Civil servants investigating 3aaa “had it in” for some providers, “jumped to conclusions” about data manipulation and took a “guilty until proven innocent” approach, internal government emails shown to the High Court suggest.
Allegations of “fraud” that led to the apprenticeship provider collapsing in 2018 have played a part in the Marples’ family lawsuit against the Department for Education, even though it was two years after the change in control issue at the heart of the case.
The DfE has relied on this as a key part of its defence, referencing multiple other cases of alleged data issues and clawbacks at providers owned by Peter Marples.
David Smales and Keith Hunter, who have 20- and 30-years’ experience in the civil service respectively, gave evidence to the High Court today. They said 3aaa had manipulated data to enhance qualification achievement rates, namely by “alteration of learners’ planned end dates and withdrawal dates”.
This put £521,000 at risk of recovery, plus 3aaa owed £1.2 million worth of Apprenticeship Grant for Employers (AGE) funding that should have been paid to employers. A referral was made to the police, but no further action was taken.
Adam Solomon, KC for the claimants, attacked the competence and investigative approach of the DfE officials.
Smales, who Solomon pointed out had been accredited as a counter fraud specialist through a four-week residential course with the Chartered Institute of Public Finance and Accountancy, admitted not all learner files at 3aaa had been reviewed because their investigation “didn’t get to that stage”.
Of 3,000 learner files, the then Education and Skills Funding Agency (ESFA) identified 253 to closely examine.
Solomon asked why he didn’t look at all of the underlying data. Smales told the court: “Had 3aaa not gone into liquidation, and had they challenged the findings of the investigation instead, then at that point it would have been necessary for the ESFA to go to 100 per cent audit.”
3aaa went bust in October, a month after co-founders Peter Marples and Di McEvoy Robinson resigned.
Hunter said it “wouldn’t have been a good use of public money to continue investigating a liquidated provider”.
‘Does he not learn?’
The ESFA’s data science team calculates numbers of learners who withdraw from their training across the whole sector.
“It turned out that the average was 7 per cent, with a median of 5 per cent. At 3aaa, Keith [Hunter] calculated that the figure was about 20 per cent. That was obviously a much higher rate than usual anyway,” Smales said.
Solomon asked Smales if he knew what was meant by the “mean” and the “median” in statistical analysis. He answered “no. I could guess, but I’m not prepared to take a guess”.
The KC then showed a draft briefing paper Smales had prepared before the investigation concluded, which included the words “in addition to data manipulation”. These words were crossed out by his boss who included a note which said Smales was suggesting 3aaa was “guilty until proven innocent”.
Solomon also read out an earlier email from Smales who had received analysis of 3aaa data from Hunter following allegations from multiple whistleblowers inside the company. He told his bosses: “I had a chat with Keith Hunter earlier this week about 3aaa and data manipulation and the conclusion is it appears 3aaa has been manipulating data for at least two years.”
Solomon showed an email from ESFA deputy director Karen Sherry to Smales’ line manager, named in the court as Ms Allen, which said: “The more I think about it the more angry I am getting. This should have been shared with me and you BEFORE BEING SENT TO DAVID. Does he not learn?” Sherry was referring to Hunter.
Sherry’s email added that “we need to do an audit” and “we need to be very careful about using words like 3aaa manipulated data”.
Allen replied: “I just don’t get it. It gets to a point where I feel I can’t even share anything anymore for fear of what he will do! Despite warnings.”
Sherry then said: “He has ‘got it in’ for certain providers and will do anything to damage them!” She added: “I showed Paul and he said the same as us. Completely out of order. What I am really cross about is he hasn’t told us he is doing it and jumped to conclusions before further work”.
Hunter told the court he was doing “what I considered to be my responsibility under the civil service code to safeguard public funding”.
While Smales told the court that accounting firm PwC “confirmed the findings of the 3aaa Investigation”, he admitted to Solomon he could only “suspect” 3aaa had manipulated data.
Smales and Hunter still work in the DfE’s investigations team.
All fingers pointed to Lee Marples
Smales also told the court that, as a result of the interviews with former 3aaa managers, “all fingers were being pointed at Lee Marples having been the perpetrator, on the instruction of the CEO of 3aaa at relevant times, Peter Marples”.
This “corroborated what 3aaa’s new management had told us in their response of 3 October to the ESFA’s allegations”.
Lee Marples, the nephew of Peter Marples and who was 3aaa’s resources manager at the time, attempted to distance himself from the responsibility of data submissions to the SFA during his evidence, claiming that manipulation would require “collusion across multiple people within the business”.
He told the court how funding rules are “very subjective” and there are “multiple different opinions of what people constitute as in learning, as a break-in-learning and a start date”.
James Segan KC, for the DfE, pointed to claims of “manipulation to inflate the organisation’s value” including “shortening aim lengths, restarting withdrawn learners, starts claimed without learning taking place”. The barrister asked: “These were all things that were happening, yes?”
