The Lifestyle To Which One Has Become Accustomed - 20 May 2013
Although the Office for National Statistics says that the divorce rate is the lowest it has been since 1977, in 2011, which is the most recent year it has statistics on, 10.8 marriages in 1,000 still ended in divorce and the landmark White v White case means that women need a champion when it comes to the settlement. Before the House of Lords’ ruling on White v White in 2000, the major point of a financial settlement was to enable a wife to maintain her lifestyle, usually through a lump sum payment by her husband. However, their case confirmed that the division of assets gained during a marriage, including businesses and controlling interests in companies, should not be gender-biased, which could lead to some interesting outcomes if the wife in 2013 decides not to employ a forensic accountant.
The Lords’ ruling means that the contribution of a wife who is not in paid employment could be given equal status to the value of her husband's business assets, and in many cases this will amount to a wife receiving far in excess of any money offered before 2000 – if she can prove ‘reasonable needs’. However, it isn’t just women within divorces who can come off badly if they are not careful; both parties can, which is why it is advisable to make use of a forensic accountant to build a case and ensure that a fair deal is achieved.
The forensic accountant will firstly value any business assets to determine whether or not the parties involved are painting an accurate picture of their finances, before following bank accounts and money transfers to check whether assets are being disposed of. In addition, during the process a forensic accountant will amass evidence about the couple’s lifestyle together, leaving no expense, from store cards to gym membership out and will piece together an accurate picture of the standard of living enjoyed by the wife in order to get a fair settlement.
Author: Roger Isaacs, 20 May 2013
Give Me The Bad News First - 26 April 2013
There are daily accounts in the news of people who have been found guilty of embezzlement, fiddling their tax, hiding assets in divorce cases or perpetrating fraud on a grand scale, but little or nothing is heard about those who are accused of such crimes but then found not guilty because they employed a good firm of forensic accountants.
Forensic or investigative accountants do just what the name suggests – they investigate the facts, not the hearsay or the circumstantial evidence and so can generally easily prove whether accusations are founded or not. For example, the taxman, who has greater powers even than the police, might come knocking and accuse an individual of hiding assets or not declaring everything they have earned.
This might be because of a tip off from a disgruntled colleague or former partner or for a variety of other reasons, but HMRC is duty-bound to investigate, as their job is to get back as much into the Exchequer as possible and the allegation might be true. Using information provided, the forensic accountant will piece together a money trail and will find any anomalies or anything that looks suspicious and will dig deeper until the true picture appears.
Author: Roger Isaacs, 26 April 2013
Forensic accounting methods save taxpayers over £1bn - 22 April 2013
The National Audit Office announced last month that its National Fraud Initiative (NFI) has saved the taxpayer over £1bn through employing forensic accounting methods and tracking cash lost through fraud, overpayment or error. As forensic accountants do, the NFI’s investigators cross-matched information from over 1,300 organisations in the public and private sectors and flagged up inconsistencies in data that potentially indicated a fraud was taking place.
The investigators find patterns in fraud activity that might otherwise be missed, as they are trained in forensic accounting methods and have permission to search in more depth than other accountants might. Of course small firms are not in the league of losing sums of the order of £1bn, but any preventable loss is money off the bottom line so business owners would do well to consider employing a forensic accountant with specially honed skills to ensure that losses do not happen or, if losses have already arisen, to find out where and how.
Forensic accountants will investigate and analyse the financial evidence they have identified and then produce answers based on fact rather than conjecture. Because their work is of an investigative nature, although they carry out interviews and speak to people involved in the loss, they work very much with financial evidence and patterns.
As the Institute of Chartered Accountants in England and Wales put it, forensic accountants are trained to ‘look beyond’ the numbers and have the ability to interpret, analyse and summarise complex financial and business issues. They may also develop their own computerised applications to assist in the analysis and presentation of their findings, as the investigators at the NFI have evidently done.
Author: Roger Isaacs, 22 April 2013
Forensic Accountants Could Check Financial Applications - 12 April 2013
As credit rating agency Experian reveals that mortgage fraud jumped by nearly 10 per cent last year, mortgage companies may have to ask forensic accountants to verify applications. According to Experian, 38 in every 10,000 mortgage applications was fraudulent in 2012 compared with 35 in 2011 and the rise is being blamed on the economic climate and tough lending rules.
Tactics used by applicants to obtain mortgages that they cannot really afford include painting a rosier picture of their personal circumstances, such as how much they earn and hiding a poor credit history. This could mean that in a prosecution, forensic accountants would be brought in to find the difference between the real picture and the one painted in order to obtain the funds.
Meanwhile, the difficult economic climate is also being blamed for businesses getting into trouble, which will also require the expertise of the forensic accountant to find out what has gone wrong or in cases of fraud perpetrated by desperate business owners. A recent study among small business owners by AXA Business Insurance reveals that insurance fraud is a real issue, with one in three admitting they have inflated, or would inflate a claim while one in ten would bend the truth when applying for a policy.
If this is suspected, the insurance company would bring in forensic accountants to investigate the circumstances in the business leading up to the claim to find out whether or not there were grounds for raising funds dishonestly. A prosecutor would need hard evidence of the real picture surrounding an individual or business before committing to a costly court case and it is the forensic accountant who would be able to provide that evidence and potentially even be used to testify during a case.
Author: Roger Isaacs, 12 April 2013
Fears over benefit fraud - 5 April 2013
With the introduction of Universal Credit giving rise to fears of mass benefit fraud, officials suspicious of people would do well to follow the methods of forensic accountants in tracking down offenders. Universal Credit will replace benefits including income support and housing benefit with a single payment and millions of existing benefit claimants will be transferred onto the new system over the next four years, with the expectation that most people will apply for them and manage them online.
However, critics are concerned that the changes will be very hard to police and could lead to fraud on a massive scale, although one way of unearthing offenders would be to follow the investigative accountant’s trail of lifestyle. The most recent episode of the BBC drama The Syndicate focused on one of the lottery syndicate’s winners, who was under scrutiny for benefit fraud and had been claiming benefits of over £100 a week for over nine years.
She was discovered through appearing on TV with her co-workers in the win, even though she was claiming not to be working. She was also taking in ironing, which the investigator found out through chatting to one of her customers. Forensic accountants, like benefits investigators, get their information from a variety of sources, such as matching data from other agencies, members of the public and general investigation into a person’s lifestyle. If someone is claiming benefits and yet living like someone on a good income, alarm bells will ring and further enquiries will be made both on paper and in person.
Although The Syndicate is a TV show, it is incredible how people will put themselves into the public eye, such as the woman last year who was found building a swimming pool in her back garden while on income support, or the ‘unemployed’ caddie at the prestigious St Andrew’s golf course, who was pictured at an event and was actually earning £45 per round plus tips. Benefits investigators and forensic accountants take the whole picture into consideration as they plough through accounts, paperwork statements and lifestyle accounts before presenting their case to prosecutors.
Author: Roger Isaacs, 5 April 2013
Finding The Fiddle - 15 March 2013
As two former Crown Prosecution Service employees are convicted of making more than £1m worth of bogus claims for taxi fares, suspicious employers could put their minds at rest – or find out if their concerns are valid – by getting a forensic accountant to go over their accounts. There are usually tell-tale signs that all is not as it should be and if an employer has any doubts, they should call in forensic accountants, who will look at a number of factors.
For example, they will check whether the member of staff is living beyond their means, having financial difficulties or having unusually close relationships with vendors. There will be other avenues to explore, such as the employee who refuses to take a holiday, as they are afraid that their theft will be detected by a replacement. The forensic accountant also won’t be fooled by an employee who continually works overtime or one who wants to take work home.
Excessive personal spending, such as new cars, fancy holidays by an employee whose income cannot support such extravagances are also giveaways and will be spotted by an eagle-eyed accountant. Meanwhile, in the case of the pair convicted this week, prosecuting counsel told the court that financial investigators were still attempting to trace the proceeds of the fraud.
The barrister said that on-going inquiries into international bank accounts were being made, as there is not currently any explanation for where the money has gone.He added that a forensic accountant is considering all the information so that a sentencing judge can be given a very clear idea of precisely what has happened to the money. No doubt by the time the two are sentenced in July, the money trail will have been thoroughly researched and their means of disposal of their ill-gotten gains revealed.
