TTF Blog: 17 July 2021

New powers planned for Insolvency Service - after an estimated £30bn in Covid loan fraud hits HMT coffers

'Phoenixing' is when a rogue Director dissolves their company to evade scrutiny, then sets up a new business untouched. The Government is creating new powers for the Insolvency Service to enable a crack-down.

by Alex Varley-Winter, TTF’s Head of Media Relations & Investigative Reporting

TTF’s founder this month alleged to British lawmakers that a “colossal amount of carnage is being cause by a relatively small number of criminally-minded individuals” in the UK. Repeat scammers, who use a technique called ‘phoenixing’ to evade capture:

“As soon as they start to feel the temperature rise around them they close down shop and reappear somewhere else” Andy Agathangelou testified. “They have in my opinion been running rings around the regulators and enforcement agencies. … One of the most powerful weapons they have is this ability to dissolve their organisation and pop up somewhere else.”

The term ‘phoenixing’ for this dodge-game is very apt, indicating a mythical bird rising again from the ashes. TTF members who are scam victims have been grappling with the reality of this practise for a very long time, and have given evidence to the Government on the same.

Pandemic Panic

So why is the Government only now getting a grip on ‘phoenixing’ – a technique believed to have been used by white collar crime for decades?

In a word: Covid. MPs reported last month that up to £30 billion in fraud or error over the past year was eating into the government’s own coronavirus support scheme. A.k.a. our taxes, hitting Treasury coffers and impacting on public spending.

This experience may have drawn the Treasury’s attention to the fact that anyone – including them – can fall victim to a crime. And how motivating it can be to lose a few £billion. “New powers to tackle unfit directors of dissolved companies” announced the Government in May: “The Insolvency Service will be given powers to investigate directors of companies that have been dissolved, closing a legal loophole and acting as a strong deterrent against the misuse of the dissolution process.”

This is being presented as a crack-down on phoenixing, in other words.

Controversially, though, they are planning to limit the power to a period of three years. This attempted time-limitation on the new powers is a measure that TTF members – many of them targeted by investment scammers – strongly oppose.

As Agathangelou puts it: “Three years is a blink of an eye in this context. … If the objective is to try to clean up our country, then make the timeframe as long as you can.”

Is this a step to ‘clean up our country’? It could be revelatory. But as with every new power, it may rest on what its enforcers – the Insolvency Service – are motivated to care about.

On that count, TTF has concerns. Will fraud alleged by consumers be equally prioritised as alleged scams on the Treasury. And is the Insolvency Service a trusted institution?

TTF urging scrutiny of the Insolvency service

TTF has repeatedly heard  a can of worms alleged when it comes to debts and bankruptcies being validated in the UK. Some of this was publicly aired at TTF’s Symposium on alleged insolvency scamming last month, which you can watch here. Journalists Ian Fraser and Emily Buchanen predicted at the event that the untrammelled power of insolvency practitioners is likely to fall into public scrutiny for the first time this year.

A report by Bill Grimsey, the former boss of Wickes and Iceland this week revealed that about 150,000 small businesses in the UK have collectively racked up £2.3bn in debt. With pandemic-recovery and Brexit-resilience potentially proving impossible for many businesses, the arbiters of bankruptcy could land at the centre of a fray.

I’ve searched for legal comment, BP Collins Solicitors published a commentary on the draft law and its implications for the Insolvency Service:

“[I]t will enable the Government to clamp down on fraudulent directors, and tackle the many instances of ‘bounce back loan’ fraud, whereby directors have simply dissolved their companies in order to avoid repayment of Covid-19 Bounce-Back loans”.

However, it goes well beyond that: “This is significant because any director of a dissolved company now has the potential to be investigated by the Insolvency Service and sanctioned if any evidence is uncovered of malpractice or fraud.”

But a log-jam of cases is unlikely to be shifted any time soon, the lawyers write: “Whilst the Government remains assured that in the long run, this reform will increase efficiency and accountability for UK companies, there will undoubtedly be a large increase in case investigations for the Insolvency Service if the Bill is made law.”

