Category: News

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 (BBLS).

While there was only one such update in September from the Insolvency Service last month, there was an important statistical update from the Department for Business & Trade with one statistic, in particular, widely reported by the press…

Marked increase in Bounce Back Loans flagged as suspected fraud

In the ‘Covid-19 loan guarantee schemes performance data‘ quarterly update to the end of June 2023, published by the Department for Business & Trade, the value of BBLS loans “flagged by lenders as suspected fraud” rose to £1.65 billion – a near 40% increase since the March 2023 update.

The official commentary on the statistics states: “Since fraudulent loans are likely to be among the first to default, it is assumed that the proportion of guarantee claims linked to loans with a suspected fraud flag should decline as the scheme matures, although this will only become apparent over time.”

As we have seen from the number of Bounce Back Loan Scheme fraud cases discussed on this website over the past couple of years, the scheme was open to fraudulent activity, as lenders were encouraged to provide businesses with financing as quickly as possible.

The loans handed out under the scheme were, of course, 100% guaranteed by the UK government and the public purse has so far paid out on £1.27bn of loans with a suspected fraud flag (around 18% of the total paid out so far under the BBLS guarantee scheme).

The data release from the Department of Business & Trade (formerly the Department for Business, Energy & Industrial Strategy) includes a set of notes specifically relating to suspected fraud reporting, which admits that the “figures for suspected fraud will vary from quarter to quarter” as lenders evolve their “processes for identifying and combatting fraud”. The release also notes that a flag of suspected fraud will not always mean actual fraud, and that reporting will differ by lender depending on their “fraud tolerance thresholds”. The general message is that the figures for this metric are “indicative” as at a moment in time.

First Bounce Back Loan compensation order secured in court

The Insolvency Service has secured its first compensation order in court, which orders Marian Ghimpu to repay £52,163 for his abuse of the Bounce Back Loan Scheme.

Ghimpu, from Croydon, obtained the maximum £50,000 Bounce Back Loan in October 2020 after he claimed his company’s turnover was £200,000 in his application. In fact, his company, Deea Construct Ltd, was only eligible for the minimum loan amount of £2,000. There was no activity at all for the year to October 2020 in the company’s bank accounts, and only around £4,000 in revenue in summer 2019 (which fell in the qualifying period for the loan application).

On receiving the loan funds, Ghimpu transferred more than £40,000 to his personal bank accounts and withdrew the remaining money in cash.

Just six months after acquiring the loan, the director placed Deea Construct Ltd into liquidation, which in turn led to an Insolvency Service investigation. The company’s liquidator, from Capital Books, was unable to recover the loan money. As a result, the Insolvency Service sought a compensation order, which was imposed on Ghimpu by Chief ICC Judge Briggs at High Court of Justice, Rolls Building on 25^th July 2023 (but only reported by the Insolvency Service on 1^st September 2023).

Ghimpu also received a thirteen-year director disqualification order.

Nina Cassar, Deputy Head of Investigations at the Insolvency Service, said: “Marian Ghimpu’s actions, providing false information to the bank, allowed Deea Construct Ltd, and himself, to have an unfair advantage over other businesses impacted by Covid-19. Abuse of taxpayers’ money will not be tolerated and I am delighted we have secured this compensation order. Where there have been similar cases of abuse by company director, we will be seeking further compensation orders and disqualifications.”

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)343 515 8686 or via our contact form.

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

 

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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 (BBLS).

The frequency of updates on the subject from the Insolvency Service certainly appears to have slowed, recently. (In fact, there were none at all in July.) However, the cases being reported now are interesting in that the errant company owners are being penalised with more than only director disqualification in more and more instances.

• Custodial sentence for Bounce Back Loan Scheme fraud
• Suspended sentence plus curfew
• Exaggerated turnovers

Custodial sentence for Bounce Back Loan Scheme fraud

35-year-old Aleksander Staskiewicz has been sentenced to eight months in prison for offences under the Fraud Act 2006 and the Companies Act 2006 related to the Bounce Back Loan Scheme (BBLS).

The Southampton-based plumber successfully applied for a Bounce Back Loan for his company Think Gas Ltd in May 2020, early in the Covid-19 pandemic.

The Polish national’s company was already facing financial challenges before the pandemic began, though. Staskiewicz “had considered closing it down.” This fact alone meant Think Gas Ltd should not have been eligible for the scheme.

As we have seen in so many other BBLS cases, the director inflated the company’s turnover when applying through the scheme and obtained a £20,000 loan.

Staskiewicz withdrew nearly all of the money a day after the loan reached the company’s bank account. And a day later, he completed a striking-off application to dissolve Think Gas Ltd.

Dissolving a company without informing creditors within seven days is a criminal offence. In this case, Staskiewicz did not inform the bank that provided him with the Bounce Back Loan.

