The Government’s bank suspended Matt Hancock’s team from making payments to PPE suppliers at the height of the Covid-19 pandemic over fears they were being taken in by fraudsters, the High Court has been told.
NatWest told the government payments over £5 million would have to be reviewed by their fraud team, over concerns about a lack of due diligence in huge contracts being handed out through the so-called “VIP lane”.
At least £1.7 billion worth of deals were struck through the “VIP lane” - some of which were for products which did not meet adequate standards for the NHS, according to a report by the Commons Public Accounts Committee.
The committee found DHSC had “wasted hundreds of millions of pounds on PPE which is of poor quality and cannot be used for the intended purpose.”
The report found firms introduced through the ‘VIP lane’ were ten times more likely to secure contracts than those that applied through the official route on Government’s procurement website.
The High Court was told one supplier, Ayanda Capital was admitted to the ‘high priority’ lane because their advisor Andrew Mills, who brokered the deals, was “influential across government.”
Correspondence revealed in new filings to the High Court reveal the bank were so concerned about huge payments to Ayanda that they tried to stop them.
A spokesperson for Ayanda said the first payment was “held up” - but “satisfactory due diligence having been completed, the payment was made.”
The messages were revealed in the latest stage of legal action brought by the Good Law Project and Every Doctor UK, accusing Matt Hancock’s team of acting unlawfully in dishing out contracts to friends and contacts of ministers, MPs and officials through the ‘VIP lane’.
An email sent by the Department of Health and Social Care’s (DHCS) Head of Finance Operations in May 2020 read: "Over recent days, and in particular over the last 24 hours, a number of approved payments have been stopped by the bank who believe there is evidence we may be being targeted by fraudsters and that the supplier due diligence processes being operated by the buying team...are not sufficiently robust."
They added: "I concur with the bank's assessment."
A due diligence report carried out on Ayanda after the contract was in place gave it a "red" rating - both for "financial information" and for its' credit score, which was "low”, the court was told.
DHSC's Anti-fraud unit also advised the department to obtain a guarantor for the contract, but documents say "there is no evidence this was ever done."
The court was told after it came to light that due diligence had not been performed properly, a DHSC official wrote in an email: "S**t hit the fan...due diligence hadn't been carried out on Ayanda...there are a lot of people covering there [sic] own a****s...I think something went wrong!!! big style!"
A spokesperson for Ayanda said “extensive” due diligence was done on the firm, but that the accounting officer was not aware of it due to an “administrative error.”
“When they checked the DD it was approved,” they added.
The spokesperson said a guarantor was not necessary because the firm had a “good credit rating”.
And they said “Ayanda had at its own instigation and without being asked, put in place with its bankers a dedicated blocked PPE bank account” - which meant there was “zero risk of fraud.”
Documents brought up in court also revealed officials were being distracted from securing deals with more established suppliers because they were having to deal with offers from firms who had links to officials, ministers and MPs.
One official report dated April 20, 2020 said “VIP escalations” were “consuming bandwidth” and “obstructing [the] process of more viable opportunities with larger/scalable manufacturers.”
The court heard an unnamed person had pressed for Mr Mills, who brokered the Ayanda deal, to be considered a “VIP case”, because he was “a Board of Trade Advisor (similar to a non Exec Director) for DIT (The Department of International Trade).
Members of the purchasing team were put under pressure to prioritise Ayanda over other suppliers - with one email warning: “This is likely to get escalated to Ministerial level in next 20 minutes or so.”
Later emails about Ayanda were marked “URGENT VIP CASE” and “VERY URGENT VIP ESCALATION”.
An email on April 17, 2020, a cabinet office official wrote to the purchasing team to say they were close to losing a contract with Ayanda to supply PPE masks, adding: “Our contact has close ties to DIT so wouldn’t be a good outcome.”
Another email with regard to a later deal to supply gloves read: “I am getting a lot of escalations from this supplier, who is influential across government, on the lack of response he is getting. Can you advise what the hold up is please so we can communicate better.”
Another email from an unnamed person to the purchasing team, on April 26, 2020 warned that if the deal fell through “Andrew [Mills] will escalate as high as he can possibly go!”
A spokesperson for Ayanda said Mr Mills had not approached DHSC through political contacts, but “via his commercial contacts in the NHS.”
They added: “The only pressure on the DHSC in April 2020 was the very real crisis of the pandemic and the critical shortage of PPE supply for frontline health workers.
“Officials were fully aware that they had to take a decision quickly on Ayanda’s offer or, in all likelihood, it would be lost to higher bidders.
“This was happening all the time and Ayanda possessed documentary evidence that France was offering to take over the whole supply of PPE masks from Zhende, the Chinese supplier.”
The spokesperson denied Mr Mills had ever made contact with Trade Secretary Liz Truss.
In a statement published on the Government website, DHSC said: “We set up, from scratch, a new parallel supply chain to procure, manage and distribute life-saving PPE. This was an enormous cross-government effort, drawing upon expertise from a number of departments together with fantastic support from the military and private sector partners.
“Officials worked day and night to secure these contracts. We prioritised procurement and we make no apology for that.”
They added: “In this unique situation, we had to change how we approached risk. The risks that the contracts might not perform needed to be balanced against the risk to the health of frontline workers, the NHS and the public if we failed to get the PPE we so desperately needed.”
The trial, being heard by Mrs Justice O’Farrell, is expected to last five days.