues
Comment Another government oversight body has just revisited the case of the QinetiQ sell-off, in which a group of business executives mounted an astonishing ten-year corporate raid on the British defence ministry. This is not, however, a commendable bit of vigilance on our behalf; it's politicians seeking limelight by attacking a safe target.
This week's report by the Parliamentary Public Accounts Committee returns to the role of Sir John Chisholm and his inner circle at the Defence Research Agency and its successor DERA - the Defence Evaluation and Research Agency - most of which Chisholm & Co subsequently took private under the name QinetiQ. Chisholm and his nine closest confederates made out like gangbusters, scooping £200 for every £1 they invested in a share deal set up by themselves.
"Such profiteering at the expense of the taxpayer is not something this Committee would expect from former public servants," say the testy MPs, led by the Tories' Edward Leigh.
But the fact is that Chisholm and his confederates - for instance colourful biz-buccaneer Graham Love, who now heads QinetiQ - were never exactly Sir Humphreys. Chisholm and Love, rather than being career civil servants, were hungry 1980s biz execs who were brought in to the Defence Research Agency to get it ready for privatisation in 1992 in a classic last-gasp-of-Thatcherism move.
This was a bit like inviting a fox to handle the reorganisation of your chicken farm. Love in particular must have come to believe he could do anything he liked: having broken off a large chunk of DERA in a 1994 management buyout - his payout on that occasion was never made public - he was actually allowed back onto Chisholm's team of "public servants" afterwards, to scoop another thumping payout in the QinetiQ deal.
Leigh and the Public Accounts Committee say that £54m which should rightfully have gone to the taxpayer went instead to Chisholm, Love and the other eight top execs of QinetiQ. They were able to negotiate this incredibly lucrative deal, according to the parliamentarians, first by ensuring that the sale would be handled by private equity investors and then by playing private equity firm Carlyle against the mandarins of the MoD.
The Department ... received 16 expressions of interest ... only one of which came from a trade bidder, SERCO ... QinetiQ management strongly objected to trade bidders ... The 12 bidders that were taken forward were all private equity firms.
QinetiQ senior management were heavily involved in the design of the incentive scheme ... Carlyle initially proposed to set aside 10 per cent of QinetiQ’s equity for management ... Sir John Chisholm [said] that the proportion of equity Carlyle were offering to incentivise management was low ... QinetiQ management held discussions on the incentive scheme with Carlyle before they were appointed preferred bidder ... Following the discussions between QinetiQ management, Carlyle submitted a revised bid. The revised incentive scheme set aside 20 per cent of QinetiQ’s equity to management [and] offered the prospect of much greater returns ... especially to the top 10 managers ... If the Department had restricted the proportion of QinetiQ’s equity made available to staff to 10 per cent it could have realised additional proceeds of £76 million.
So, in short, Chisholm, Love and the others got Carlyle to bump up the management payout. Subsequently, Carlyle is named preferred bidder. As a result, the MPs say, £54m of the £76m unnecessarily paid to QinetiQ staff went to Chisholm's top ten.