Author: Roger Isaacs, 15 March 2013
Following the Money Trail - 11 March 2013
Finding the assets of criminals can be very difficult when people are determined to hide them but the case is made even more difficult when the perpetrators know exactly what they are doing, as in the recent case of two professionals who laundered more than £1.8m of criminal cash from VAT fraud.
However, forensic accountants, such as those used by HM Revenue & Customs (HMRC), who brought the case, are trained to look beyond what is presented as ‘normal’ and deal with the business realities of situations.
The investigative team found the trail of money, which had been laundered through a complex web of bank accounts, first in Greece, Cyprus and Switzerland and then through banks in the UK.
They did this through investigating and analysing the financial and other evidence and then communicating their findings to HMRC in the form of reports and collections of documents.
There is no record as to whether the accountants involved assisted in the legal proceedings or testified in court as expert witnesses but this is all part of the job for the forensic accountant.
Of course, forensic accountants are also routinely used to find out where assets have been hidden once criminals have had confiscation orders served on them according to the rules of POCA.
As they were jailed for a total of six and a half years, a spokesperson for HMRC said that a confiscation hearing to recover the criminal proceeds of the fraud will take place towards the end of this month, before which no doubt the forensic accountants will be hard at work.
Author: Roger Isaacs, 11 March 2013
Investigative Accountants To Find QC’s Money - 4 March 2013
As a high-flying London barrister starts a three-and-a-half year sentence for evading VAT over a twelve year period, investigative accountants must start the lengthy process of finding the cash he withheld from HM Revenue & Customs (HMRC). Rohan Pershad was deregistered for VAT in 2000 following a history of failure to submit tax returns and to tell the taxman about a change of address. This meant that he was unable to trade legally over the VAT threshold, which was £54,000 at the time and rose to £67,000 in 2008. However, his self-assessment tax return in 2001 showed that his income had increased from £85,000 in 2001 to £346,000 in 2008, meaning that he was breaching the VAT registration limit by £279,000.
HMRC argued in court that Pershad was using his invalid VAT number on fee notes to charge VAT but then pocketing the money rather than paying it to HMRC. Investigative accountants employed by HMRC will now begin to trace the cash, as confiscation proceedings are now underway, which means that money can be legally recovered under the Proceeds of Crime Act 2002 (POCA).
There is huge political pressure to maximise confiscations under POCA, so the accountants will scrutinise every aspect of Pershad’s life, from bank accounts to lifestyle. Since HMRC says that Pershad spent the money he made on two homes in Surrey and Somerset and on school fees for his children, the accountants will investigate these claims first but may well unearth other money trails.
Author: Roger Isaacs, 4 March 2013
Divorce Hot Spots - 1 March 2013
As the top ten hotspots for divorce in the UK are named, divorcing couples should ensure that they have the number of a good forensic accountant in case their current other half tries to hide any of the joint assets to which they are entitled. Unfortunately, with around 42 per cent of marriages in the UK ending in the divorce courts, couples that start off with white lace and promises may well find themselves ending up with acrimony and painstaking scrutiny of accounts.
Forensic accounting is the specialty practice area of investigating details of financial issues which can then be used in negotiations or in court. For divorce cases, this routinely involves valuing assets, tracing accounts, looking into business affairs and evaluating lifestyles, so those figures can be used in financial settlements. The important document in the financial aspect of a divorce is called Form E, which is a full and frank disclosure of each partner’s finances.
It is a criminal offence to make a false declaration on a Form E but a surprising number of people try to ‘massage’ the figures either by omitting things from the form, putting in a lower valuation for an asset, perhaps for a business or overstating their liabilities. A forensic accountant’s work begins when forms are exchanged simultaneously. A trained eye can spot inconsistencies by examining supporting documentation and areas of concern may start to emerge.
The survey that named the divorce hotspots was brought out in conjunction with advice from the Ministry of Justice to use mediation rather than ending up in a courtroom battle. As with most situations, if in doubt, ask for help and a forensic accountant could be a divorcing person’s best friend.
Author: Roger Isaacs, 1 March 2013
Forensic Accountants Find ‘Systemic Fraud’ - 25 February 2013
Three more people have been arrested over alleged fraud at welfare-to-work company A4e, highlighting the importance of forensic auditors, who first picked up on anomalies at the company in 2009 during a routine internal audit. The audit unearthed evidence of staff claiming for putting people into non-existent jobs, jobs that did not qualify for payment and generally fabricating paperwork.
Subsequently, after laborious and painstaking financial investigations, officers made numerous arrests at the company’s office in Slough, Berkshire and Emma Harrison, Chairwoman of the company stepped down last year over the allegations. In February 2012 Thames Valley Police’s Economic Crime Unit was revealed to be investigating the alleged theft by A4e staff of ‘tens of thousands of pounds' worth of vouchers meant to help the unemployed back to work
Then in March 2012 the Department for Work and Pensions announced that following fraud allegations regarding an A4e contract, it had begun an independent audit of all its commercial relationships with A4e and in the May, Employment Minister Chris Grayling announced that contracts with A4e had been terminated, after deciding that continuing would pose 'too great a risk'.
Later that month a leaked internal audit report exposed ‘potential fraud’ at A4e. The report compiled by the audit and risk department examined a sample of 224 of the company’s job placements and found that “potential fraudulent/irregular activity is not confined to one particular geographical area of the division, and shows a potential systematic failure to mitigate the risk towards this behaviour at both an office and regional level”. The auditors also discovered that A4e had sent an unemployed job-seeker to work in a lap-dance club, while a number of former employees have now come out with additional allegations.
Author: Roger Isaacs, 25th February 2013
Forensic Accounting Helps To Convict In Insurance Fraud - 22 Feb 2013
A claims management company has been shut down and two fraudsters jailed after a ‘crash for cash’ fraud ring was exposed through the work of the Metropolitan Police and painstaking backroom work on the criminals’ financial dealings. Last week company secretary of the firm and the ring’s mastermind, Andre Malagiac was sentenced to 12 months in prison after pleading guilty to conspiracy to defraud, while his accomplice received a four month prison sentence and had his car seized for his role as a stooge driver who deliberately caused crashes.
Officers from the Met Police Traffic Unit launched the investigation in November 2011 following intelligence that the company run by Malagiac was organising induced accidents across London. Malagiac helped to orchestrate the scams in collusion with stooge drivers, who were sent out to deliberately cause crashes with unsuspecting motorists, typically on slip roads or at roundabouts.
After the arrest of the two men in June 2012, a potentially multi-million pound fraud was uncovered, which was masked behind the seemingly-legitimate front of the claims management company. Guilty pleas demonstrated the quality of the evidence gathered by the Metropolitan Police and the investigative work carried on behind the scenes once records and accounts had been seized.
Since organised fraud costs the insurance industry almost £2.1bn a year and inflates premiums for honest policyholders, the work carried out in uncovering evidence against the criminals who perpetrate it is vital to the industry and the taxpayer.
Author: Roger Isaacs, 22nd February 2013
Investigative Accounting Useful In Due Diligence - 4th February 2013
With the news that Caterpillar Chief Executive Doug Oberhelman has accepted blame for overpaying a key acquisition in China because of a “deliberate accounting misconduct”, it would be wise for businesses to remember to bring in the investigative accountants if conducting a due diligence exercise. If a company the size of Caterpillar, the world’s largest manufacturer of construction and mining equipment can be duped, then what hope is there for the smaller company? The answer is the quality of its due diligence checks.
Last month, Caterpillar disclosed that it had uncovered “deliberate accounting misconduct” at Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., a maker of roof-support equipment for underground coal mines that it had acquired last June. However, the former Chairman of the acquired firm said that he was “dismayed” at the finding, as Caterpillar had conducted extensive due diligence and that he and his board had cooperated very closely with the Caterpillar team. He added that he and John Lee, the English name used by fellow ERA director Li Rubo, had taken the company's fiduciary and reporting responsibilities very seriously prior to its acquisition.
Notwithstanding the cooperation, Caterpillar found itself having to write down the value of the company by $580 million, having paid around $700 million for it, which is a shocking loss. Thorough due diligence, which apparently didn’t happen in this case, means that all the facts regarding the firm being acquired are available and have been independently verified. All the documents of the firm are assembled and reviewed, the management’s interviewed and a team of financial experts and accountants start the laborious process of checks and investigation to analyse them.
