Cathy McClafferty, whose role was to manage the client relationship with the MoD for part of the contract, said "it was widely known" that BT managers and phone operators were making false calls to hit performance targets and "didn't really think anything of it at the time".

Ms McClafferty, who had been based at the Dumbarton call centre – one of four BT call centres where millions of false calls were generated, said she had not instructed anyone to make the calls herself.

She also said she had not been aware that BT had carried out an investigation in 2004 after the MoD received a tip-off about the fraud – an investigation which found nothing was wrong. BT eventually acted over a year later when another informant came forward and last year sacked five managers for their role in systematic falsification of calls. The fraud ran from at least 2001 to late 2005.

One of the sacked managers, Joseph Hewson, who was based at a call centre in Wakefield, has taken BT to a tribunal alleging he was unfairly dismissed on the grounds that he was simply following instructions from more senior managers and any attempt to blow the whistle would have been fruitless because of the bullying culture at BT.

Giving evidence yesterday, he said: "Every single person in every single centre was fully aware (of the fraud) not just one or two people, we are looking at hundreds of people being fully aware of what was occurring."

Mr Hewson, from Ossett, said another BT employee called Carl Marston produced calculations on how many calls needed to be made to hit performance targets based on calls being answered within a set period of time.

BT faced financial penalties if 85 per cent of general calls from military bases were not answered within 15 seconds or emergency calls within five seconds.

Mr Hewson admitted he had instructed operators on about 20 occasions to generate false calls that were answered within the requisite time. But he said the number of times instructions had gone out in total "probably ran into the thousands".

James Ward, solicitor for BT, suggested Mr Hewson had been in a position to report the fraud and that the reason he hadn't was that he was actually part of the bullying culture he blamed for remaining silent.

But Mr Hewson said reporting it would have been pointless and would have resulted in his life at work being made "absolutely unbearable".

He added that the question should be asked: "Why has not a single other person ever reported this? That's because of the culture."

The tribunal went on to hear allegations that BT had pre-determined Mr Hewson and the other managers would be sacked prior to the completion of the disciplinary process.

An email was sent from Jeremy Stafford, the managing director of BT Government, containing a briefing note to Admiral Rees Ward at the MoD prior to the dismissals last year giving a timetable for their sackings. The MoD is currently negotiating with BT for a settlement on the long-running fraud.

The tribunal continues.