New powers planned for Insolvency Service - after an estimated £30bn in Covid loan fraud hits HMT coffers
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.
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:
15 July 2021 – Don’t ditch ‘tried and tested’ investments for ESG by
13 July 2021 – Private equity and the raid on corporate Britain by Kaye Wiggins, Harriet Agnew and Daniel Thomas
05 July 2021 – FCA breaking law over consumer consultation, campaigners allege by for MoneyMarketing
02 July 2021 – Banks’ bad behaviour damaging consumer confidence by
25 June 2021 – MPs LCF report too soft on FCA, campaigners say by
06 Feb 2021 – Fraud victims suffer enough – guarantee will help innocent overcome shame of scamming by Daniel Jones for the Sun
05 Feb 2021 – Leader: The FCA’s leaders need to step up when things go wrong by Justin Cash for MoneyMarketing
04 Feb 2021 – Pension scam victims say regulators should have saved them from from losing life savings, by Jessica Beard for the Telegraph
02 Feb 2021 – SMCR 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 2021 – Regulation 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 2021 – FCA criticised for trying to omit names from LCF report by Rachel Mortimer for FT Adviser
02 Feb 2021 – Poll: 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 2021 – MPs 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 2021 – The Financial Services Bill doesn’t provide the tough regulation we need by Professor Prem Sikka for Left Foot Forward
25 Jan 2021 – FCA urges clients of collapsed British Steel firm to consider claims by Sonia Rach for MoneyMarketing
21 Jan 2021 – MPs call on FCA to ‘hold bad advisers to account’ by Laura Purkess for CityWire
21 Jan 2021 – FCA told it lacks vision to tackle consumer issues by Amy Austin for FT Adviser
18 Jan 2021 – Former Hong Kong lawmaker rejects HSBC’s explanation over frozen accounts by Reuters
18 Jan 2021 – What we learned from a bumper FCA data dump by Justin Cash for MoneyMarketing
18 Jan 2021 – Wall Street fears bubble from Biden stimulus as retail investing booms by Katherine Greifeld, Claire Ballentine and Vildana Hajric for Independent.ie
15 Jan 2021 – Mortgage prisoners accuse Treasury of working against them as wider FCA remit blocked by Owain Thomas for Mortgage Solutions
14 Jan 2021 – MP 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 2021 – Bank of England fails to publish officials’ expenses by Alex Ralph for the Times
18 Dec 2020 – Executives 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 2020 – The fallout from the financial regulator’s shocking failure on LC&F is not over yet by Nils Pratley for the Guardian
17 Dec 2020 – FCA 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 2020 – Former Financial Conduct Authority boss Bailey apologises over handling of mini-bond scandal by Ben Martin for the Times
16 Dec 2020 – EU cannot be ‘captured’ by City of London, warns financial services chief by Sam Fleming and Jim Brunsden for the Financial Times
09 Nov 2020 – Spike 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 2020 – How financial services watchdog has reacted to UK consumer worries in Covid by Hilary Osborne for Guardian
08 Nov 2020 – Five predictions for banking regulation in a Biden presidency by Jon Hill for Law 360
05 Nov 2020 – Martin Lewis warns of ‘epidemic of scams’ after ICU nurse loses £8,000 by Scott Edwards for Wales Online
05 Nov 2020 –FCA 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 2020 – Aviva’s shares fiasco highlights weakness of the city watchdog by Patrick Hosking for the Times
02 Nov 2020 – Banks 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 2020 – U.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 2020 – Bank 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 2020 – Work 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 2020 – MPs 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
03 Oct 2020 – Record number of savers fall victim to investment fraud as scam adverts stay on Google by Andrew Ellson for The Times
11 Sep 2020 – The Hut Group facing fresh questions over governance after it reveals one of country’s best-known private equity barons to oversee pay policy by Lucy White for the Daily Mail
10 Sep 2020 London Capital and Finance investors relieved after court ruling opens route to compensation claims by Ben Chapman for the Independent
05 Sep 2020 Crime Agency under fire over bank signature forgery by Andy Verity for BBC
24 Aug 2020 – Financial Conduct Authority rushes to minimise compensation for its failings by James Hurley for The Times
04 Aug 2020 – Have 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 2020 – MPs launch inquiry into pension scams by Tom Kelly for Daily Mail ; UK 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 2020 – Pension 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 2020 – It’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 2019 – Victims hit by Connaught’s collapse blast City watchdog for ‘whitewashing’ independent review by Lucy White for Daily Mail
05 Aug 2019 – Plunder 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 2019 – Guernsey Stock Exchange disputes FCA account over Woodford by David Thorpe in FT Adviser
29 Mar 2019 – MPs 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 2016 – Solicitors 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