Without this process, figures that appear to stack up may lead to unwise purchases, which could have serious repercussions in the future. Going back to Caterpillar, Mr Oberhelman is now warning of a tough year ahead for the firm, which has been contributed to by this acquisition.
Author: Roger Isaacs, 4th February 2013
Following Fraudsters’ Money - 28th January 2013
With fraud of some sort or another being in the news almost every day, forensic accountants are being thrust into the limelight, with an article on the practice being used in divorce settlements even making it into the London Evening Standard this week. This is because forensic accountants specialise in following the money trail and are called in by lawyers and other investigators whenever a fraud is uncovered or when people are deliberately trying to hide their assets, as in the case of Scot Young, who was jailed for contempt of court last week in the long-running financial remedy proceedings with his former wife, Michelle.
Although financial misdemeanours often come to light through routine accounting checks, even very good accountants and auditors can easily miss clues when investigating fraud, which is where more specially trained forensic accountants come into their own. They will track fraud back years, scouring each deposit and expense in the fraudster’s businesses and personal life for clues as to when and where the money was taken and where it was spent and, in addition to searching through records, will interview employees, business partners and spouses.
According to the National Association of Forensic Accounting in America, the first known use of the practice was in the case that convicted Al Capone on tax fraud charges but since then the industry has burgeoned and fewer and fewer fraudsters are ‘getting away with it’. This is obviously filtering through to the criminally-minded, as in the past 12 months the number of cases perpetrated by professional criminals fell from 98 at the end of 2011, valued at £1.4 billion, to 79 in the 12 months to December 2012, valued at £414 million. Perhaps the thought of a forensic accountant on their trail has finally put the hardened criminal off.
Author: Roger Isaacs, 28th January 2013
Hiding Assets Won’t Work - 21st January 2013
A former property tycoon, who attempted to hide his £400m fortune in an attempt to prevent his wife getting a fair share of the assets after their divorce was jailed this week for his “deliberate” refusal to prove how he lost the money. Judge Mr Justice Moor jailed Scot Young for six months for “flagrant” contempt of court after he failed to disclose details of his finances to his wife’s lawyers, who are looking for evidence of the £1m she is owed in unpaid maintenance.
Young’s wife, Michelle, mother of his two teenage daughters, has been fighting to get the money a judge in 2009 ordered him to pay, which amounted to £27,500 per month. Ordered to produce tax returns and complete detailed questionnaires on his finances, Scot pleaded poverty but led a champagne lifestyle according to his wife’s lawyers, who have been trying to find a trace of his fabulous wealth through investigative accounting.
It is vital to use such investigators to trace marital assets, as in 2010 the Court of Appeal ruled that covertly obtained documentation could no longer be used to reveal a spouse’s hidden assets in divorce proceedings. Instead, all information must come through legitimate sources and painstaking examination of accounts.
Therefore, in the case of Young v Young, if Mr Young still refuses to disclose his true financial position once he is released from prison, investigators will keep checking those tax returns, bank accounts and any expenses that have been paid out since the financial order was made. They will also look closely at his business dealings and check whether he has used nominees to acquire assets that should legally be disclosed. The couple’s competing claims will now be argued at trial, which is due to be held later this year. In the meantime, Mrs Young’s investigative accountants will keep looking.
Author: Roger Isaacs, 21st January 2013
Forensic Investigation Uncovers Business Loans Corruption - 14th January 2013
Following a large-scale investigation into corruption, fraud and money laundering at a high street bank, which took over two years to come to fruition, Thames Valley police have charged eight people, including two former senior managers at HBOS.
Allegations, which were reported under privilege in the House of Commons as long ago as June 2009, surfaced that a banker at HBOS's high risk lending unit in Reading was working with a consultancy called Quayside, to strip assets from financially troubled customers of the bank. Consequently, investigative accountants from the ECU were called in and the trail led to a series of allegedly fraudulent business loans made through the bank to a value of around £35m, although some connected with the case believe that the final tally could be much higher.
The investigation centred on allegations that the lending unit forced clients to use adviser Quayside Corporate Services to receive further funding and many firms that used Quayside complained that they were crippled by exorbitant fees, which forced several of them into administration. Allegedly, the two bankers were given numerous high-value gifts by the financial consultancy in return for appointing the firm to administer bank loans to the struggling companies.
Among those charged are the two former senior managers at HBOS, Lynden Scourfield and Mark Dobson, while David Mills and Michael Bancroft of Quayside Corporate Services have also been charged, along with a fifth man, John Cartwright. The other defendants are three of the men's wives, Jacqueline Scourfield, Alison Mills, and Beverley Bancroft. The charges come only a month after Lord Stevenson, former Chairman of the collapsed bank, was accused by MPs of being "either delusional or dishonest".
HBOS had to be rescued in 2008 through a Government-engineered takeover by Lloyds Banking Group which weeks later, had to ask for a £20bn Government bailout.
Author: Roger Isaacs, 14th January 2013
Olympus CEO Called In Forensic Accountants - 4th January 2013
The first CEO to turn whistleblower, Michael Woodford, last month published a book on how he eventually called in forensic accountants to get to the bottom of the fraud that threatened his livelihood, health and even at one stage, his life. Mr Woodford recalls in Exposure: Inside the Olympus Scandal: How I Went from CEO to Whistleblower, how he found out in 2011, through an article in a Japanese magazine, that something was wrong shortly after he was appointed as CEO.
The article revealed that Olympus had bought three tiny, profitless companies in 2008 for $800m, only to write down three-quarters of their value by the end of the financial year. Then the company gave nearly $700m in “advisory fees” to an entity in the Cayman Islands whose ownership and legal standing were unclear. When Mr Woodford learned of this, he sought answers from the firm’s chairman, Tsuyoshi Kikukawa but to no avail and was met with a wall of silence from the Japanese hierarchy and rest of the board.
Determined to find out the extent of what by then he strongly suspected to be fraud, Woodford sought the help of forensic accountants, who painstakingly followed a trail that went even further back than 2008. They found that the scandal centred on an accounting fraud designed to conceal losses on financial instruments amounting to the equivalent of $1.1 billion.
Initially there were suspicions of the involvement of the Japanese mafia, the Yakuza, but it turned out that it was not the mob but managers, who tried to use accounting write-offs to cover up investment losses dating back from the 1990s that would have gone undetected had it not been for the investigation ordered by Mr Woodford.
Author: Roger Isaacs, 04th January 2013
Investigative Accountants Going Global - 14th December 2012
After As the investigation into wrongdoing over the rigging of the Libor rate continues, international regulators have now uncovered evidence leading to the arrest of two executives at broker RP Martin, while another brokerage has been asked to provide information to the investigators. The ever-widening investigation has led to more people being dragged into the regulatory net, despite, until now, only high street banks being accused of rigging the London interbank offered rate (Libor).
Now Hong Kong is to investigate possible rigging by UBS, shortly after the Swiss bank agreed to pay £940m to regulators for trying to manipulate the key rate on an "epic scale" and two former traders at the bank have been charged with conspiracy to manipulate the rate. In the second-largest banking fine ever, this week UBS was fined by Swiss, British and US regulators after an investigation revealed evidence of massive misconduct in the setting of the rate, a global reference that affects trillions of dollars, loans and mortgages.
The Hong Kong Monetary Authority said it had begun an investigation to assess whether the potential misconduct had any material impact on Hibor, the Hong Kong rate, which is considered a key benchmark interest rate for economies in the region. The authority has said it will work with overseas regulators to gather information and "consider further actions that need to be taken" pending the findings of the investigation.
The Serious Fraud Office began its official investigation into the rigging of the Libor rate back in July, when Chief Secretary to the Treasury Danny Alexander said that he wanted the regulator to “follow the evidence wherever it goes” and to bring prosecutions where possible.
It now looks as though forensic investigators will be following the trail for a longer way than previously thought and potentially for a very long time.
