What looks like the biggest fraud in NHS history was uncovered in a district audit office in Caernarfon. Audit manager Ian Hughes unravelled the story exclusively for Mark Gould

'He was very blase about the whole thing. You didn't get the feeling that the bottom had just fallen out of his world. '

That was the impression gained by auditor Ian Hughes when he came face to face with the perpetrator of what is thought to be the biggest fraud in the history of the NHS.

Locum agency boss Dr Dimitri Padelis (pictured, left) faces a jail sentence next month after he was found guilty at Southwark crown court last week of 12 counts of fraud totalling£340,000.

The court heard that Dr Padelis stole£12,000 from Great Ormond Street Hospital in London. But Mr Hughes says other trusts lost between£30,000 and£50,000 each in a career in which Dr Padelis used his locum agency, Allcare, to steal at least£3m from up to 100 trusts.

And Mr Hughes, audit manager for Caernarfon district auditor's office, says he would have gone on swindling the NHS but for the vigilance of one auditor in his office. 'This was six years ago when we were doing computer interrogation of various trust payment systems with our IT specialist Nigel Griffiths and auditor Sharon Jones.

'Sharon found nine duplicate payments from Gwynedd Hospitals trust from the same agency. This meant a total of 18 identical locum payments for the same hours, same doctors and same dates, same travel expenses.

There was no sign that the duplicates were reminders or overdue notices.

'We looked at other trusts in Wales and England and found the same pattern, and then contacted the police, who agreed we had evidence of criminality. '

Mr Hughes met Dr Padelis when fraud squad officers raided his office in south London and uncovered evidence of a variety of scams.

'None of his staff or any of the locums knew about the fraud. He came into work alone on Saturdays and altered invoices, adding an hour a day to a timesheet, charging an extra£5 an hour for a senior house officer when the locum was a house officer, claiming for car or rail expenses when a doctor cycled or submitting invoices with overlapping dates so several days were paid twice. '

Mr Hughes says Dr Padelis' success was based on stealing little and often. 'He worked on the basis that no minor clerk would walk up to a locum consultant and challenge him about an extra hour on a timesheet - and of course they didn't. '

Blackpool's Victoria Hospital was one of the 12 named in court.

In a statement, Blackpool Victoria Hospital trust said: 'The fraud occurred in 1993 , before the trust was established. Very little use was made of the locum agency and the total lost to the fraud was less than£2,000.

Systems have been put in place since the formation of BVH trust to ensure that this type of fraud cannot happen again. '

Dr Padelis stole£746 from the Royal Marsden Hospital, of which most was recovered. A trust statement said: 'There were two main elements to the fraud - overcharging National Insurance contributions and inflating the number of hours worked. Steps have been taken to prevent something similar happening again. '

Philip Madeley, finance director of Royal Cornwall Hospitals trust, another victim, says he does not accept Dr Padelis's court assertion that the overpayments were as a result of 'universal incompetence' in the NHS.

'He would say that wouldn't he?

When you are looking after an NHS organisation with£150m turnover and the fraud comes to less than£2,000, then I think that accusation is nonsense.

'I think generally the health service is far more fraud-aware than it was 10 years ago - the whole culture is very new and of course we have the new counterfraud directorate as well. '

Mr Madeley says the trust has since introduced new financial systems which strengthen the payment and reporting processes.

He adds: 'We are also using far fewer agency and locum staff generally, and this really avoids the occasion of fraud. '

Kate Elis-Williams, finance director for North West Wales trust which now covers Gwynedd Hospitals trust, paid tribute to Mr Hughes and his team.

'I think the case shows how undervalued good district auditors are and it underlines the importance of good internal and external auditing systems. '

But another senior finance director, who did not want to be named, was concerned that small thefts could still creep through.

'We have got systems that uncover big fraud but these were relatively tiny amounts which we wouldn't necessarily detect, so the district auditors did well. '

Mr Hughes agrees. 'He had been doing this for over four years and if our team had not looked closely at it nobody would know today. '

So are the Caernarfon auditors known as the Untouchables now?

'We received the Read Award, which recognises major contributions to the profession, but this happened quite some time ago, really. I suppose it is very rare for an auditor to come across even a£50 school dinner fraud, so to uncover the biggest fraud in the history of the NHS is quite pleasing. '