Forensic Accounting Case Studies

Criminal

Here are some criminal cases Chris has dealt with:

International fraud

Chris led a team of 6 accountants in the defence of the chairman of an international investment company, Barlow Clowes, which had collapsed because £150 million had been stolen by the directors and spent on yachts, Porsches, Bentleys, vineyards, and corporate raiding including a brewery – for $3.5million they had even bought a yacht from Christina Onassis! The SFO laid charges against Chris’s client and the other directors.

The backroom work

By tracing the funds through very complex funds flow charts, and identifying the person who had authorised each and every transfer, he and his team were able to demonstrate that the chairman was not responsible for any of the thefts. Chris’s report ran to 43 ring binders, and he had been warned that he could be at the trial in London for up to 18 months. But the report was agreed by the SFO, so he did not need to appear.

“Not guilty”

After an 18­month trial his client was found not guilty on all charges, whereas the managing director (not his client) was jailed for 10 years and disqualified as a company director for 15 years, the maximum.

Environmental Health

The Rotherham Mouldy Chicken Case

Chris and his team assisted environmental health officers and the local police in the “Mouldy Chicken” case. Condemned poultry, send for rendering and conversion into dog food, was being diverted back into the human food chain by being dipped in baths of acid and brine, shrink-wrapped and sold to local butchers. The environmental health officers had seized a huge amount of financial records from the food brokers, but didn’t know how to deal with them.

The boring accountancy work

Dog meat was worth 1p per pound, choice cuts of chicken worth £1 per pound, so the profits were enormous but so was the risk to public health; someone could have died of food poisoning. The seized records revealed a national conspiracy, and that all the chicken joints came from a rendering factory in Notts.

Chris’s team seized further evidence at the rendering factory with the help of armed police, which implicated the managers there in the conspiracy.

Go Directly to Jail

Chris’s evidence helped to secure convictions for 7 perpetrators, with prison terms of up to 71⁄2 years.

Drug Trafficking

Drug Trafficking by Light Aircraft

Chris’s biggest failure was whilst assisting in the defence of a man caught red-handed importing cocaine by light aircraft. By review of the flight plans and the number of times the accused had flown to Holland, Customs alleged he had imported drugs worth £100million.

Could Chris help?

Chris held an interview in Strangeways with the accused, who tried to convince Chris that he knew nothing of the contents of the suitcases in his aircraft, and that his wealth had come from trading in race-prepared sports cars. Chris, knowing from acting for car dealers that they had an impressive memory of the cars they had dealt in, advised the accused to write out the dates and amounts of purchase and sale for all the cars he could remember.

Now the bad news

That list of cars never materialized, and the case was hopeless. The accused was jailed for 25 years, with a further 10 years in lieu under POCA if he did not pay £100million to the authorities. Of course he didn’t, and he is no doubt still behind bars.

Interestingly, the instructing solicitor was Jonathan Duff, the first solicitor jailed under Money Laundering for not reporting suspicious transactions through his client account. He had become friendly with the accused through sports car racing. And guess whose money he’d been looking after!

Theft & False Accounting

Low level fraud and theft

At a more modest level, Chris has assisted in the defence of several sub postmasters accused of theft (not involving the infamous Horizon accounting system), of care home staff accused of stealing from residents, and of club stewards accused of creaming the takings.

The hack work

Chris applied himself to understanding the accounting systems (if any) and demonstrating in his report, if appropriate, that the thefts were over-stated or not proved.

The outcome

In several such cases, Chris has helped the accused secure a not guilty verdict or a reduced sentence.

POCA: the convict’s benefit

The authority’s view is that hardened criminals regard prison time as the price they pay for their career; what really hurts them is having the benefits of their crimes taken away. Hence the Proceeds of Crime Act empowers the courts to take away the benefits, on a civil burden of proof. In one such case, a man had been sentenced to 71⁄2 years for producing false visas to facilitate students coming to an English college which did not exist. The Met Police financial fraud unit had produced a report in which they assessed the benefits of the crime at £1,300,000.

The hack work

Chris looked at the report. The convict had been in practice as a lawyer. The Met had alleged that all the payments into his office account were source unknown, hence benefits; that transfers from the office account to private account were from an unknown source, hence benefits; and that, because there was now no known source of income, the cost of living based on National Statistics was also a benefit.

To his amazement, Chris found that the Met had exhibited all the office account bank statements to the report, and that all but about £30,000 of the inpayments were marked “Legal Aid Authority”. In other words, the convict had been defending clients on legal aid, and the source of his earnings could hardly be more legitimate! Thus the transfers to the private account were also legitimate, and there was no need to use national statistics to quantify the living expenses.

The result

The court found for Chris, that the benefit was £30,000, and not £1,300,000. As a result of Chris’s work, the benefit to be paid by the convict had been reduced by over 97%!

Taxation Offences

Taxation – VAT on Ice Cream

Chris’s client was an ice-cream vendor in London who was not registered for VAT. Customs said his business should be aggregated with other family members’ businesses, taking the combined business over the registration threshold; and they contended that VAT of £500,000 then became due from the family. Customs took criminal action against the family.

Just how much ice cream had been sold?

Because of shared resources, there was little doubt that the family’s business should be aggregated, taking the income over the level at which VAT should be charged. The challenge was to quantify the level of takings since, unsurprisingly, the accused’s business records were unreliable.

Customs had done stake-outs, looking at the price lists on the vans and counting how many ice creams had been sold in a sample period. But they had not accounted for the sales mix. Chris recognised that the most reliable way to calculate takings was to take the sales mix from the stake-outs, but quantify the mix from the Cadbury’s flakes used in 99s and bunny’s ears, since Cadbury’s records were reliable. This resulted in a much lower takings figure than had been alleged by Customs, and hence a much less severe offence.

The result

Chris appeared at Wood Green Crown Court as expert for the defence and, although the aggregation point was lost, his work on quantification showed that trade was much lower than Customs alleged, resulting in a much reduced sentence for his client.

You managed to move entrenched parties to address difficult issues and resolve a situation that looked impossible.