Author: Roger Isaacs, 14th December 2012
Investigative Accounting Brings About First Land Banking Convictions - 14th December 2012
After what has been described as a “complex and painstaking investigation” into the accounts, lifestyles and business practices of a couple of conmen, the UK’s first criminal convictions and prison sentences for a land banking fraud were secured last week.
Omar Eshpari and Stefan Mitchell were sentenced to seven and six years respectively, having been found guilty of five counts of money laundering after masterminding a £3m deception, conning the elderly and vulnerable into buying plots of land that were either worthless or massively over-priced.
The criminals set up a string of fraudulent companies and sold land bought cheaply in Halifax, Folkestone and Bromley or plots they did not even own, then marketed the locations as being in a prime position for development that would quickly increase in value. In reality investors were putting their money into plots located on farmland, in the Green Belt, within an Area of Outstanding Natural Beauty or on the sides of hills, with no chance of gaining planning permission let alone building houses. Some investors received small returns while others lost everything, with the gang funnelling off the funds into a network of bank accounts, which took investigators a long time to track.
By late 2009 more and more investors were becoming concerned about the lack of returns from Pemberton International, Eldon International, Willow International, Allied Investment and Abacus Investment and were increasingly asking for their money back. However, following reports from numerous victims and a detailed City of London Police investigation, working closely with agencies including Companies Investigation Branch and the Financial Services Authority a series of arrests were made in October 2009.
Further investigations were carried out into their pair’s bank and company accounts to be used in evidence and the weight of information gleaned gained the convictions, sending out a clear message to the criminal fraternity that no stone will be left unturned to find their ill-gotten gains.
Author: Roger Isaacs, 14th December 2012
Proceeds of Crime Act Nets Millions - 7th December 2012
Thanks to the diligence of investigative accountants, West Yorkshire Police were able to reveal yesterday (November 6th 2012) that they have increased the amount of cash taken though the Proceeds of Crime Act (POCA) every year since 2007 and last year doubled the amount taken from convicted criminals from £5.6m in 2010/11 to £12.3m in the last tax year.
The force also revealed that the two Bradford police divisions, Bradford South and Airedale and North Bradford, recovered a combined total of £1,831,876 between April 2011 and April this year.
While in Cumbria, more than £13.5m has been recovered from criminals over the past nine years, with more than 500 of them having their assets seized.
However, earlier this year, the Court of Appeal slashed the largest confiscation orders ever made in England & Wales. The Crown Court had made orders of over £92 million each against Shakeel Ahmad and Syed Ahmed but the Appeal Court cut each order to just over £16 million.
Often these huge crimes make the headlines but what the public does not realise is that the investigative aspect, which goes on behind the scenes, is a very important and painstaking job.
The work of the forensic accountants will involve the assessment of accounting systems and accounts presentation in cases where a business owner has been convicted of fraud.
In the case of employee fraud, an accountant might employ forensic analytics, which is the procurement and analysis of electronic data to reconstruct, detect, or otherwise support a claim of financial fraud.
Once a criminal is convicted, the investigation is continued, with both offender and prosecutor trying to prove whether assets come from legitimate or criminal sources through analysis of accounts, bank statements and following legal paperwork, such as house purchase records.
Author: Roger Isaacs, 7th December 2012
Investigative Accounting Aids Insurers Beat Cash For Crash Scams
The Insurance Fraud Bureau’s (IFB) statistics from earlier this month reveal that undetected general insurance claims fraud total £2.1bn a year, adding on average £50 to the annual costs individual policyholders face, each year.
Following an investigation carried out by Northumbria Police, with the help of the IFB’s highly-sophisticated counter-fraud software, three men and two women were arrested at an accident management company in Sunderland.
In addition, three homes were searched, and a quantity of cash, jewellery and documentation was recovered, which will no doubt lead to further investigations.
All five were arrested on suspicion of conspiracy to commit fraud by false representation and have all been bailed pending further enquiries, as crash for cash activities, as they are called, cost the UK nearly £400m per year.
If found guilty, the alleged fraudsters will then be ordered to pay Confiscation orders, which will involve a minute inspection of their accounts to find out to what extent they profited from their criminal activity.
Such cases involve long and complex investigations into accounts and can take several years to bring to court but the IFB is determined to send a clear deterrent message to fraudsters targeting the insurance industry.
However, the five arrests are almost certainly a drop n the ocean, as an IBF report from earlier this month revealed that one in 12 people would consider taking part in a crash for cash scam for financial gain.
While the research, which was organised by Ipsos MORI, also revealed that more than half the population think it unlikely that someone perpetrating such a fraud would be caught, which shows just how wrong people can be.
Author: Roger Isaacs, 3rd December 2012
Rogue Trader Brought Down By Investigative Accounting
The recent jailing of former UBS trader Kweku Adoboli for what the police describe as the UK’s biggest ever fraud, is in part due to the internal investigation launched in the summer of 2011 and headed by a forensic accountant.
The accountant began his investigations but had his work cut out, as, having started in the back room, Adoboli had become adept mastering the bank’s processes and at entering false information into UBS’s computer systems to conceal the enormous risks he was taking.
In many cases he extended the time in which some trades would complete to buy to give him the time to make up any losses and then failed to insure or “hedge” these transactions, which is a ploy to maximize profits, thus exposing the bank to greater risks.
He also set up what he called his “umbrella” fund, which was a slush fund he could use to hide any profits on his unauthorised trades. Having started on £30,000 a year, by 2011 Adoboli was a director and earning a combined salary and bonus of £360,000.
However, the bank became suspicious and got a forensic accountant to investigate. It was his probing that eventually culminated in Adoboli sending him an email in September last year that apparently confessed to booking false trades.
Making the decision to start an internal investigative accounting probe can have benefits, and, in the case of UBS, starting the investigation sooner might have prevented the massive losses and the subsequent resignations of its Chief Executive Oswald Gruebel and the co-heads of global equities Francos Gouws and Yassine Bouhara.
Author: Roger Isaacs, 26th November 2012
Unprosecuted mortgage fraud in criminal lifestyle confiscations
R v Waya – the UK Supreme Court judgment
Written on 16 November 2012 by David Winch in 10 most popular this month, Case law, Confiscation, Fraud, Prosecutions. The Supreme Court judgment in the case of R v Waya in November 2012 may prove to be of profound significance in confiscation cases. This article discusses the case and some practical implications.
Forensic accounts are often associated with fraud, recovery of assets and finding cash in overseas accounts in criminal cases or locating where spouses have hidden assets in the divorce proceedings of the wealthy. But they are just as vital in scrutinising accounts when a business underperforms or fails.
In these situations, there are often issues or disputes arising from the financial dealings of the business managers; investors and stakeholders want to know where the money has gone and lawyers need to be sure that they have their facts straight if the matter ends up in court.
The purpose of forensic accounting is to provide litigation support in the form of an accurate assessment of a business’ or individual’s assets and/or financial behaviour. This information is reviewed by judges and, in some cases, juries, and it may have a large impact on the case’s outcome.
Recently, listed property developers Safeland have discovered that they have been the victims of further fraudulent transactions since the announcement of discovered losses by the firm last month.
The losses from these further transactions, all of which occurred during the year ended 31 March 2012, amount to approximately £265,000 and the aggregate of the sums lost to the company through fraudulent transactions now stands at approximately £1.525m.
Safeland will continue to attempt to recover as much of these losses as possible and is currently trying to get back a reported £700,000 of the cash it has lost.
When losses such as these are discovered, forensic accountants should be brought in to ask the who, how, when, where questions and then supply the answers. They gradually piece together the parts of the financial puzzle that reveal the picture and hopefully help to obtain justice for the victims in the case.
Author: Roger Isaacs, 16th November 2012
The Chimera on The Springboard
Moylan J described the ostensible accuracy of private company valuations as being no more than a chimera whose purpose was to assist the court “in testing the fairness of the proposed outcome”. His view is shared by many judges and even the most robust forensic accountant would undoubtedly accept that the exercise of valuing shares in a family business for the purposes of matrimonial ancillary relief proceedings is an inexact science.
That inexactitude has been exacerbated by the widely reported case of Jones v Jones which introduces a new degree of uncertainty by means of the so-called “springboard effect”.
The case of Jones and Jones concerned a couple whose total assets at the date of trial amounted to approximately £25million representing, in effect, the proceeds of the sale, in 2007, of the husband’s business.