“Coupled with the recent surge in dissolutions as a result of the Covid-19 pandemic, there is also the possibility that the Insolvency Service’s resources will be stretched, thereby undermining the effectiveness of its investigations.”

TTF’s Agathangelou told MPs drafting the new powers that from our perspective, there are even deeper concerns about the enforcer’s fitness.

Insolvency is ‘murky’ anyway to past victims of financial crime:

“There is a pile of evidence suggesting the weaponisation of the insolvency service. … the net result of this is that people have their homes taken away from them or their businesses as a result of engineered bankruptcies,” Agathangelou told MPs. The insolvency service, ‘needs to be opened up and looked into’ – particularly if it is about to be gifted a raft of new powers.

The insolvency abuse outlined to us in the past, while we may hope this is rare, is of white collar criminals targeting wealthy, solvent people and seeking to take control over their assets by fabricating a bankruptcy.

It sounds deeply paranoia-inducing. But at least one case has already been well-documented in the press:

In depth: how a con-artist can exploit every loophole

British-Iranian academic Dr Sheida Oraki is a reported victim of well-heeled conman Sharokh Mireskandari. Her case is one of very few fake bankruptcies that I have observed being challenged in court. Her years mired in litigation now span almost two decades, seeking to reverse herself and her husband’s bankruptcy and wrest control from its trustees. 

Being rendered falsely bankrupt was apparently sprung on her by Mireskandari, as a perceived punishment for reporting him to the Law Society, in the mid-’00s. He was later exposed by Mail investigative journalists for having no legitimate legal qualifications being struck off the UK Solicitor’s Roll in 2012. The SDT’s judgment against him covers counts of dishonesty towards clients spanning many years.

That bold 2008 investigation of Mireskandari, which quoted Dr Oraki, saw the Daily Mail shortlisted in Private Eye’s Paul Foot awards for its investigative reporting. Nevertheless, the plight of two of his victims is embedded in our justice system,  unresolved to this day.

Dr Oraki believed that the hounding of her was purely aimed to punish herself and her husband for dobbing in Mireskandari to legal services watchdogs in the early 00’s.

Like many of these battles it started shockingly small: In 2003, they told the Law Society that their purported lawyer had double-billed them £1000. Dr Oraki recalled in court that he then threatened them, that if they did not withdraw their complaint he would make them bankrupt and strip them of all their assets.

The Orakis’ purported legal costs for repeatedly appealing, challenging, and pleading against the bankruptcy he secured, now run to more than a £million spanning more than a decade. They have been repeatedly threatened with repossession, and live in as state of perpetual uncertainty as a result.

In 2017, a Deputy High Court judge, Robert Ham QC, even acknowledged: “I am willing to accept that the original judgment was obtained by fraud”. But that, in his view, it would make no difference – the court did not annul the bankruptcies.

This legal intransigence is what people alleging fake debts or, forged documents, repeatedly rail against. Judges also  acknowledged that the Orakis’ situation is ‘kafkaesque‘, yet they have been wading through a legal quagmire for more than a decade.

The Orakis continue to believe that if ‘fraud unravels all’ they should owe a lot less than a £million, and closer to nothing. Having observed Dr Oraki in court, I believe that morally she is right – and has always been right – to refute a bankruptcy allegedly secured by way of a false instrument, and when she was in good financial health.

I do not know what protections being a victim of fraud ought to garner Dr Oraki under the Law – I’m a journalist not a legal scholar. I can only tell you that to observe the case in court feels like watching a glass fall in slow motion, repeatedly.

Having seen the worst that can happen, TTF’s founder and many of our members are hoping that new insolvency powers, if they are passed into law, will be used well and wisely. New powers would, however, need to be extended over a far longer time-scale, and be robustly used if they are to serve most victims. As Agathangelou emphasised to MPs, it should only be the first step.

