Exclusive: A4e and a £200m back-to-work scandal

Accusations of fraud and widespread malpractice have prompted Commons watchdog to take tough action

Catherine Verwaerde had been unemployed for 13 months when she was referred to A4e. A supporter of the Government's drive to get people back into work, she hoped they would help her to find a job. Instead, what she experienced left her angry and determined to expose what she believes is "widespread" malpractice at the heart of the taxpayer-funded scheme that is supposed to help unemployed people back into work.

Ms Verwaerde, 25, from Leicester, is just one of a growing number of people who have come forward to make complaints against A4e. Controversy forced the firm's millionaire chairman, Emma Harrison, to step down as David Cameron's "back-to-work tsar" last Thursday. She relinquished her position as chairman of the company a day later. A4e has won more than £200m worth of contracts to run welfare-to-work schemes since May 2010.

Ms Harrison announced last Friday she was stepping down due to the intense "media focus", which began when it was revealed that she had paid herself a dividend of £8.6m last year, despite the failure of A4e to meet targets on finding jobs for the unemployed. The company has been investigated nine times since 2005 by the Department for Work and Pensions (DWP) and four former employees were arrested recently on suspicion of fraud.

While most personal complaints against A4e are concerned with their work under previous government contracts, Ms Verwaerde's stem from three weeks ago when she was put up for an interview by A4e, as part of the coalition's Work Programme. The job was in sales, offering £7,000 a year plus commission. But after A4e told her she had been offered the position, she says she was discouraged from asking for written confirmation of her hours and pay; she was told she could have her benefits sanctioned if she did not accept the position, and was then told by two A4e staff that she could "give it (the job) a go" without having to notify the Jobcentre.

The Labour MP Margaret Hodge, chair of the Commons Public Accounts Committee, who has seen a copy of Ms Verwaerde's complaint, said it was "horrifying". Tomorrow she will call on Chris Grayling, the Employment minister, to carry out an "urgent investigation" into the state of A4e's contracts with the DWP. She will also present him with documentation outlining allegations that she has received from people describing themselves as clients of A4e or previous employees of the firm.

"I have had so many serious concerns and allegations raised with me about what now appears to systemic poor practice and fraud at A4e that I shall be calling on the minister on Monday to undertake a transparent, thorough and urgent investigation," she said. "When public money is at risk, the common-sense thing is to suspend these contracts until we can all be confident that taxpayers' money is being properly used."

She added that current Work Programme contracts were set up in a "black box" fashion and without sufficient IT systems to check contractors' claims. "The fact that we don't have systems in place to check the veracity of claims, given the history of this company, makes everything very worrying," she said. Ms Hodge plans to set out her allegations in a letter to Mr Grayling or to raise an emergency question in Parliament.

Ms Verwaerde, whose ambition is to work in the police service one day, said she feels she has been failed by the very service meant to help her. "It felt like I was being pushed into a corner," she added. "I told A4e: 'I need the terms and conditions of the job in writing, as I can't agree to do a job until I know what I'm agreeing to.' They told me this is not how business worked and I would look awkward if I asked for information in writing. They then said I could try the job out without telling the Jobcentre. I thought this was ridiculous."

Ms Verwaerde is not the only dissatisfied customer. A dossier of evidence and complaints given to Ms Hodge, details of which The Independent on Sunday has seen, include allegations of past financial fraud, in-work bullying, claims of bad treatment and accusations that the welfare-to-work company delivered poorly run services. One complaint, written by someone who describes himself as a former A4e employee and whom the IoS has agreed not to name, described A4e as "nothing short of a gravy train". He said fraud at A4e had been "systemic" and "common practice".

Meanwhile, Ram (who did not wish his surname to be published), 58, from Leith, Edinburgh, said his encounter with A4e cost him two weeks of jobseeker's allowance. He attended an appointment in June last year, under the Work Programme, but did not take part in the interview when he was told that his adviser was not allowed to sit in with him. A4e told the DWP, wrongly, that he had not arrived for the appointment and that he had been denied a request for a translator. After making a formal complaint, Ram received a letter of apology from the DWP, his benefits and a consolatory payment – made in "exceptional circumstances" – of £50. This weekend he said his treatment by A4e had made him angry and frustrated.

Fiona Mactaggart, Labour MP for Slough, who has written to the Serious Fraud Office asking for an inquiry into A4e, said she has received numerous complaints regarding allegations of poor practice at A4e, whose offices in Slough are currently being investigated. "The descriptions of poor practice [I received] were so similar from people in completely different parts of the world that it's obviously a problem and obviously insufficiently inspected," she said.

In response to the current investigation in A4e's Slough offices, she added: "I think that a culture of fraud was probably allowed to flourish; we have to take urgent steps to roll that back right now."

In addition to the DWP, A4e has contracts with the Cabinet Office, the Department for Business and the Ministry for Justice. Those departments are not reviewing those contracts at the moment. The Cabinet Office said it has a £300,000 contract, agreed last August, with a subdivision, A4e Insights, which is designing workfare programmes for local authorities. It was already the case that, once those programmes were developed, A4e itself would not bid for the work.

In the wake of Ms Harrison's departure, A4e announced it had appointed the law firm White and Case to undertake an "independent audit" of its controls and procedures. Ms Hodge welcomed this last night.

Solicitors for A4e said: "A4e does not propose to comment on individual complaints, which will be referred to White and Case for their consideration."

