Fraud Watch – July 2006

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

We make no judgement whatsoever as to the morality, legality or appropriateness of the conduct which forms the subject matter of this bulletin. We simply aim to bring these matters to the attention of those involved in the prevention, detection and investigation of fraud.

Frageand Naseem has been charged with six offences relating to attempts to extract money from banks by false representation. Mr Naseem targeted The Royal Bank of Scotland, HSBC and Barclays Bank claiming to represent other financial institutions in order to obtain money. The Daily Telegraph, 26 June 2006

Jean-Pierre Regli, founder of Langbar International, has been sentenced to six months in prison for contempt of court after failing to comply with an asset freezing order. The Serious Fraud Office began an investigation into Langbar International after the company was unable to account for £365m. The Daily Telegraph, 19 June 2006

Five men have been charged with conspiracy to defraud in connection with the collapse of Imperial Consolidated Group. The company failed in 2002 owing £200m. Financial Times, 15 June 2006

Tom Leask, an Edinburgh businessman, has been charged with handling £1.6m in relation to a £21m fraud at Royal Bank of Scotland. The former manager of the bank's Princes Street branch has already been convicted on charges of defrauding the bank. Evening News, 13 June 2006

According to Ernst & Young's latest global fraud survey "Fraud Risk in Emerging Markets", one in five organisations has made a decision not to invest in an emerging market as a result of a fraud risk assessment. Ernst & Young, June 2006.

The House of Lords has refused to hear a legal challenge by three former NatWest bankers who are fighting extradition to the United States to face charges in connection with the collapse of Enron. Financial Times, 22 June 2006.

Mark Selby has been sentenced to six years in prison after pleading guilty to taking part in a missing trader fraud that cost HM Revenue & Customs £60m. Financial Times, 17 June 2006

A House of Commons report by the Public Account Select Committee has warned that tobacco fraud remains a "significant'' problem, costing the taxpayer almost £3bn a year in lost VAT and excise duty. The Daily Telegraph, 22 June 2006.

The Fraud Bill had its second reading in the House of Commons on 12 June 2006 and waits the publication of a report following Standing Committee stages on 20 and 22 June 2006. The bill makes provision for, and in connection with, criminal liability for fraud and obtaining services dishonestly.

The Members of the European Parliament have adopted a report by Herbert Bosch on protection of the financial interests of the Communities and the fight against fraud. The report criticises individual Members and the Commission for their lack of effort to improve the situation and calls on the European Anti-Fraud Office to reform. European Parliament, 15 June 2006

Peer Steinbruck, the German finance minister, has claimed that VAT fraud costs the country €17-18bn a year and asked the European Commission to allow Germany to change its tax rules to tackle the problem. Financial Times, 8 June 2006.

Bawag PSK, an Austrian bank, has agreed to pay $675m to avoid prosecution by the Securities and Exchange Commission in relation to a fraud case against Refco. Bawag was accused of helping Refco hide losses of almost $1.3 billion. Bloomberg, 5 June 2006.

Criminal proceedings have been launched in Italy against Parmalat. Up to 64 people could face fraud charges in connection with the $18bn collapse of the dairy company. CBS, 5 June 2006.

Jeffrey Skilling, former Enron chief executive, has lodged an appeal against his conviction on fraud and conspiracy charges relating to the collapse of the energy company. The Daily Telegraph, 22 June 2006.

The former chief executive officer and two other former executives of Buca, an American restaurant chain, have been charged with criminal fraud in connection with the alleged use of company money for personal expenses. Two of the accused face charges of civil fraud in connection with alleged fraudulent accounting practices. The Daily Telegraph, 8 June 2006.

Lord Black of Crossharbour, the former owner of The Daily Telegraph, has rejected claims that he lied about his remaining assets when he negotiated his $20m bail on fraud and racketeering charges. The Independent, 21June 2006.

The Bank of Communications is investigating a possible fraud of 200m yuan from a branch in Liaoning province. HSBC has a 20% stake in the bank, which is listed in Hong Kong. The Standard (China), 12 June 2006.

Mishcon's 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 extensive experience in conducting and/or project managing highly sensitive international investigations in respect of bribery and corruption allegations. The Group founded and run both the Asset Protection & Recovery Network, made up of international legal fraud specialists, and the Financial Fraud Group, for risk and compliance officers.