UK: Mishcon Fraud Watch (February)

Last Updated: 2 February 2006
Article by Gary Miller

Welcome

Welcome to the February edition of Mishcon Fraud Watch, prepared by the Corporate Investigations & Asset Recovery Group at Mishcon de Reya and designed to provide businesses and their advisors with a snapshot of what has been happening in the world of fraud in the last month.

UNITED KINGDOM

Asset Recovery

The Assets Recovery Agency (ARA) was granted its first Property Freezing Orders (PFOs), following the introduction of legislation on 1 January 2006.  Two orders were granted over assets estimated to be worth £770,000.  The first relates to assets in Norbury and Croydon held by Gheorghe Virtosu, currently serving an eight-year prison sentence in France. The second relates to assets in Yorkshire held by Rosalind Glover.  The ARA contends these have been acquired through the unlawful activity of Ms Glover’s brother, Matthew Glover, who is serving a twenty-five year prison sentence.

Banking & Finance

Banks have been urged by the Financial Services Authority to do more to engage with customers in the fight against online banking fraud.  Recent research showed that half of Internet bank customers are concerned about the risk of fraud.

Identify Theft

 Millions of pounds of tax credits have been stolen from the government by fraudsters using the identities of Network Rail employees.  Gangs made fraudulent claims through the HM Revenue and Customs website using stolen names, date of birth and national insurance numbers of Network Rail employees. 

Tax Fraud

Six employees of HM Revenue & Customs (HMRC) are under investigation by the Independent Police Complaints Commission after a £100 million VAT fraud trial collapsed.  The investigation was instigated after a High Court judge criticised HMRC staff for withholding evidence from defence lawyers.

The European Court of Justice (ECJ) has ruled that traders who have been unwittingly caught up in VAT carousel fraud can claim back VAT payments.  HM Revenue & Customs has withheld VAT rebates to carousel fraud victims since 2002.  The ECJ ruling could open the door to claims for compensation running into hundreds of millions of pounds.

The British government has asked the European Commission for permission to remove VAT from the supply chain of goods, such as mobile phones, in an attempt to reduce missing trader fraud.

The Serious Fraud Office (SFO)

The Serious Fraud Office is considering whether Respect MP and Big Brother contestant, George Galloway, should face charges in connection with the Iraqi oil-for-food scandal.

EUROPE

Telecommunications

The new chief executive of Nokia, Olli-Pekka Kallasvuo, has been fined about €31,000 for "a minor tax fraud".

ASIA

Internet

Takafumi Horie has stepped down as CEO of Livedoor Co, the Internet portal after he was arrested on suspicion of securities fraud.  Livedoor is suspected of concealing losses of $8.7million in results for the year ending September 2004.  Livedoor Credit, a subsidiary company, is suspected of providing false information during the 2004 takeover of the publishing company, Money LifeThe Tokyo Stock Exchange is considering delisting Livedoor over the scandal.

NORTH AMERICA

Computer Crime

Robert Mueller, director of the FBI, has called for the introduction of an international information exchange system for law enforcement agencies, which would help in the fight against global computer crime and fraud.

Politics

Republican lobbyist, Jack Abramoff, has pleaded guilty to conspiracy, fraud and tax evasion, charges that carry penalties of up to thirty years in prison.  Mr Abramoff is expected to receive a reduced sentence in return for testimony against former associates.

Energy

Former Enron chiefs Kenneth Lay and Jeffrey Skilling will go on trial in Huston charged with 42 counts of conspiracy, fraud and insider trading.  It is alleged that Mr Lay and Mr Skilling conspired with others to hide the company's financial difficulties through a series of complex deals.

SOUTH AMERICA

Tax Fraud

Lucia Hiriart, the wife of Chile's former ruler Augusto Pinochet, has been arrested on charges of tax evasion.  She is being held together with four of their five children.  The arrests are part of a wider investigation into foreign bank accounts held by General Pinochet, who has already been charged with tax fraud.

UNITED NATIONS

Corruption

The UN has uncovered evidence of mismanagement and possible fraud in the department that runs international peacekeeping operations.  An investigation has found suspicions that UN employees colluded with vendors in awarding contracts for peacekeeping programmes.  A report calls for staff members to be investigated to find out whether they "colluded to award" one supplier an $85.9m fuel contract for the Sudan mission.

Mishcon Fraud Watch is published by the Corporate Investigations & Asset Recovery Group of Mishcon de Reya Solicitors.  Widely recognised as the leader in the field of fraud investigations, the Group has pioneered the use of financial fraud techniques in numerous fields, including the rapidly growing areas of theft of confidential information and counterfeiting.  The Group founded and run both the Fraud Network, made up of international legal fraud specialists, and the Financial Fraud Group, for in-house fraud lawyers and compliance officers. 

To find out how you can turn your losses into profits (Tulip) please go to www.mishcon.co.uk/tulip

To view the Corporate Investigations & Asset Recovery Group's research report on Protecting Corporate Britain' please visit www.mishcon.co.uk/fraudreport

To learn more about the Corporate Investigations & Asset Recovery Group, please visit http://www.mishcon.co.uk/iarg.

This article is only intended as a general statement and no action should be taken in reliance on it without specific legal advice.

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