UK: Fraud Watch – September 2006

Welcome to the September 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.

Frederick Clough, who was found guilty in 2004 of faking turnover and profits at Versailles, a loan company, has been sentenced to an additional three years in prison after failing to comply with a £14.2m confiscation order.
The Daily Telegraph, 21 August 2006

Traders in mobile phones and computer chips have applied for six judicial reviews to test whether it is appropriate for HM Customs & Revenue to withhold VAT repayments while it investigates apparently innocent transactions for contra-trading.
Financial Times, 21 August 2006

Seventeen people from Strathclyde in Scotland have been charged in connection with a £1.9 billion alleged carousel fraud.
The Times, 17 August 2006

A woman has been arrested in connection with an investigation into a holiday website which is thought to have defrauded £2m from 3,000 holidaymakers.
Independent on Sunday, 20 August 2006

Angus Cook, the former owner of Dundee Football Club, has been found guilty of operating a sham company to obtain goods from around the world. Mr Cook was ordered to pay £580,000 to his victims and fined more than £200,000.
The Express, 15 August 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.

Fraud in the NHS has been cut by more than 50% since 1998, according to figures published by the NHS Counter Fraud Detection Service.
The Daily Telegraph, 12 August 2006

The Department for Constitutional Affairs has published proposals to give trial judges in very high cost cases the power to order the withdrawal of representation where there appears to be a risk of conflict of interest, or where there is a lack of capacity, such that the efficient progress of the trial may be impeded. 'Proposals to Create Judicial Powers to Manage Conflict of Interest and Capacity Issues in Very High Cost Cases' published by the Department for Constitutional Affairs, 4 August 2006

It is estimated that fraud cost the UK over £650m in the first six months of 2006. 'Fraud Barometer' published by KPMG, 3 August 2006

Six senior managers at Interserve, a business support provider, were suspended following the discovery of a 'mis-statement of accounting balances' going back five years.
Daily Mail, 15 August 2006

Severn Trent has paid David Donnelly an undisclosed sum in compensation after admitting that he was not treated fairly after he blew the whistle on a multi million-pound fraud at the company in 2004.
Mail on Sunday, 20 August 2006

The Italian football federation has ordered Reggia football club to stand trial for fraud.
Financial Times, 9 August 2006

Jacob Alexander, the former chief executive of Comverse Technology, is thought to have fled to Israel to avoid arrest on charges of securities fraud in the US.
Financial Times, 18 August 2006

US Life assurance company, Prudential Financial, has admitted taking part in a scheme aimed at defrauding mutual funds and their shareholders on behalf of hedge fund clients. The company has agreed to pay a $600m fine.
Financial Times, 29 August 2006

Eight New York stockbrokers have been charged with defrauding customers of at least $13m over five years whilst working at three different brokers. It is alleged that they manipulated the share price of Stratus Services Group.
The Times, 3 August 2006

David Carruthers, the former chief executive of BetonSports, has been released on bail of $1m. Mr Carruthers is charged with racketeering, fraud and tax evasion for his part in running the company's sports betting operations and accepting wagers from the US.
Financial Times, 17 August 2006

Jeremy Crook, a former executive with San Diego-based Peregrine Systems, will be extradited from the UK to the US to face charges of conspiring to defraud shareholders.
The Daily Telegraph, 24 August 2006

GlaxoSmithKline has agreed to pay $70m to settle claims that it inflated the price of drugs used by cancer patients in the US.
The Times, 12 August 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.