Forensic accountants for both parties agreed that the value of the business at the date of the marriage, in 1996, had been £2million.
The court held that a deduction ought to be made from the available pool of £25million to reflect the value that the husband brought to the marriage, namely the value of the company in 1996. One might have thought that that would have caused the court to deduct £2million from £25million to arrive at a figure of £23million to be shared equally between the parties. However that was not the approach adopted.
Instead the court declined to accept the valuation of £2million because it considered that it failed to take into account the latent potential of the business to which it referred as the ‘springboard effect’.
Accordingly, in a calculation that was by the court’s own admission “arbitrary”, it ascribed a value of £9million to the company at the date of the marriage. It then deducted this figure from the pool of £25million, concluding that the matrimonial property amounted to £16million, of which the wife was entitled to 50% (£8million) by application of the sharing principle.
The court’s approach creates unwelcome uncertainty for both family lawyers and forensic accountants who assist them.
Clearly it is now more important than ever for consideration to be given, not only to the value of family companies at the date of divorce but also at the time of the marriage. Furthermore it seems that it is necessary to apply a degree of hindsight to the valuation at the time of marriage.
It seems that the question for the forensic accountant is no longer “what would a prospective purchaser have been likely to pay to acquire the business at the time of the marriage?” The answer to that question in the Jones case was £2million and it was this answer that the courts rejected.
Instead the question that the forensic accountant or advising lawyer seems to need to consider is now “what would a prospective purchaser have been likely to pay to acquire the business at the time of the marriage if he had known that, by the time of the divorce, it would have become worth £X?”
As if that were not sufficiently fraught with uncertainty, the position is further complicated by the need to uplift the value so derived to reflect its economic growth during the marriage. In the Jones case this was done by applying the relevant FTSE Index for the sector in which the business operated.
Author: Roger Isaacs, 15th November 2012
Picture Your Forensic Accountant in the Hot-Tub….
...And Ask Yourself How You Feel About the Mental Image You Have Conjured Up.
It seems likely that the giving of concurrent evidence by expert witnesses, so-called ‘Hot-tubbing’ is likely to become ever more common, not least because the experience of the courts is that it saves considerable judicial time and, as the Ministry of Justice is all too keenly aware, time is money.
Instructing solicitors therefore need to give some thought to how they think proposed expert witnesses are likely to perform in the Hot-tub. Cross-examination can be a daunting prospect for some but those who are likely to perform best in the Hot-tub will need very particular character traits.
The traditional scenario in which a lawyer cross-examines a forensic accountant pits an expert in one discipline (law) against an expert in another (accountancy). There is therefore always the prospect that the accountant will be able to bamboozle whoever is cross-examining him or her. Such a scenario is unlikely in the Hot-tub in which accountant is pitted against accountant.
By giving evidence simultaneously, direct comparisons will inevitably be drawn between two opposing experts and whichever is able to give the most cogent and convincing evidence is likely to overshadow his or her counterpart.
Hot-tubbing may therefore appear to be a less formal and more relaxed format than traditional cross-examination but experts who let down their guard will do so at their peril. The key, as ever, is to ensure that you choose an expert on whom you can rely to master the evidence and deliver a persuasive unbiased opinion founded solidly on the facts.
Author: Roger Isaacs, 14th November 2012
Placing a Value on Free Time in Loss of Earnings Cases
Consider a self-employed consultant who claims compensation for loss of earnings as a result of a personal injury. Suppose that the Claimant earned £30k pa before the accident and but has earned only £15k after the accident, as evidenced by accounting records. On the face of it, the Claimant has a claim for loss of earnings based on a multiplicand of £15k using an appropriate multiplier from the Ogden Tables.
However, it is sometimes the case that part of the reason for the fall in earnings is that the claimant’s injuries prevent him or her from attracting as much work after the accident as before it.
This can mean that the Claimant is unable to devote him/herself full time to the business simply because there is insufficient work to fill the working week. The Claimant, in these circumstances, may have a considerable amount of ‘free time’, which did not exist before the accident. This raises the question as to whether and, if so, to what extent, that free time ought to be taken into account for the purposes of the loss of earnings claim. Might it, for example, be open for the Defendant to argue that the Claimant’s duty to mitigate any loss extends to having to find an additional source of income to occupy the free time that has arisen?
It may well be that the additional income is deemed only to be paid at national minimum wage rates but it could still make a significant difference to the overall quantum of a claim.
As a first step, it would seem to be prudent for the terms of any instructions to forensic accountants to include not only an assessment of financial loss but also an assessment as to whether the accident has given rise to ‘free time’ for the Claimant. If it has, the arguments as to how it should be treated can then begin.
Author: Roger Isaacs, 13th November 2012
The Money Laundering (Amendment) Regulations 2012 by David Winch
Amendments to the Money Laundering Regulations 2007 came into force on 1 October 2012, but what effect will these have on practitioners? The answer in most cases is likely to be ‘little or none’.
This article by David Winch article considers what is meant by a defendant’s ‘available amount’ and explains some of the rules the court must follow in determining the ‘available amount’.
In confiscation proceedings against a convicted defendant the Crown Court will ordinarily have to separately determine two figures – the ‘benefit’ obtained by the defendant and his ‘available amount’. The court will then order the defendant to pay an amount equal to the lower of these two figures (see s7).
This article is based on the confiscation provisions of Part 2 of the Proceeds of Crime Act 2002, PoCA 2002, which apply in England & Wales. Slightly different rules apply in Scotland and Northern Ireland. In earlier confiscation legislation the ‘available amount’ was referred to as the ‘amount that might be realised’.
Money laundering – entering into an arrangement – s328 PoCA 2002 by David Winch
Prosecutors are sometimes tempted, unwisely, to strain the meaning of statutory provisions in order to charge a defendant. There have been a couple of successful appeals recently against money laundering convictions unders328 Proceeds of Crime Act 2002 where a defendant has been charged with “entering into or becoming concerned in an arrangement which he knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person”.
In effect the courts have held that this statutory provision should be given its natural meaning and not artificially stretched to cover situations which it had not originally been intended to encompass.
Local authority to use Proceeds of Crime Act to crack down on rogue landlords
A London local authority is to crack down on rogue landlords using a law normally seen in fraud cases involving forensic accountancy expert evidence.
Newham Council is to apply the Proceeds of Crime Act, originally aimed at stripping drug dealers of their ill-gotten gains, to seize money from people who charge desperate tenants a fortune to live in sub-standard accommodation.
The move follows the successful prosecution of a landlord for illegally letting a damp and overcrowded flat. A judge at Inner London Crown Court ruled that overcharged rent money should be classed as a proceed of crime and ordered the property company to repay around six thousand pounds to the tenants.
The Act enables the authorities to recover cash and assets from people convicted of offences.
The use of experts, including forensic accountants, is to be cut back in Family Court
The use of experts in Family Court, to include forensic accountants, is to be curbed under new UK Justice Ministry proposals.
As a report by Mr Justice Ryder on the operation of child proceedings is published, the Lord Chief Justice, Lord Judge, warns that too many experts are being wastefully used, particularly in child proceedings. He says he wants to see hearings speeded up and a cutback on excessive delays.
Lord Judge goes on to say that expert testimony is often ‘misused and overused’ and suggests that a single expert per case is often enough.
The proposals, aimed at streamlining the Family Court, come in response to Government reforms contained in the Crime and Courts Bill.
Forensic accountants soon to dip a toe in the evidential 'hot tub'
Experts have given a broad ‘thumbs up’ to evidential ‘hot tubbing’ in Court in experiments that could soon be introduced in trials involving forensic accountants.
The new practice, where experts give evidence in the witness box together, is claimed to save costs and allow disagreements between experts to be understood and resolved by the court more quickly, directly and efficiently.
According to expert chartered surveyor, John Seed, the experience showed how much greater control the judge could take over the hearing and, for him, resulted in a better opportunity to express his views more clearly.
Plans to extend the use of ‘hot tubbing’ at Trial await a decision by the UK Justice Ministry after reviewing a report on the three-trial pilot.
Forensic accountant for the high jump in charity bid
One NIFA member is aiming high in a bid to raise money to help adults with acquired brain injury.