Lee Marples replied: “There are reasons why aim lengths should be shortened, because they could be input incorrectly in the first place. There were various components and each of these would have a different timeframe against them because of the volume of data we were processing.
“There would be legitimate reasons to change the dates if they were wrong. The restarting of withdrawn learners – if a learner comes back after they’d previously withdrawn and hadn’t been on a break in learning, learners could be restarted.”
The court heard that one of Lee Marples’ team members told the ESFA: ” …well aware that Lee Marples [was] actively changing information in the Maytas system which would be submitted in the ILR. This usually revolved around end dates for apprentices being manipulated. This was a constant issue.”
Segan added that the team member said he would “correct Lee’s changes to end dates but would often find them changed back. He never confronted Lee directly but described it as a kind of ongoing silent battle between them.”
Other 3aaa workers made similar allegations against Lee Marples.
Lee Marples denied all data manipulation accusations.
‘Poor use of language’
Former SFA director turned college principal Keith Smith denied having a direct role in 3aaa’s change of control during his evidence, despite making significant amendments to official government communication about the process.
He also admitted to “poor use of language” in enforcement rules that led to the multi-million-pound sale of the training provider falling through.
Smith, who is now CEO of Harrow, Richmond & Uxbridge Colleges (HRUC), held multiple roles in civil service for 30 years until 2022. During 3aaa’s proposed sale to TLP he was an SFA director who worked on the implementation of post-16 funding policy.
A member of Smith’s team, Sharon Forton, took the lead on 3aaa’s change of control request.
In early November she sent an email suggesting the case should be approved. Smith, who told the court he had limited involvement in this specific case, replied “no further questions from me…if Peter is happy to approve I would want to make sure we review this carefully over the next few months to make sure nothing changes or starts to raise alarm bells”.
But following the refusal letter a month later, Forton asked Smith for his advice on how to respond to 3aaa. Smith made series of track changes that included concern around the business plan, namely TLP’s expected non-levy growth.
And in January 2017, Forton drafted a letter to then skills minister Robert Halfon to inform him of the 3aaa situation. Smith made significant changes to this and changed the name of the sender from Sir Peter to himself. Solomon pointed out this was despite what Smith claimed to be a “lack of knowledge” about the case.
Solomon showed Smith an email he sent following conversations with 3aaa about their potential sale following a tip off in September 2016. Smith’s internal response was “they know the rules too well not to proceed without our agreement” and another said “we must approve any sale”.
Solomon put to Smith: “You were under impression that at the time you had the power to veto a proposed sale, wasn’t you?”
Smith denied this, stating that while he knows “how this type of language might look”, what he is referring to in those emails “is the process where we could approve the continuation of a contract”.
He added: “I accept that was a poor use of language, I was never at any point approving a sale per say, what I was saying here is about approval of transfer of contract.”
Kirsty Evans, a former SFA director of funding who now works in the Construction Industry Training Board (CITB) which Sir Peter Lauener chairs, also gave evidence to the court. She was pressed on the impact of levy funding reforms and achievability of TLP’s business plan around non-levy growth.
An email from Evans at the time said projections were “challenging but not unreasonable” and that 3aaa needed to “diversify” followed by a list of unanswered questions for TLP and 3aaa.
She also questioned whether or not the possible new investors and contract holders were “more likely to pull the plug, cut and run, than the current owners of 3aaa who had demonstrated their commitment” to the training market.
Allen and Linford
It was claimed by Tony Allen, a witness for the claimants who worked in the SFA’s large contracts unit until May 2016, that Smith and Sir Peter would take issue with private providers making profit.
Smith strongly denied this to the court, stating that private providers are a critical part of a healthy training market. He said there was concern about “excess profits” because a core responsibility of the agency was to deliver value for money, but there was a “difference between profits and excess profits” and he would expect Allen to understand that.
Allen also claimed he heard, but had no evidence, that Smith would meet former FE Week editor Nick Linford regularly, while Solomon accused the SFA director of being under the influence of Linford and taking everything he said at face value. This was largely due to a tip-off that Linford gave the SFA in 2016 that led to the KPMG investigation of 3aaa.
“I not only deny the allegations, I do not believe there is any possible basis for them to be made about me,” Smith said.
The court heard Allen questioned about his assertion that changes of control at other apprenticeship providers would happen “with little in the way of questioning” from the SFA.
Allen claimed to recollect changes of control to this effect for Lifetime Training and Babington, which he said took place in 2015.
They in fact took place in 2016, one of which was after he left the SFA. He admitted he had no involvement in either process during cross-examination.
Allen told the court: “My memory has failed me on this occasion.”
The court will hear from experts for both sides tomorrow followed by a week’s break before closing statements on July 9 and 10.
You can read our report on the opening statements here, cross-examination of Peter Marples here, and evidence from ex-SFA chief Sir Peter Lauener here.
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