Press Timeline of relevant articles:

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05 July 2021FCA breaking law over consumer consultation, campaigners allege by for MoneyMarketing

02 July 2021Banks’ bad behaviour damaging consumer confidence by

25 June 2021MPs LCF report too soft on FCA, campaigners say by

24 June 2021Regulators should do more to prevent another HBOS debacle by
09 June 2021FCA risks ‘legal jeopardy’ over consumer duty by
18 May 2021How the vulnerable lost their life savings while regulators stood by by Ben Chapman for the Independent
17 May 2021 – Business Banking Resolution Service ‘done on the cheap’ by James Hurley for the Times
12 May 2021Where next for mortgage prisoners? by Olivia Selley and Tara Panicker for FT Adviser
26 Apr, 2021 – ‘Catatonic’ FCA under fire over mini-bond firm’s collapse by Ollie Smith for Citywire
24 Apr, 2021 City watchdog ignores 45 warnings as investors lose £47m in bond scandal by Adam Williams for the Telegraph
09 Apr 2021PM urged to ‘clean up’ financial services by Amy Austin for FT Adviser
15 Mar 2021Andrew Bailey under pressure over link to RBS scandal by Edward Thicknesse in City A.M.
12 Mar 2021Beware the City’s push for a new regulatory watchdog by Helen Thomas for the FT
20 Feb 2021£1.5bn Germany property scandal leaves British savers facing financial ruin by Jessica Beard for the Telegraph
18 Feb 2021 Barclays boosts bonus payouts despite 30% fall in profit by Kalyeena Makortoff for the Guardian
17 Feb 2021Where next as government bonds lose power of diversification? by Adam Lewis for Portfolio Adviser
17 Feb 2021Neil Woodford under fire from Jersey regulator by Lucy Burton for the Telegraph

06 Feb 2021Fraud victims suffer enough – guarantee will help innocent overcome shame of scamming by Daniel Jones for the Sun

05 Feb 2021Leader: The FCA’s leaders need to step up when things go wrong by Justin Cash for MoneyMarketing

04 Feb 2021Pension scam victims say regulators should have saved them from from losing life savings, by Jessica Beard for the Telegraph

02 Feb 2021SMCR rules come back to bite FCA in mini-bond probe ‘rules around senior managers being held responsible for their actions have come back to bite the regulator’, by Daniela Esnerova for MoneyMarketing

02 Feb 2021Regulation must deliver transparency and protection for Buy Now Pay Later consumers by Alex Marsh for City A.M.

02 Feb 2021 Bank chief Bailey ‘should be censured’ for failings by James Hurley for the Times

02 Feb 2021FCA criticised for trying to omit names from LCF report by Rachel Mortimer for FT Adviser

02 Feb 2021Poll: Should FCA executives bear personal responsibility for the London Capital and Finance fallout? by MoneyMarketing

01 Feb 2021 – Investment funds flouting new transparency rules by Patrick Hosking for the Times

01 Feb 2021MPs launch full inquiry into London Capital & Finance scandal with chairman declaring it will be “thorough and clear” by Jim Armitage for the Evening Standard

29 Jan 2021The Financial Services Bill doesn’t provide the tough regulation we need by Professor Prem Sikka for Left Foot Forward

25 Jan 2021FCA urges clients of collapsed British Steel firm to consider claims by Sonia Rach for MoneyMarketing

21 Jan 2021MPs call on FCA to ‘hold bad advisers to account’ by Laura Purkess for CityWire

21 Jan 2021FCA told it lacks vision to tackle consumer issues by Amy Austin for FT Adviser

18 Jan 2021Former Hong Kong lawmaker rejects HSBC’s explanation over frozen accounts by Reuters

18 Jan 2021What we learned from a bumper FCA data dump by Justin Cash for MoneyMarketing

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15 Jan 2021 –  Mortgage prisoners accuse Treasury of working against them as wider FCA remit blocked by Owain Thomas for Mortgage Solutions