Forensic accountant, Roger Isaacs, is set to take one small step for him and one giant leap for the charity, Headway Somerset.
Announcing his sponsored parachute jump, Mr Isaacs said he was ‘far too unfit to run a marathon or do anything that requires similar physical exertion’.
He added that he had “opted to do his bit by just taking a single step – out of a plane at fifteen thousand feet”.
The event is due to take place next month.
Forensic accountants and other experts consulted in Family Court changes
Forensic accountants are amongst a wide variety of experts being consulted over proposed changes in the way specialists are used in Family Court.
Hot on the heels of an update of the civil experts code, the move is aimed at private law financial remedy proceedings and all other family court procedures where expert evidence would not affect issues involving children.
Experts have until 20th September to reply to the Justice Ministry on such questions as whether expert evidence should be more closely controlled, whether experts should only be used when ‘necessary’ rather than when ‘reasonably required’ and whether experts should be asked to justify the cost of their services beforehand.
Forensic accountants feature in new experts code
Forensic accountants are being asked to brush up on a new version of the Experts Protocol published by the Civil Justice Council.
The total rewrite, titled ‘Guidance for the instruction of experts to give evidence in civil claims 2012’, is aimed at helping litigants, those instructing experts and experts themselves, to understand what constitutes best practice.
Forensic accountancy was one of the three expert disciplines featured on the seven-man working party responsible for the update.
Forensic accountants unlikely to be caught on camera
UK Justice Secretary Kenneth Clarke QC has unveiled plans to allow cameras in Court for the first time in British legal history but it seems unlikely that forensic accountants and other experts will appear live on TV.
Mr Clarke said the move was aimed at making justice more publicly accessible than ever before when television braodcasting is introduced.
The proposals will form part of the new Crime and Courts Bill, intended to replace present legislation banning the practice.
If the change goes through Parliament, which seems likely as both coalition parties are in favour, broadcasting will start in the Court of Appeal, where, according to the Ministry of Justice, filming of opening and closing arguments by Counsel will be allowed and handing down the judgement will also be covered.
The Government will later look at allowing filming of judges' sentencing remarks only. The MoJ has posted an assurance that no victims, witnesses, offenders and jurors would be filmed.
Launching the proposal, Justice Secretary Kenneth Clarke said that: "We are bringing the concept of open justice into the modern age and in doing so we will make the courts more accessible to the public than ever before." He added: "People have always had the right to go to watch proceedings in courts but in reality very few actually do." Mr Clarke concluded by saying: "By allowing broadcasting from courts we are now enabling many members of the public to see, for the first time, court proceedings as they happen."
Prominent former MP declared unfit to face trial over parliamentary expenses charges
An ex-MP due to stand for trial accused of fiddling her parliamentary expenses has been declared unfit to stand trial.
NIFA News has learnt that, according to consultant psychiatrist Philip Joseph, the former member for Luton South, 56 year old Margaret Moran, is suffering from a depressive illness as well as extreme anxiety and agitation.
Dr Joseph told a procedural hearing at Lewes Crown Court before Mr Justice Saunders that she had tried to harm herself and there was a risk of suicide.
She was due to face trial on a range of charges centring on expenses claims totalling around eighty thousand pounds and involving three homes in London, Luton and Southampton. Other charges ranged from forgery to false accounting.
Among the allegations made, it is said that she dishonestly claimed over twenty two and a half thousand pounds to repair dry rot on her home in Southampton. A second allegation accused the former Parliamentarian of falsely claiming a further fourteen thousand pounds for boiler repairs and work on her conservatory.
Away from the case of Ms Moran, when the issue of parliamentary expenses claims first hit the headlines, there was talk of MPs "flipping" homes to increase their allowances. The practice involved repeatedly changing which of a Member's two homes was declared as the main property. In this way, it was said that claimed expenses could be maximised by sidestepping time limits on how much could be claimed.
NIFA member David Winch told Andrew Castle, presenter on ITV's former breakfast show GMTV, how the process worked, how an audit might be carried out, how long it might take and who would pay for it.
Forensic accountants key to a six million pound ‘fish scam’ confiscation hearing
Illegal fish catches cost nearly fifty million pounds in lost revenue, according to forensic accountancy evidence being considered by the High Court in Edinburgh.
In a case that has become known as the ‘black fish’ scam, prosecutors are claiming that the company that helped quota dodging boat skippers land undeclared fish earned more than six million pounds overall in illegal profits.
Now, at a confiscation hearing, the Crown is arguing that the money should be handed over to the authorities.
In the long-running case, Shetland Catch Ltd admitted helping local skippers to defy quota rules between January 2002 and March 2005 but is fighting the confiscation action.
Counsel for the company, David Burns QC told the Court that the fish processing plant, the biggest of its type in Scotland and one of the largest in Europe, was a major employer in Shetland and was already struggling to cope with substantial debts.
Mr Burns said that the state had already got back some of the illegally made profits, in the form of corporation tax, adding that discovery of the scam meant fish quotas were drastically reduced, turning profits into losses in subsequent years.
He went on to say that: “It is not the case that the profits were being used to line the pockets of directors or shareholders.”
Mr Burns asked the Court to take into account the importance of the firm in the local economy.
Last December, fishing boat skippers agreed to hand over a total of almost three million pounds to settle confiscation demands in their cases.
In February, seventeen skippers and a Peterhead-based fish processing firm were fined a total of almost one million pounds for defying quota regulations.
The confiscation ruling by Judge Lord Turnbull in the case of Shetland Catch Ltd is due next month.
Firm mounts fightback after forensic accountants uncover scandal
Shareholders at global camera giant, Olympus, have voted in a new board after forensic accountants in Japan uncovered a one billion pound scandal involving the hiding of losses going back over twenty years.
The company had nominated new members to the board after all its previous team quit in the wake of the scandal, which came to light last October and knocked almost fifty per cent off the company’s value on the Tokyo Stock Exchange.
However, former chief executive Michael Woodford, who broke news of the scandal at the firm, has threatened to have the results of the vote at the extraordinary general meeting annulled.
He said “Today is the day the new Olympus is supposed to start. But, he added: ‘It’s Alice in Wonderland.’
The company still faces investigation by the Japanese authorities and several former members of the management, possible criminal charges.
Watch out there’s a forensic accountant about !!
Judges and forensic accountants appear to be the professionals to watch for when it comes to keeping a close eye on business expenses, according to an article in the Irish Times on the latest consumer gadgets.
It describes one expenses tracking app for iPads and iPhones in particular and calls on the consumer to “punch in your receipts, photograph and organise them, make PDFs and charts and keep it all together, ready to produce any time you’re asked by a judge or a forensic accountant.”
The article, which comes hot on the heels of the Irish parliamentary expenses scandal, says consumers should throw away paper receipts stuffed in envelopes and go for the latest smart software to follow the money.
Row breaks out over allegations that corruption investigation lacked forensic accountancy evidence
A row has broken out over allegations by former Irish Prime Minister Bertie A'Hern that an anti-corruption tribunal report “..had been arrived at without deploying the services of a forensic accountant..”
The fomer Taoiseach's statement came after a panel of enquiry investigating allegations of financial mismanagement concluded that Mr A’Hern had failed to give a “truthful account” concerning funds that had reportedly passed through his bank accounts.
A spokesman for the Mahon tribunal has told reporters that two forensic accountants were retained by investigators and that Mr A'Hern could have called his own experts in the investigation into claims of bribery and corruption.
The former Prime Minister had said: "I find it extraordinary that the tribunal has also disregarded the expert evidence that was given to it on tax, accounting and banking matters which supported me. In particular, I believe that the notion that I got large sums of sterling and dollars is objectionable, inaccurate and without an iota of foundation".
The corruption allegations centre on a payment of one hundred and sixty five thousand Irish pounds from Cork-based developer Owen O’Callaghan in the early and mid-1990s.
The Irish Government has now referred the three thousand page report from the Mahon tribunal to the Garda Commissioner, the Director of Public Prosecutions. the Revenue Commissioners and to the Standards in Public Office Commissioner.
Mr A’Hern has denied any suggestion of bribery or corruption and vows to fight on to clear his name after resigning from Fianna Fail, the party of which he was leader.