A DWP spokesman said it would not comment on a matter under investigation, but added: "We have been clear that if systemic fraud is proven in relation to DWP contracts we will not hesitate to terminate our relationship with them."

How up to 35 job-seekers chase one vacancy

As many as 35 people are chasing one job vacancy in the worst-hit areas of the UK, new research revealed last night.

Analysis by the Institute for Public Policy Research North has identified the unemployment "cold spots" – mainly in the west of Scotland, South Wales and the north of England – with the longest dole queues in the country.

The think-tank figures cast doubt on the premise of ploughing hundreds of millions of pounds into work-programme contracts with firms such as A4e when, in the worst affected areas, there are just not enough jobs to go round.

Worst off is Clackmannanshire, where there are 35 job seekers chasing each job, followed by the Isle of Wight, with 21, East Renfrewshire, with 20, Haringey, 19, Inverclyde and East Ayrshire, with 18 each. Job centres in Middlesbrough, West Dunbartonshire and Lewisham have 17 people chasing each vacancy, while Blaenau Gwent has 16.

The City of London, with a small population and high employment, has more vacancies than job seekers. In Oxfordshire, Buckinghamshire, Westminster, Windsor and Maidenhead, and Surrey, two people chase every job.

With unemployment at 2.7 million, an average of six job seekers are chasing each vacancy.

IPPR North last night called for help to be aimed at the worst-affected areas, with regional investment banks targeting innovation and enterprise.

Ed Cox, director of IPPR North, said: "There must be more targeted help for struggling regions [or] we are in real danger of not only betraying a whole generation of people who can't find work but of ignoring the very places that could help grow the UK economy."

Jane Merrick

Rapid rise of a multi-millionaire

Emma Harrison, the 48-year-old mother of four, reportedly worth £70m, had a tough week. First she stepped down as David Cameron's "back to work tsar" and then as chairman of A4e, the company she set up in 1991. She can comfort herself with the fact that she retains 87 per cent of the shares of the firm that paid her nearly £9m last year.

Ms Harrison was born to an oil worker in Clacton-on-Sea in Essex and grew up in Nigeria and Yorkshire. Her multimillion-pound stately home, Thornbridge Hall, near Bakewell, is a far cry from her childhood home in Ranmoor, Sheffield, which was filled with lodgers to cover the bills.

The Grade II-listed mansion reportedly includes a nightclub, pool and bar. Ms Harrison, her husband, Jim, and their children, share the residence, with 11 friends and six of their children. She has reportedly described it as a "posh commune".

Despite being appointed CBE in the 2010 New Year Honours, things did not always come so easy for the Prime Minister's former family champion. She received low grades in her A-levels, thwarting her dreams of becoming a doctor, but credits this setback with fostering an entrepreneurial spirit early on in life.

She secured a place at Bradford University, sponsored by British Steel, and graduated with a degree in engineering. She founded A4e in 1991 after a short stint at her father's industrial training business. Ms Harrison has said in an interview that her father left the company after only 18 days of her starting, saying: "You've got the hang of it, right, I'm off.' Within her first year, the firm reached the £1m turnover milestone.

A4e got its big break with the New Labour government which introduced reforms to the welfare system under the New Deal. By 2009 it was the single largest operator of Labour's Flexible New Deal. This dominance was consolidated under the coalition government and today it employs approximately 4,000 staff across 250 centres around the world.

Ms Harrison also appeared on Channel 4's Secret Millionaire series, where she worked undercover at a working men's club in east London, where she heard racist language that made her feel "physically sick". She left after two and a half hours.

Sarah Morrison

Timeline

8 February Commons Public Accounts Committee hears how all A4e's £180m turnover came from government contracts; 87 per cent of the £11m paid in dividends to the company's five shareholders went to A4e chair Emma Harrison – some £8.6m, a three-fold increase on the previous year. Committee chair Margaret Hodge labels A4e's past performance "abysmal". MPs hear it missed its target of getting 30 per cent of people on its scheme into work, hitting just 9 per cent; this is disputed by A4e.

10 Feb Mail fires opening salvo against Harrison, revealing A4e received £63m in "termination fees" when DWP ended one scheme. It details her 20-bedroom "posh commune" in Derbyshire; shared with her husband, four children, 11 friends and their six children.

17 Feb Police visit A4e offices in Slough as part of an allegation of fraud referred by the DWP.

18 Feb Four former A4e staff are arrested, across the Thames Valley. Mail rips into Harrison as "Living off the state – and how!", with her "fleet of luxury cars" and her "medieval court", replete with 42 loos; it also reports that some of her less-than-satisfied clients dub A4e "All 4 Emma".

20 Feb Mail cites a source in A4e who says it received fees for finding jobs that lasted no more than 24 hours. Employment minister Chris Grayling denies this. Margaret Hodge calls on DWP to suspend all its contracts with A4e until the police inquiry is complete.

21 Feb Fifth member of A4e staff is questioned by Thames Valley police. Fiona Mactaggart, MP for Slough, the constituency where A4e is based, writes to the Serious Fraud Office requesting an inquiry into the firm. Mail reports allegations that jobseekers were ordered to sign blank timesheets.

22 Feb Guardian reveals DWP has investigated A4e nine times since 2005; the firm had to repay public money on five occasions after evidence was found of "irregularities". In one case fraud was proven at trial.

23 Feb Police launch second fraud inquiry. Harrison resigns as Government's "family champion".

24 Feb She steps down as chair of A4e.

25 Feb Mail runs gleeful headline: "Now she's the out of work tsar!"