Welcome to the October edition of Mishcon Fraud Watch, prepared by the Fraud & Insolvency Group at Mishcon de Reya. It aims 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 that 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.

UNITED KINGDOM

Assets Recovery Agency (ARA)

The ARA has been granted an Interim Receiving Order over assets estimated to be worth in excess of £2.75m. The assets, which are owned by Wai Keung Cheung of Northern Ireland, are alleged to be derived from the proceeds of trafficking controlled drugs, multiple fraud offences and tax evasion.
ARA press release, 19 September 2007

The ARA has frozen in excess of £300,000 of assets held in a pension scheme of a company owned by Brian John Meehan and his son-in-law, Gerard Martin McAllister. It is the first time a pension scheme has been subject of civil recovery proceedings in the UK. The ARA alleges that the pension scheme assets were funded from the proceeds of unlawful conduct.
ARA press release, 13 September 2007

Media

The City of London Police is considering whether or not to bring fraud charges against GMTV following a record £2m fine from Ofcom for "widespread and systematic deception'' on its premiumrate phonein competitions.
The Daily Telegraph, 27 September 2007

Tax

A judge at Southwark Crown Court has ordered Ian Leaf to hand over assets worth £16.25m. Mr Leaf was convicted of defrauding the Inland Revenue of £55m in 2005 and is currently serving a 12 year jail sentence.
The Times, 20 September 2007

INTERNATIONAL

Surveys

According to a new survey by Kroll, four out of five companies worldwide have been affected by fraud.
Kroll Global Fraud Report, 24 September 2007

NORTH AMERICA

Banking and Finance

The Securities and Exchange Commission is to investigate whether underwriters of mortgage-backed bonds "unduly influenced" ratings agencies to ignore their risks. The investigation was announced as a congressional hearing into the role of ratings agencies in the failure of the subprime mortgage market.
The Times, 27 September 2007

The Securities and Exchange Commission has charged 38 people with civil fraud following an industry-wide investigation into bribery in the stock lending industry.
The Financial Times, 21 September

Energy

Jeffrey Skilling, the former chief executive of Enron, is seeking a new trial citing "profound and inherent weaknesses in the government's case''. Mr Skilling was sentenced to more than 24 years in prison for his part in the collapse of the company.
The Daily Telegraph, 8 September 2007

Regulation

A case before the US Supreme Court, Stoneridge v ScientificAtlanta, will ask the court to consider if securities laws allow shareholders to sue third parties who, knowingly or unwittingly, participate in a "scheme to defraud" even if they did not directly mislead investors. The court's decision could extend liability for corporate fraud to any company that does business with a US corporation that defrauds its investors.
The Financial Times, 1 October 2007

EUROPEAN UNION

Tax

The European Court of Justice has ruled in favour of a number of companies that were unwittingly caught up in a carousel fraud involving the sale of mobile phones. The court ruled that if traders acted in good faith and could show that they had taken "every reasonable measure" to ensure that they did not deliberately participate in tax evasion, the tax authorities should not be able to withdraw any value added tax exemption rights they held.
The Financial Times, 28 September 2007

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