Recruitment drive unearths the origins of modern forensic accountancy
The early origins of forensic accountancy have come to light from an unexpected source, the latest recruitment drive by the FBI to boost the number of investigators employed to follow the money and unearth evidence of modern crimes from terrorism to espionage, large-scale corporate frauds to the investigation of other complex financial schemes.
It has been revealed that, when America’s Federal Bureau of Investigation was founded in 1908, the original team of thirty four investigators numbered a dozen officers known as bank examiners amongst its ranks.
Today, around fifteen percent of agents employed by the Bureau qualify as special agent accountants.
NIFA member gets to grips with money laundering
In the latest crackdown on suspected money laundering, officers from HM Revenue and Customs have raided a canal boat moored in the centre of Leeds and arrested a sixty four year old man in a joint operation with police and the UK Border Agency.
The man, named as Richard Williams, has been bailed to return in April to face the results of the taxman's investigation in connection with an alleged one million pound VAT fraud.
The operation is just one of a number that highlight the complexity of investigating money laundering allegations.
With ever increasing pressure on accountants and tax advisers to get the issue and its reporting right, Giles Mooney from internet channel TaxTV has been talking to NIFA member and industry expert David Winch, explaining the core of the issue and some of the traps waiting to snare the unwary.
Forensic accountants on standby to figure out allegations of expert witness perjury
Forensic accountants are set to check out the financial impact of allegations that expert witnesses have made false claims that could add up, said a senior judge, to perjury ‘on an industrial scale’.
The allegations come amid a long-running battle between insurers and the credit hire companies who supply replacement vehicles to drivers involved in accidents.
At the centre of the dispute is the evidence given by employees of research company Autofocus. Their expert opinions were seen as critical to advising the Courts over whether hire charges in civil claims between insurers and hirers were reasonable.
But, one hirer, Steve Evans of Accident Exchange, has discovered that evidence given by Autofocus and used to challenge his charges as ‘over-inflated’ and ‘unreasonable’ in one case, had been falsified. A court found that the Autofocus employee concerned, Helen Whysall, had lied on oath about the research that she presented. She was handed a twenty-eight day suspended sentence for perjury.
Now, after the courts granted Mr Evans access to Autofocus’ computers, he says he has discovered faked data in around twenty thousand cases involving forty different credit-hire firms. Some five thousand of the cases involving his own firm, Accident Exchange.
Seven more employees of Autofocus now face similar contempt proceedings to Whysall, and possible jail terms if found guilty, after a High Court judge agreed to allow the case against them to go ahead.
Giving permission, Lord Justice Moses said: ‘If proved, it is difficult to think of a more serious conspiracy.’ He added: ‘we are talking about industrial-scale perjury.’
Autofocus, who are now in liquidation, were not available for comment.
Forensic accountants campaign against Government legal aid fee cuts
Forensic accountants are among a wide range of experts who have launched a campaign for a judicial review of a Government decision to force through caps on expert fees in publicly-funded cases before the Family Court.
The organisation, known as the Consortium of Expert Witnesses to the Family Court, say that the action will focus mainly on London fee rates but that it should be seen as a whole as an attack on what they describe as the Government's bizarre approach to funding access to justice, by making decisions, say campaigners, based on an almost total lack of data.
The five-hundred strong Consortium was formed last year after the Ministry of Justice decided to cut fees in the Legal Aid system.
If successful, the Consortium say it will force the Government to act more evenhandedly on paying proper professional rates to expert witnesses of all disciplines.
Forensic accountants to face giving 'paperless' evidence in Court
The Crown Prosecution Service is to experiment with 'paperless' criminal trials as lawyers in selected Courts are given laptops and electronic tablets.
The plan could mean expert witnesses including forensic accountants giving evidence electronically rather than being questioned using large bundles of documents.
The moves comes as the CPS tries to cut its budget by twenty five per cent and improve efficiency by reducing unnecessary transport costs.
Director of Public Prosecutions Keir Starmer told Guardian Law that: "at the moment we use vans, lorries and people to move these mountains of legal paper around the country on a daily basis. It's time the electronic case file became a common basis." He added: "I would like to see prosecutors arriving at court carrying a laptop with no papers being passed to the defence, both having been served the documents electronically." Finally, Mr Starmer said that he wanted to see: "the results of the case and notification sent back to the victims online."
Critics of the move say that complete digital justice could be problematic as lawyers face difficulties taking electronic information into prisons and claimants cannot apply for legal aid online.
The DPP has already successfully trialled the new system at a hearing in Winchester, is developing the systems at Norwich Crown Court and plans to launch the change nationwide next April.
Witness fees 'row' hits leading UK accountancy firm
The Government of the Channel Island state of Jersey has claimed that a leading accountancy firm billed inappropriately for the cost of attending a hearing that was set up to examine the costs of a state enquiry into child abuse on the island.
Deputy Trevor Pitman said his Education and Home Affairs sub-panel received a bill from BDO Jersey for attending while the committee was reviewing the company's report on the financial management of the investigation into alleged abuse at the home, Haut La Garenne, in 2006.
Mr Pitman alleged that BDO was, in his words: "attempting to charge fourteen thousand pounds, reduced from twenty six thousand pounds, for attending the two-hour scrutiny hearing and that they had been obstructive from the start."
But Constable Juliette Gallichan, Chairman of the Privileges and Procedures committee, said the matter was a misunderstanding over who was making a statement about the review and a perceived conflict of interest involving the panel chairman.
She said the company had not pursued the matter of payment since it was originally brought up.
No-one from BDO Jersey was available for comment.
Isle of Man tax haven more open thanks to forensic accountants
Forensic accountants, economists and lawyers at the heart of an organisation campaigning against tax havens have praised the Isle of Man Government for their efforts to make money laundering and tax avoidance more difficult.
The Tax Justice Network (TJN) says the island has moved down its secrecy league to thirty-sixth position because it has joined the European Union's Automatic Information Exchange, which means that it will participate in sharing information across national borders about people opening new bank accounts.
The Isle of Man now lies below such countries as Ireland, Canada, Italy and India in the TJN's league table.
The organisation's annual Financial Secrecy Index aims to show how effective countries are at combatting money laundering and tax avoidance.
No-one at the Manx Government was available for comment.
Forensic accountants in energy price investigation
UK energy industry regulator Ofgem has called in forensic accountants as it steps up its investigation into pricing by the big six suppliers.
The action has been prompted by EDF Energy's decision to put up its gas prices by 15.4 per cent and electricity prices by 4.5 per cent from 10th November. It is the last of the 'big six' to announce price increases for domestic customers. The company says that it had absorbed wholesale price rises before being forced to raise costs to consumers.
The regulator has now decided to see whether higher prices are justified.
Forensic accountants BDO are to investigate whether the energy firms understated their retail profits to justify the higher cost of energy.
Ofgem began investigating the companies last year, and in March it said it had evidence they had pushed up prices in response to rising costs more quickly than they reduced them when costs fell.
The regulator said it had appointed BDO to gain an independent accountant's view to improve transparency over pricing decisions made by the power companies and give consumers more clarity over how retail prices relate to wholesale energy costs.
An Ofgem statement said: "Ofgem has appointed accountancy firm BDO to provide recommendations on how best to improve accounting disclosures by energy suppliers.
"This follows Ofgem's review of the retail market earlier this year, which identified the need to improve accounting transparency to give consumers more clarity about how retail prices relate to suppliers other costs."
Vincent de Rivaz, chief executive of EDF Energy, welcomed Ofgem's decision, saying that "suspicion" of the industry needed to be addressed.
UK audit industry faces competition investigation
After much discussion, consumer watchdog, The Office of Fair Trading, has decided to call for an independent inquiry into the audit industry following criticism of the actions of four of Britain's largest accountancy firms.
The OFT started to examine the industry after allegations of poor quality published accounts and conflicts of interest against Deloitte, KPMG, Ernst & Young and Price Waterhouse Coopers, surfaced in a House of Lords Committee report last year.
The committee had also said the failure of the auditors to communicate regularly with regulators ahead of the banking crash of 2008 / 2009 amounted to what they described as a "dereliction of duty."
The OFT added it had been concerned for some time that the audit market was highly concentrated with substantial barriers to entry and switching.
