February 2024 Tax Investigation Round Up

February's round up of the latest tax investigation news and cases:

• Council worker jailed for £88k fraud
• Adventure company £100k potential fraud
• Jail time for £13m pension fraud
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Council worker jailed for £88k fraud

In a notable case of fraud, a former employee of New Forest District Council and a roofing contractor have been sentenced to prison for their roles in a scam involving overinflated invoices and manipulated quotes.

The scheme was orchestrated by Richard Cullen, a 55-year-old from Luton, who was in charge of overseeing maintenance contracts for the council, and Mark Diaper, a 34-year-old roofer from Southampton. The duo conspired to secure council contracts at exaggerated prices, with Cullen receiving kickbacks amounting to 10% of the job costs. Furthermore, to avoid the requirement for competitive bidding on projects exceeding £15,000, they split the quotations, ensuring they remained under the threshold. Cullen also instructed Diaper to inflate the costs further by adding unnecessary extras, like scaffolding, to boost their profit margin.

Their fraudulent activities were brought to light at Southampton Crown Court following a HMRC tax investigation, where both men faced justice. Cullen received a sentence of 58 months, while Diaper was sentenced to 32 months in prison.

Investigations into their operations revealed incriminating communications, including Cullen's inquiries to Diaper about the potential "roofing dollar" profit and notifications about forthcoming jobs, emphasizing the intent to maximize their financial gain illegally.

The fraud was initially detected in 2019 after the council observed an unusual spike in payments to Diaper's roofing company, authorized by Cullen, which had surged by 146%.

The unraveling of their deceit began when Cullen was discovered asleep at his desk, leading to his suspension. In a desperate attempt to destroy evidence, Cullen suggested to Diaper that they should erase all data from their phones using a specific program to prevent any recovery of the incriminating evidence.

Kevin Hansford from the Crown Prosecution Service condemned the fraudulent scheme, highlighting the betrayal of trust by Cullen, who was entrusted to protect the council's financial interests. Instead, he exploited his position for personal gain, diverting funds meant for community services into their pockets, defrauding the council and, indirectly, the taxpayers of a significant amount of public money.

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Adventure company £100k potential fraud

An adventure company is currently under police investigation following accusations that it failed to deliver on a £100,000 expedition to climb Mt. Kilimanjaro for a group of 30 trekkers. Aspire Adventures and Expeds, the company responsible for organizing the charity fundraising trip, allegedly did not compensate suppliers, including local guides and hotels, jeopardizing the entire journey.

Participants discovered the oversight upon their arrival in Tanzania, when they were informed by the hotel, purportedly reserved by Jason Rawles, the 49-year-old CEO and founder of Aspire Adventures, that no payments had been made. Further complications arose when Rawles disclosed via email that other segments of the trip remained unbooked.

North Wales Police have since initiated an inquiry into Aspire Adventures for potential fraudulent tax activities. The company, established in April 2023, has also sought liquidation, citing "cash flow problems" on its website. Despite Rawles's claim of having over two decades of experience in leadership and adventure, the firm's failure has left many disheartened.

The trekkers, who had collectively spent £100,000 and raised an additional £43,000 for the Hope4 charity—a charity aiding Ukrainian refugees in Eastern Europe—are now facing the aftermath of the failed expedition. A statement on the company's website, allegedly posted by a friend on behalf of Rawles, expressed regret over the incident, attributing the failure to unforeseeable circumstances and escalated costs despite efforts to secure the necessary funds.

The statement also mentioned that Rawles would be collaborating with an insolvency practitioner to mitigate the impact on the customers and advised them to contact their card issuers for potential refunds.

North Wales Police have encouraged anyone with relevant information to come forward to assist with the ongoing investigation into the alleged fraudulent practices of the Anglesey-based Aspire Adventures, emphasizing the seriousness with which they are treating the allegations.

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Jail time for £13m pension fraud

In a significant legal development, two individuals who served as trustees for pension schemes have been sentenced to prison for defrauding 245 people out of £13 million. The fraudulent operation involved misleading pension holders into transferring their funds to fake investment schemes between 2012 and 2014.

Alan Barratt from Essex and Susan Dalton from Rochdale admitted to fraud by abuse of position and were sentenced at Southwark Crown Court. Barratt received a five-year and seven-month sentence, while Dalton was given four years and eight months. Additionally, both were prohibited from serving as company directors for eight years, a restriction requested by The Pensions Regulator (TPR).

The court has scheduled a Proceeds of Crime Act (POCA) hearing to explore the potential recovery of the stolen funds, with an initial session set for November 4, 2022.

The scam, orchestrated by David Austin of Guildford, Surrey, who passed away in 2019, operated out of a call center in Spain. Victims were contacted through cold calls and internet inquiries, offering free pension reviews. Barratt and Dalton falsely claimed that the victims' current pensions were underperforming and that transferring them could enhance their retirement funds.

Promising cash incentives and high returns, the duo convinced victims to transfer their pensions, only to misappropriate these funds through Austin's network, which included offshore accounts and speculative investments like a non-existent timeshare development in St Lucia.

The Pensions Regulator intervened in December 2014, removing Barratt and Dalton as trustees and appointing professional replacements. It was concluded that it was highly unlikely that the pension funds could be restored to the scheme members.

Throughout their operation, Barratt and Dalton managed to mislead 245 pension scheme members into transferring their savings, with an average transfer value of £55,000, totaling £13,737,202 in stolen funds. The personal gain from the scheme amounted to £250,416.49 for Barratt and £126,624.69 for Dalton.

Following a civil trial in 2018, Barratt was ordered to repay £7.7 million and Dalton £5.9 million. This was followed by a criminal investigation by TPR, leading to their recent sentencing.

Judge Gregory Perrins highlighted the devastating impact of their actions on the victims, mentioning the personal statements of 13 victims as representative of the broader harm caused. The case included a critical care nurse and an ex-miner who lost substantial amounts of their pension savings to the scam.

Nicola Parish, TPR's executive director of frontline regulation, condemned the scam as despicable and emphasized the regulator's commitment to pursuing legal action against pension fraudsters. The successful extradition of Barratt from Spain underscored the message that there is no safe haven for scammers.