Staskiewicz was sentenced at Southampton Crown Court on 17^th August 2023, having pleaded guilty at a hearing on 20^th July 2023 to fraud by misrepresentation contrary to sections 1 and 2 of the Fraud Act 2006 and failure to notify creditor of a strike off application contrary to section 1006 of the Companies Act 2006. He was handed an eight-month sentence for both offences, to be served concurrently.

Peter Fulham – Chief Investigator of the Criminal Investigation Team at the Insolvency Service, said: “Aleksander Staskiewicz thought he could abuse the rules to exploit a scheme, backed by taxpayers, specifically designed to help businesses get through the pandemic. He now has a criminal conviction as a consequence of his actions. We will not hesitate to prosecute such cases.”

In court, Staskiewicz said “he had hoped to repay the loan…within twelve months”, but the money was still outstanding after three years.

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Suspended sentence plus curfew

In another case involving the dissolution of a company after securing a Bounce Back Loan, Ivan Hristov Fratev was given a two-year suspended prison sentence, a four-month electronically tagged curfew from 19.00 to 7.00 each night, a six-year director disqualification and fifteen days rehabilitation activity requirement at Snaresbrook Crown Court.

The Bulgarian national ran a construction, security and extermination business, BI&F Ltd, in Chingford, London. Fratev obtained a £50,000 Bounce Back Loan (the maximum amount under the scheme) in May 2020.

Using powers granted in December 2021 to investigate directors of dissolved companies, the Insolvency Service found that Fratev moved to dissolve his company less than a fortnight after receiving the loan money. He did not inform the bank that provided the loan.

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Exaggerated turnovers

Two cases of exaggerated turnovers to secure Bounce Back Loans, now, that were uncovered due to the companies involved entering liquidation.

Ryan Moir, an Eastbourne-based builder, took out the maximum £50,000 Bounce Back Loan in May 2020 through his company Croxton Group Ltd.

In order to obtain the maximum loan amount, Moir claimed that the company’s turnover was £250,000 for the relevant period. Insolvency Service investigators found that Croxton Group Ltd’s actual turnover was under £21,000 – less than 10% of the figure Moir used in the loan application.

Moir’s company went into liquidation owing more than £184,000 in May 2022, including the majority of the loan (£49,400). Croxton Group Ltd’s liquidators, from FRP Advisory, “are taking action to recover the money.”

Separately, Bradley Malone also obtained a £50,000 loan through the Bounce Back Loan Scheme in June 2020. Malone recorded the turnover of his company – ONENETPRINT Ltd – as £200,000 (the amount needed to claim the maximum loan value).

The company’s actual turnover was around £90,000 – less than half that stated by Malone – the Insolvency Service found, once the company had gone into liquidation in February 2022 with the full loan amount still outstanding.

Both Malone and Moir have received ten-year director bans.

Interestingly, Malone claimed that all he had done through the Bounce Back Loan application process was “clicked ‘next’ on his phone, and the money arrived within the hour.” This perception by some directors of the Bounce Back Loan Scheme as providing easy money with few or no checks goes some way to explaining the issues being uncovered now, as companies are dissolved or enter insolvency.

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)343 515 8686 or via our contact form.

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

 

Download your copy

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 (BBLS).

While there were only two updates from the Insolvency Service on the subject in June, those updates covered £600,000 of Bounce Back Loans and thirteen companies.

Network of sham companies wound up

Eleven companies have been wound up after an Insolvency Service investigation uncovered “systematic fraud” to the tune of £500,000 through the Bounce Back Loan Scheme.

While the group of companies listed various registered office addresses across England, no evidence of trading premises nor trading could be found for any of the companies. Despite never having traded, the companies obtained Bounce Back Loans during the Covid-19 pandemic, with nine of the eleven claiming the maximum £50,000 loan and one company securing two loans.

Money was moved around the network of fake companies – which were also linked by their registered addresses, in some instances – before eventually “being transferred to entities registered in Hong Kong.” The investigation started after the Insolvency Service found links between these eleven companies and five other companies that were wound up in 2021 and 2022. The five companies in the earlier investigation fraudulently obtained £250,000 through the BBLS, as well as £350,000 through other schemes.

The companies were wound up in the High Court in Manchester with the Official Receiver appointed liquidator and now “working to trace the funds and those responsible, with a view to recovering the money.”

The eleven companies in question are:

• Laslett Industries Limited (company reg no 11690274).
• JP Capital Management Ltd (formerly called Hampton Brookers Limited) (company reg no 11690206).
• CMJA Limited (company reg no 11690056).
• JK Distributions Limited (company reg no 11667454).
• Kubrick Trade Ltd (company reg no 11386566).
• Lowe Brokers Limited (company reg no 11474219).
• Rubeum Auri Limited (company reg no 11886277).
• Share Apartment Limited (company reg no 12248395).
• Stella Management Limited (company reg no 11886188).
• Globexel Ltd (company reg no 12063877).
• JLS Enterprises Limited (company reg no 11830409).