14 Jan 2021MP Vows To Keep Pushing Tougher Economic Crime Law by Richard Crump for Law360

12 Jan 2021 – Bitcoin: be prepared to lose all your money, FCA warns consumers by Kalyeena Makortoff  for the Guardian

07 Jan 2021 Regulators and police say Covid lockdowns have driven up online pension scams and demand regulation of Google, Facebook and others by Jim Armitage for the Evening Standard

06 Jan 2021 Why UK savers could fall through the cracks in Brexit regulation from the FCA by Jim Armitage for the Evening Standard

04 Jan 2021Bank of England fails to publish officials’ expenses by Alex Ralph for the Times

18 Dec 2020Executives at Financial Conduct Authority to lose bonuses over London Capital & Finance scandal by Ben Martin for the Times – Bosses at the Financial Conduct Authority will lose £205,000 in bonuses after the highly critical report on the regulator’s handling of the London Capital & Finance scandal

17 Dec 2020The fallout from the financial regulator’s shocking failure on LC&F is not over yet by Nils Pratley for the Guardian

17 Dec 2020FCA did not ‘effectively supervise’ collapsed mini-bond issuer LCF, says report by Matthew Vincent for the Financial Times  “Members of the Transparency Task Force, a lobby group pushing for regulatory reform, pointed out that in his own representations to the Gloster review, Mr Bailey included a demand “to delete references to ‘responsibility’ resting with specific identified/identifiable individuals”.

17 Dec 2020Former Financial Conduct Authority boss Bailey apologises over handling of mini-bond scandal by Ben Martin for the Times

16 Dec 2020EU cannot be ‘captured’ by City of London, warns financial services chief by Sam Fleming and Jim Brunsden for the Financial Times

09 Nov 2020Spike in personal pension cases at ombudsman by Rachel Mortimer for FT Adviser

09 Nov 2020 – Regulator: Climate risk ‘looms even larger’ than pandemic by Avery Ellfeldt for ClimateWire (U.S.)

08 Nov 2020How financial services watchdog has reacted to UK consumer worries in Covid by Hilary Osborne for Guardian

08 Nov 2020Five predictions for banking regulation in a Biden presidency by Jon Hill for Law 360

05 Nov 2020Martin Lewis warns of ‘epidemic of scams’ after ICU nurse loses £8,000 by Scott Edwards for Wales Online

05 Nov 2020FCA bans adviser trio jailed for sex offences by Rachel Mortimer for FT Adviser

03 Nov 2020 – ‘We haven’t received a penny’: Business interruption insurance row intensifies as owners fear payout delays, by Elizabeth Anderson for iNews

03 Nov 2020Aviva’s shares fiasco highlights weakness of the city watchdog by Patrick Hosking for the Times

02 Nov 2020Banks have done little to help the country through the pandemic, so why is the government rewarding them? by Simon Youel for the Independent

29 Oct 2020 – Calls to sack Malta financial regulator CEO by Cristian Angeloni for International Adviser

27 Oct 2020U.S. group urges Biden to use financial regulation to control climate change by Valerie Volcovici for Reuters

27 Oct 2020 ‘Impact startups’ continue to raise funding during the pandemic despite difficulties faced by the wider tech startup sector by Sebastian Klovig Skelton for Computer Weekly

26 Oct 2020 – Why there must be thorough probe of claims made by Bank Signature Forgery Campaign – Greg Wright  for the Yorkshire Post

26 Oct 2020 –  Critics demand action over ‘flawed’ British Banking Resolution Service by James Hurley for the Times

23 Oct 2020Bank Signature Forgery (film) by Nicholas Wilson for Corruption UK

22 Oct 2020 – UK fraud agency suffers string of senior departures by Kate Beioley for the FT

22 Oct 2020Work harder to find fraud, watchdog tells auditors by James Hurley for the Times

17 Oct 2020 – MPs pursue claims bank signatures were faked on court papers by Rupert Jones for the Guardian

16 Oct 2020 We need universal digital ad transparency now by Laura Edelson, Erika Franklin Fowler and Jason Chuang for TechCrunch

