News |Insolvency

1st September 2022

Bounce Back Loans: August news roundup

A recap of recent Bounce Back Loan Scheme-related news stories.

As we’ve been reporting, the Insolvency Service’s recent press releases have been awash with director disqualifications and bankruptcy restrictions related to misuse of the Bounce Back Loan Scheme.

August was a particularly prolific month for such news. Here’s a roundup of what was announced.

Five cases end in bankruptcy restrictions

On 5th August, the Insolvency Service detailed cases against five individuals, all made subject to bankruptcy restrictions due to their abuse of the Covid support scheme. Charlene Wilson accepted an eight-year bankruptcy restrictions undertaking, with each of the other four cases resulting in bankruptcy restrictions for ten years.

Wilson falsely inflated her turnover in her Bounce Back Loan (BBL) application in order to obtain the maximum £50,000 loan. The self-employed beauty therapist then went on to use £15,000 of the loan on personal expenses.

Similarly, another beauty business owner, Georgiana Cercel, overstated her turnover, received a £50,000 BBL, and gave her sister one fifth of the loan monies.

Despite eligibility criteria stating businesses must have been trading before March 2020, Sarah Sweeting successfully applied for a £22,000 BBL for her farm shop home delivery service which started in October 2020. She subsequently transferred the majority of the loan (£14,000) to her husband.

Abbas Moradmand secured a £26,894 BBL by applying on behalf of a company he was no longer involved with. He ran a tyre business from 2018 to 2019, but the company was under new ownership and Moradmand was working as a taxi driver at the time of his application to the scheme.

Finally, Florin Bodale took out a £50,000 loan after artificially inflating the turnover of his company Varga Construction. When questioned by investigators, he told them he thought the application asked for the company’s combined turnover for the last three years. However, the figure he stated was still more than double Varga Construction’s three-year turnover.

About the five cases, Kevin Read, Official Receiver at the Insolvency Service, said:

In all of these cases it was obvious, or it should have been obvious, that they either misused the Bounce Back Loan for personal benefit, took a larger loan than they were eligible for, or weren’t eligible for a Bounce Back Loan at all.”

CVL triggers Insolvency Service investigation

Tia-Bella Limited, a balloon and gifts retailer in Wolverhampton, entered into creditors voluntary liquidation (CVL) in July 2021, leading to “further enquiries from the Insolvency Service.” The investigation uncovered that one of the directors, Rebecca Simmons of Walsall, had overstated the company’s turnover to obtain a £45,000 Bounce Back Loan.

In fact, Tia-Bella was not eligible for the minimum BBL amount of £2,000, even, as the company’s turnover was £1,300 – not the £180,000 claimed by Simmons.

Investigators were “unable to confirm whether the…loan benefited the business or not”, but their enquiries showed that Simmons paid out a £10,000 directors’ loan, £10,000 on a company car, and £10,000 in “repayments of deposits incurred before the pandemic” in the space of two months after acquiring the BBL.

“Bounce back loans were issued by the government to help viable businesses during the pandemic. Not only did Rebecca Simmons grossly exaggerate the company’s turnover to secure a loan she shouldn’t have got a single penny of, Rebecca Simmons went onto use the funds on activities she couldn’t even justify as benefitting Tia-Bella.”

– Lawrence Zussman, Deputy Head of Insolvent Investigations

Simmons has been disqualified from running companies for nine years, effective from 25th August 2022.

Tia-Bella’s liquidator, Bhardwaj insolvency practitioners, is said to be “considering the bounce back loan and recovery of funds.”

Two companies closed down amid potential scam

At the end of last week, the Insolvency Service announced that two companies – Micasa WW Ltd and Remultex Ltd – had been wound up in court following an investigation into suspicious transactions potentially related to a cryptocurrency scam.

Due to “the lack of accounting records” kept by Micasa, it wasn’t possible to confirm its involvement in a scam. However, a £50,000 Bounce Back Loan which the company likely wasn’t entitled to was uncovered.

“Nearly all the BBL was transferred to Remultex Ltd”, which also received a £30,000 loan, again, when the company was likely ineligible for the scheme.

Remultex was sent payments from three other companies, too – around £250,000 in total, which was then withdrawn in cash, with no adequate records kept.

Director disqualified for wrongly claiming £200,000

And finally, Rotherham-based Stephen Burke has been banned for eleven years after obtaining Bounce Back Loans for his four construction companies on false pretences. One of the companies was dormant and Burke hugely overstated the turnover of the others.

Yorkshire Plant Hire and Sales Limited, Woodhouse Civil Engineering Limited and Richmond Brokers Limited had “turnover ranging from just £635 to £3,400”, but Burke listed turnover for each company as between £200,000 and £320,000.

The sixty-three-year-old spent the majority of the loan funds (£174,000) “repaying a personal loan to his former partner”.

Burke’s abuse of the Bounce Back Loan Scheme was uncovered when he attempted to dissolve his companies in February of last year, with the businesses instead placed in liquidation due to the unsettled loans,

Rob Clarke, Chief Investigator at the Insolvency Service said:

“Stephen Burke not only sought to defraud the Bounce Back Loan scheme for personal gain, but then sought to cover his tracks by dissolving the companies he’d used. This abhorrent conduct has rightly resulted in a lengthy ban, removing his ability to trade with the benefit of limited liability until 2033.”

Burke’s disqualification is effective from 4th August 2022.

The companies’ liquidator, Yorkshire-based DSI Business Recovery, “has begun recovery action.”

Insolvency and debt investigations

Seeing the whole picture in insolvency and debt cases is key to maximising returns to creditors. For more information on how ESA Risk can help to identify hidden assets or locate targets who have gone to ground, contact Mike Wright, Investigations and Risk Management Consultant, at mike.wright@esarisk.com, on +44 (0)843 515 8686 or via our contact form.

You can also learn more from our Insolvency & Debt Investigations brochure:

 

 

Insolvency & Debt Investigations

Seeing the whole picture in insolvency and debt cases is key to maximising returns to creditors.

What are you looking for?

Get the advice you need

Deep dive for the answers you need
Or contact us on +44 (0)843 515 8686 or at advice@esarisk.com.

Deep dive for the
answers you need

Lawyers, accountants, advisors, investors, senior
management. You name it, we help them find the answers
they need. Ready to discover how we can help you?