Personal use of loan funds and exaggerated turnovers

George Pinnegar successfully applied for the maximum £50,000 Bounce Back Loan through his company London Sound Engineering Ltd in July 2020. In the application, he gave an estimated turnover of £250,000 for 2019, as the company began trading after 1^st January that year, making the company eligible for the maximum loan amount. However, investigators found that the company had not been trading on 1^st March 2020. Under the rules of the Bounce Back Loan Scheme, companies had to be trading on that date to be eligible for a loan.

Pinnegar “transferred almost £38,000 of the loan money to his personal bank account” and the other £12,000 “into the bank account of a connected company.”

London Sound Engineering Ltd was listed as a temp agency on Companies House, but traded as a sound engineering business. The company’s liquidator – Ian Yerrill of Yerrill Murphy LLP – “is currently working to recover the funds.”

Pinnegar has been disqualified as a company director for eleven years from 20^th June 2023.

Azmi Shafi Ahmed also obtained a £50,000 Bounce Back Loan in July 2020 through his company AZ Fiancials Ltd, a bookkeeper in Ludgate Hill, London. He claimed the company’s 2019 turnover was £200,000 (the amount needed to apply for the maximum loan through the scheme). However, investigators found that Ahmed had exaggerated that figure by more than five times the true turnover, which was “less than £40,000”.

Ahmed moved the entire £50,000 he secured through the scheme into his personal bank account just three days after his company received the money.

He has repaid £25,000 of the the loan and has agreed to repay the remaining £25,000.

Ahmed has been disqualified for six years from 13^th June 2023.

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)343 515 8686 or via our contact form.

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

 

Download your copy

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 (BBLS).

While there were no announcements from the Insolvency Service on the subject in May, there were two interesting stories related to Bounce Back Loans from other sources – one from the Traffic Commissioners for Great Britain and another from the BBC.

Group of companies now in insolvency received c. £2m in Bounce Back Loans

The BBC reports that JVIP Group – a group of companies in the property sector – obtained “more than 40 Bounce Back Loans, each of about £50,000.”

The businesses, based in Tunbridge Wells, Kent, have faced insolvency since the start of last year, with the companies now either in administration or liquidation.

On the face of it, there is nothing necessarily wrong with companies in the group receiving loans under the Bounce Back Loan Scheme, designed to help businesses through the Covid-19 pandemic. However, the BBC article suggests that some of the companies were unlikely to have met the turnover requirements to access the maximum £50,000 loans, therefore implying that figures were manipulated during the application process.

Additionally, the article questions whether the JVIP Group companies were in financial difficulty before the pandemic, which would have made them ineligible for the scheme. The article quotes “a former member of staff who…said alarm bells were ringing in January 2020, three months before the first lockdown.”

Investors in the JVIP Group are “facing losses of up to £30m collectively”. Group director Peter Dabner “denies any wrongdoing.”

With formal insolvency processes underway across many of the group’s companies, it is only a matter of time before the facts about JVIP Group’s use of the Bounce Back Loan Scheme is revealed.

Bounce Back Loan Scheme abuse cited in licence decision

Gregorys Transport Ltd’s application for a goods vehicles operator’s licence was refused at a public inquiry, in part due to the director Gregory Swartz’s misuse of the Bounce Back Loan Scheme in his previous company.

Investigators found that GMAKX Ltd had a Bounce Back Loan of £40-45,000 which remained outstanding when the company was sold earlier this year. “The company had not had the necessary turnover to have been eligible for that Bounce Back Loan in the first place.”

Swartz was seen as “disposing of the company” by the Traffic Commissioner for the West of England, Kevin Rooney, in order to “avoid insolvency proceedings” and “avoid significant liabilities” including the Bounce Back Loan. His attempt to set up again almost immediately, using a new company, was blocked with the reason given that the commissioner was not satisfied that Gregorys Transport Ltd “is of good repute”.

Perhaps the most interesting element of the case, as set before the public inquiry, is the company that purchased GMAKX Ltd in January 2023 – Atherton Corporate Limited – and the director who replaced Swartz after the sale – Neville Taylor.

There are, apparently, “hundreds of businesses which appear[…] to have the same Mr Taylor listed as director albeit with several different dates of birth and addresses.” And additional research led to the discovery of related “websites touting services to protect reputations from insolvency.” A quick web search returns a host of sites doing just that with anti-insolvency practitioner messaging, promises of quick wins and specific mentions of Covid-related loans.

The commissioner decided that “if the sale was not illegal, it was certainly unethical.”

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)343 515 8686 or via our contact form.

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

 

Download your copy