15 Oct 2020 – Rising COVID-19 Rates Send NatWest Misselling Trial To Video by Bonnie Eslinger for Law 360

15 Oct 2020 – MPs Push Agencies to Act on Forged Signature Claims by Law360

13 Oct 2020 –  Mark Carney says banks should link executive pay to Paris climate goals by Kalyeena Makortoff for the Guardian

12 Oct 2020 ‘It is time to reboot the competition regime for the modern, digital age’ by David Wighton, The Times

12 Oct 2020 Gina Miller blasts FCA complaints scheme changes ‘unfair, immoral and illegal’ by Cristian Angeloni for Portfolio Adviser

12 Oct 2020MPs call for input on Pension Schemes Bill by James Phillips for Professional Pensions

10 Oct 2020 Give pension trustees power to fight scammers, say MPs by Kenza Bryan for the Times

08 Oct 2020  – Freedom to transfer pensions should be stripped where scams are suspected, industry experts urge by Jessica Beard for the Telegraph

08 Oct 2020 – Planned pensions shake-up passes first Commons hurdle by Law 360

08 Oct 2020 – WPC chairman says transfer rules ‘must be changed’ by Amy Austin for FT Adviser

07 Oct 2020 – Tech giants share blame for pension scams, MPs told by Law 360

06 Oct 2020 – FCA opens 85 cases over pension scam concerns by Amy Austin for FT Adviser

28 Sep 2020 – PM urged to show leadership in fight against scams by Amy Austin for FT Adviser
28 Sep 2020The 100 Whistleblowers who changed Wall Street by Stephen M. Kohn and Mary Jane Wilmoth for National Law Review
28 Sep 2020TTF calls for govt leadership on pension scams following meeting with PM by Sophie Smith for Pensions Age
26 Sep 2020 – £60m revamp for Action Fraud hotline that failed victims by Martin Beckford for The Sunday Times
25 Sep 2020 – FCA labels Google’s scam advert efforts ‘deeply frustrating’ by Rachel Mortimer for FT Adviser
23 Sep 2020 – Bank Forgery Campaign (video) by Andy Verity for BBC
21 Sep 2020 Flood of complaints expected over Covid-19 UK business loans, by Kalyeena Makortoff for the Guardian
16 Sep 2020 – Regulators Accused of Ignoring Scam Warnings by Jack Gray for Pensions Age
16 Sep 2020Tougher clampdown on pension scams is needed, MPs told by Vicky Shaw for Belfast Telegraph
11 Sep 2020 – ‘Delay changes to Watchdog Complaints Scheme’ by James Hurley for The Times
03 Sep 2020Regulators have not yet got to grips with how to close down crooks, warns TTF  by Hope William-Smith for Professional Pensions

24 Aug 2020Financial Conduct Authority rushes to minimise compensation for its failings by James Hurley for The Times

04 Aug 2020Have your say: Will the WPC’s inquiry into the impact of pension freedoms be too overshadowed by Covid-19 impacts? by Professional Pensions

03 Aug 2020 – ‘“I’m 39, have lost my job and am in debt – can I unlock my £18k pension?” … DON’T do it!’‘ by Steve Webb for This is Money

01 Aug 2020‘I lost £2.3m after I was conned into transferring my pension’ by Jessica Beard for the Telegraph

28 Jul 2020MPs launch inquiry into pension scams  by Tom Kelly for Daily MailUK Pension Scams Under Scrutiny After 2015 Relaxation in Rules by Reuters & MPs launch wide-ranging pension scams probe by Justin Cash for MoneyMarketing

