MP calls for clarity on payments to iSoft

Following yesterday’s suspension of iSoft co-founder, Steve Graham, pending investigation of possible accounting irregularities, Richard Bacon MP, has called for the health secretary, Patricia Hewitt, to confirm whether advance payments were made to iSoft under the NHS National Programme for IT (NPfIT).

The Conservative MP, a leading member of the House of Commons Public Accounts Committee has also said he will call on the trade and industry secretary, Alistair Darling, to consider whether there are grounds to begin an investigation of the conduct of iSoft’s directors under the Companies Acts.

NHS software supplier iSoft yesterday suspended co-founder and former commercial director Steve Graham, pending a formal investigation of possible accounting irregularities in the financial years 2004 and 2005. The investigation centres on possible early booking of revenues from the NHS National Programme for IT.

Bacon, who has repeatedly raised concerns about iSoft and the national programme, said: "It appears that iSoft’s previous accounting policy – which it has now had to abandon – was based on its receipt of letters of credit, apparently centred around advance payments from NHS Connecting for Health (CfH) and from NHS local service providers (LSPs). In evidence to the House of Commons Public Accounts Committee on 26 June, CfH chief executive Richard Granger stated: ‘… we would only make an advanced payment when covered by a letter of credit from a bank’.”

Bacon added that he understood that CfH keeps close tabs on contractors and has access to details of their finances. He pointed out that iSoft issued profit warnings on 30 January 2006, 28 April 2006 and 8 June 2006, which in turn led to the company’s share price dropping from 460p to 50p. “It concerns me that iSoft directors have sold £76m in personal shareholdings since 2003, the last sale for which there is a published record being on 16 January 2006,” commented Bacon.

He added: “I am also concerned that the company may be facing difficulties in meeting its banking covenants, which appear to have been put in place in order to cover advance payments from the NHS.”

"I will be writing today to the Secretary of State for Health [Patricia Hewitt] to ask whether advance payments were indeed made to iSoft under the NHS National Programme for IT, and, if so, how much was paid and when. I will also be asking if such payments were made with the intention that they would ultimately be repaid to CfH, and whether such repayments have occurred.

Bacon said Hewitt “should make clear whether CfH used the open accounting clauses in its contracts to investigate the impact of any advanced payments on iSoft’s published accounts and what action if any it took as a result.”

"Finally I shall be asking the Secretary of State for Trade and Industry [Alistair Darling] to consider whether there are grounds to begin an investigation of the conduct of iSoft’s directors under the Companies Acts.”

Bacon said the crisis now surrounding iSoft “has potentially devastating consequences for the whole NHS National Programme for IT”. He said: “The most important software provider in the programme is in serious trouble. The whole future of the programme must be reconsidered as a matter of urgency."