Since May, the OFT has been holding talks with interested groups in a bid to identify possible remedies but has now decided that a Competition Commission inquiry is the best way to provide what they said was an "appropriate response to our long-standing competition concerns in this market."
The decision, which is yet to be officially confirmed, will be formally taken following a six-week consultation period.
Deloitte said they would welcome measures to increase competition while KPMG said it believed that there was already effective competition and pricing in the UK audit market. Ernst & Young have confirmed that they will co-operate with the inquiry and Price Waterhouse Cooper, that they will respond after reading, in more detail, the OFT's provisional decision to hold an inquiry.
Accountancy giant denies allegations that it missed US mortgage fraud
A leading international accountancy firm is facing allegations that it did not use sufficient forensic skills to detect fraud while auditing an American mortgage company that went under in the US housing crash.
Complaints have been filed in a Florida Court against Deloitte Touche Tohmatsu.(DTT) alleging that the fraud went undetected over a seven year period.
The action is being brought by the trust overseeing the affairs of the failed company, Taylor Bean & Whitaker (TBW) and one of its subsidiaries, in a claim for losses valued at a combined total of around seven and a half billion dollars.
Lawyers for the trust allege that DTT certification of TBW's books gave legitimacy to a business that was, they argue, selling false or highly overvalued mortgages, mis-stating its liabilities and hiding overdrawn bank accounts.
Attorney Steven Thomas says that they will show that DTT "certainly did not do their job".
TBW was closed down by the FBI afte a raid on its headquarters in August 2009. Seven TBW executives were later convicted on a range of federal criminal charges, with the former chairman Lee B Farkas sentenced to thirty years in prison.
Deloitte spokesman Jonathan Gandal said DTT rejected the court claims, dismissing the action and the claims as "utterly without merit".
Forensic accountants help uncover theft of charity money
Howard Rose (c) BBC News
A sixty-three year old charity administrator is serving a fifteen month jail term after he admitted stealing more than seventy six thousand pounds from a children's charity.
York Crown Court was told that forensic accountants working with police officers uncovered evidence that Howard Rose from The Village, Earswick had used false invoices to divert donations, intended for the Yorkshire Childrens' Hospital Fund, to his personal bank account.
Police said that Rose used the money from the charity, which helps provide equipment for local paediatric services, to pay off his debts over a three-year period between June 2007 and May 2010.
Commenting on the sentence, Detective Sergeant Garry Ridler from the North Yorkshire Constabulary's Major Fraud Team, said: "Howard Rose abused his role within the trust for his own personal gain, without sparing a thought for the children he was supposed to be helping." He added: "He fully deserves the sentence he has been given and now has time to reflect on the major breach of trust which he should be ashamed of."
Self-assessment paper problems no bar to accurate tax payments
Around half a million self-employed taxpayers are being given an extra two months to make their July tax payment because of an error by the UK tax authorities.
It's been revealed that Her Majesty's Revenue and Customs did not order enough special paper to meet the demand for printing statements confirming the amount of tax due from returns sent in earlier in the year.
This is the second time in three years that the tax authorities have under-ordered this special paper, the last time was in January 2008.
MPs criticise the taxman for poor customer service
Within days of admitting under-ordering paper for tax statements, Her Majesty's Revenue and Customs has once again been forced to apologise, this time for poor customer service.
The criticism came from the Treasury Select Committee of MPs, who concluded that dissatisfaction with the taxman was at such a level that there was a risk of public confidence in the system being undermined.
The Committee, in its report to Parliament, singled out major inefficiency in answering the phone at peak times and what they described as 'endemic delays' in replying to letters.
MPs blamed bad management, demoralised staff, excessive job cuts and increasingly complex tax laws for the poor level of service it found.
While saying that HMRC did a good job collecting taxes, MPs expressed concern that the quality of service to taxpayers could become even worse by too much reliance on the internet for filing tax returns, overambitious computer projects such as real time data for employee PAYE and the legacy of millions of unresolved tax problems.
Replying, HMRC chairman Mike Clasper told BBC Radio Five Live: " It simply wasn't good enough on post and telephone and I'd like to take the opportunity to apologise to the people who had to take a long time to get through, or we didn't get back to them quick enough with the post."
He added that one thousand extra contact centre advisors had now been recruited to handle calls during exceptionally busy periods.
Expert witness immunity against suit falls in landmark Supreme Court decision
In a landmark Supreme Court decision, a panel of seven senior judges has decided that expert witnesses, across the criminal, family and civil courts, should no longer have immunity from claims against them for breach of duty in contract or in negligence. Immunity against slander and libel remain in place.
Although this landmark case did not involve forensic accountancy evidence, the principles apply to all NIFA members giving expert evidence.
In the original case, the claimant, Paul Wynne Jones, sued for damages for personal injury in a road traffic accident. The parties could not agree on whether he suffered post-traumatic stress disorder (PTSD) or whether the symptoms had been exaggerated. The claimant’s solicitors instructed a psychologist. Initially, the expert suggested in her report that he was a victim of PTSD. Later, after a telephone conference between experts, she changed her mind and signed a joint statement that suggested that the claimant was 'deceptive and deceiptful' and that his reaction to the incident was not PTSD. Instruction of a second expert was denied by the Court and the case settled for a considerably lower figure but for the expert signing the joint statement in the way that she did.
The claimant started negligence proceedings against the expert Sue Kaney, seeking damages. She entered no defence to the claim against her on merits, but instead pleaded immunity against suit.
The judge hearing the case, Mr Justice Blake, decided that case law dictated that immunity should stand but granted the claimant a 'leapfrog certificate' to allow him to put the immunity question directly to the Supreme Court and it is on that issue that the senior judges have now ruled.
Lord Phillips gave the lead judgement saying that: "I conclude that no justification has been shown for continuing to hold expert witnesses immune from suit in relation to the evidence they give in court or for the views they express in anticipation of court proceedings.”
Phillips LJ added: “It follows that I consider that the immunity from suit for breach of duty that expert witnesses have enjoyed in relation to their participation in legal proceedings should be abolished. I emphasise that this conclusion does not extend to the absolute privilege that they enjoy in respect of claims in defamation. Accordingly, I would allow this appeal.”
The majority of the panel of judges, Lord Brown, Lord Collins, Lord Kerr and Lord Dyson agreed with Lord Phillips.
Lord Collins pointed to where the risk for expert witnesses lay, saying that: “This appeal is concerned only with the liability of the so-called ‘friendly expert’ to be sued by the client on whose behalf the expert was retained. The facts raise directly only liability to be sued for out of court statements, but any immunity in relation to such statements is a necessary concomitant of the immunity for things said in court, and the same principles must apply equally to each.”
Collins LJ made it clear that there is nothing in this judgement “which affects the position of the adverse expert.”
He stressed that defamation claims against experts are still barred, because it could have "a chilling effect, inhibit frankness and bring the trial process into disrepute. Thus there is nothing in the present decision which would enable a client to sue his handwriting expert for slander because in the witness box he changed his mind and expressed the view that the client’s document was a forgery.”
Responding to fears that the judgment would affect the supply of experts willing to offer their services to the Courts as expert witnesses, Lord Collins offered the following reassurance: “There is no basis for suggesting that experts will be discouraged from testifying if immunity were removed – most are professional people who are insured or can obtain insurance readily, and those who are not insured can limit their liability by contract.”
But, two of the judges expressed serious reservations about the removal of expert witness immunity; Lord Hope and Lady Hale stating that they profoundly disagreed with their judicial colleagues.
In dismissing the appeal, Lord Hope argued that: “The lack of a secure principled basis for removing the immunity from expert witnesses, the lack of a clear dividing line between what is to be affected by the removal and what is not, the uncertainties that this would cause and the lack of reliable evidence to indicate what the effects might be suggest that the wiser course would be to leave matters as they stand." He said that any reform in this are of law should be subject to proper consultation and debate and be left to Government aided by the Law Commission.
Lady Hale said that: “… it does not seem to me self-evident that the policy considerations in favour of making this exception to the rule are so strong that this Court should depart from previous authority in order to make it. To my mind, it is irresponsible to make such a change on an experimental basis. This seems to me self-evidently a topic more suitable for consideration by the Law Commission and reform, if thought appropriate, by Parliament rather than by this Court.”