24 Jul 2020 – US business groups seek steps to stamp out online fraud by Leonie Barrie for Just Style

22 Jul 2020Pension scams increase amid lockdown by Sophie Smith for Pensions Age & Missed Opportunity to Use Victims in Scam Work by Amy Austin for FT Adviser

21 Jul 2020  Londongrad Calling: Is Europe’s Laundromat the ‘New Normal’? by Mark Conrad

20 Jul 2020 Campaigners Aim to Create Pension Scam Database by Michael Klimes & Government eyes unauthorised firms by Justin Cash for MoneyMarketing

17 Jul 2020 – Year ‘dominated’ by FCA shortcomings as 205 complaints made,  by Rachel Mortimer for FT Adviser

29 Jun 2020 – MPs Pushed to Launch Pension Scam Inquiry by Amy Austin for FT Adviser & Lawmakers Urged To Open Inquiry Into Pension Scams by Martin Croucher for Law 360

11 Jun 2020 Blackmore minibond investors get just £5m back by Ben Martin for the Times

11 May 2020 – FCA urged to build public trust in independent reviews by Rachel Mortimer for FT Adviser

30 Apr 2020 – FCA was warned three years ago about mini-bond firm Blackmore Bond, which collapsed with £45m of savers’ money by Ben Chapman for the Independent

15 Apr 2020 – Met police lose two thirds of finance officers as fraud soars by Ben Ellery for the Times

25 Mar 2020 – Care Home Wants NatWest Docs in Misselling Fight by Law360

20 Mar 2020 – Connaught review delayed as Covid-19 concerns loom by Rachel Mortimer in FT Adviser

07 Jan 2020It’s time to keep your pensions promise, Boris! The PM pledged to help these victims of a huge scam FOUR years ago – and they’re still waiting by Tom Kelly for the Daily Mail.

29 Dec 2019‘Lambs to the slaughter – tens of thousands of savers have lost up to £10billion in rogue pensions schemes sanctioned by the government… and now the taxman is threatening VICTIMS with fines’, and ‘Making millions from other people’s misery’: A Government adviser, call centre chief and pension scheme director are among those who stand accused of involvement in pension schemes that exploited loophole in the law by Tom Kelly for the Daily Mail

03 Sep 2019
Chris Gordon Developer who ‘lost £1m’ takes legal action against Ulster Bank by Alan Erwin for the Belfast Telegraph

30 Aug 2019 – MPs back businessman on hunger strike at Clydesdale Bank by Kalyeena Makortoff for the Guardian

15 Aug 2019Victims hit by Connaught’s collapse blast City watchdog for ‘whitewashing’ independent review by Lucy White for Daily Mail

05 Aug 2019Plunder in paradise: The ‘adviser’ behind a Costa scam that has cost expat pensioners £25MILLION – and led one to attempt suicide by Laura Shannon for Mail on Sunday

05 Jul 2019 Government-owned bank ‘forging signatures’ in repossession cases by Andy Verity for BBC

18 Jun 2019“I came home to find my house had been stolen!” by Angela Ellis-Jones for the Daily Mail

20 Jun 2019 – FCA orders review of its handling of Connaught collapse by Rachel Mortimer for FT Adviser

13 Jun 2019 – Investigation into disgraced RBS small business unit branded a ‘whitewash’ by MPs by Ben Chapman for the Independent

07 Jun 2019Guernsey Stock Exchange disputes FCA account over Woodford by David Thorpe in FT Adviser

29 Mar 2019MPs call for inquiry into alleged forgery of signatures by Andy Verity for BBC

15 Feb 2017 – RBS accused of fraud & forgery by customers and ex-employee by Andrew Hosken for The World Tonight BBC Radio 4

22 Dec 2016Solicitors suspended for roles in collapsed Brazilian investment scheme by Nick Hilborne for Legal Futures

10 Oct 2016 The Dash For Cash: Leaked Files Reveal RBS Systematically Crushed British Businesses For Profit by Heidi Blake, Jane Bradley, Tom Warren & Richard Holmes for Buzzfeed News

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