Category: News

After February’s relative lull in Bounce Back Loan-related announcements, March saw a return to form with five stories shared by the Insolvency Service.

As in previous months, we’ve put together a summary of those announcements:

• Company dissolutions after obtaining loans
• Abuse of multiple Covid support schemes
• False turnovers used to obtain loans.

Company dissolutions after obtaining loans

March 2023’s roundup starts with two directors who dissolved their companies soon after acquiring Bounce Back Loans, without notifying their creditors.

Simon Gorgin, from Kings Langley in Hertfordshire, obtained a £45,000 Bounce Back Loan in May 2021 through his company P3 Estates Ltd. He had applied to dissolve the company a month earlier, in April 2021. Gorgin did not inform the Bounce Back lender that he had applied to dissolve P3 Estates.

Despite the company having been incorporated in April 2010, investigators revealed that P3 Estates had never traded and was therefore not entitled to support through the Bounce Back Loan Scheme (BBLS).

Gorgin fabricated a 2019 turnover of £180,000 in order to acquire the loan. Furthermore, he transferred the full amount of the loan from P3 Estate’s business bank account to his personal bank account three days after receiving the funds.

Gorgin has received a twelve-year director disqualification.

Rukia Begum ran a takeaway in Oldham from September 2018. She obtained a £35,000 loan through the BBLS for her company New Polash Oldham Ltd in May 2020.

In July 2020, only two months later, Begum applied to dissolve the company and failed to tell her creditors about the application.

In addition, Begum had continued to trade in the three months before applying for the company’s dissolution – also an offence under the Companies Act 2006.

And, Insolvency Service investigators found that New Polash’s turnover had been inflated by Begum in her BBLS application. The director stated that the company’s turnover was £154,000 when it was, in fact, less than £44,000. As a result, Begum had been able to obtain a loan at more than three times the value New Polash was entitled to within the scheme.

Begum has been banned from holding directorships for ten years.

Peter Smith, Deputy Head of Dissolved Company Investigations at the Insolvency Service, said about the cases:

“Bounce Back Loans were designed to help businesses to survive the pandemic. Rukia Begum and Simon Gorgin abused the scheme and took taxpayers’ money at a time when many businesses were in genuine need.”

The money is yet to be recovered from either director.

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Abuse of multiple Covid support schemes

James Ireri successfully applied for the maximum £50,000 allowed under the Bounce Back Loan Scheme (BBLS) through his Surrey-based recruitment business Safi Care Ltd in May 2020.

A lack of company account keeping by Ireri meant that Insolvency Service “investigators were unable to determine whether Safi Care Ltd had ever been eligible to apply” for the loan based on the company’s turnover.

During the Covid pandemic, companies were able to apply for either a Bounce Back Loan or a Coronavirus Business Interruption Loan. Despite having secured a loan through the BBLS, Ireri applied for and obtained a £100,000 loan (from a different lender) through the Coronavirus Business Interruption Loan Scheme, three months after Safi Care was given its Bounce Back Loan.

Businesses were allowed to “obtain a second loan if the money was used to repay the first in full.” However, Safi Care went into liquidation a year later (in August 2021) owing around £231,000 including the full amount of both loans.

In the fifteen months between obtaining the first loan and Safi Care’s liquidation, nearly £500,000 was withdrawn from the company’s bank account, with over £80,000 used by Ireri “for personal spending” and nearly £94,000 transferred into his personal bank accounts.

Ireri has received a seven-year director disqualification.

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False turnovers used to obtain loans

Michael Higgins, from Sheffield, ran Steel Rigging Ltd – a company working on outside TV broadcasts providing driving services – from March 2015. Higgins obtained a £20,000 Bounce Back Loan in November 2020 by claiming his company’s turnover in 2019 was £80,000.

In fact, Steel Rigging’s 2019 turnover was around half the figure stated by Higgins. The company was therefore entitled to only half of the acquired loan (at most).

Steel Rigging went into liquidation just over a year later in December 2021, owing the full amount of the Bounce Back Loan.

Higgins has been banned for eight years.

Dean Miller, also from Sheffield, incorporated his company IBODYTALKS Ltd in April 2019.

Companies incorporated after 1^st January 2019 were told to use an estimated turnover in their Bounce Back Loan applications. Miller claimed that IBODYTALKS had been dormant until April 2020 when he applied for a £42,000 loan in May 2020. However, investigators found that the company has been trading since December 2019 and Miller had exaggerated the turnover estimation in comparison to money received by the company during its trading period.

In addition, “Miller transferred £41,000 to a connected company, and did not provide any evidence to show the money was used for the benefit of IBODYTALKS”, one month after receiving the £42,000 loan.

Miller has been disqualified for nine years.

Director disqualifications prevent individuals from directly or indirectly becoming involved in the promotion, formation or management of a company without the permission of the court.

Insolvency and debt investigations

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February has been unusually quiet for news and announcements related to the Bounce Back Loan Scheme (BBLS), compared to recent months (as we’ve been reporting).

The Insolvency Service published only two press releases on the topic, announcing the jailing of a BBLS fraudster on 15^th February and a director disqualification a couple of days before.

Bounce Back Loans were also mentioned in the latest issue of the Insolvency Service’s Dear Insolvency Practitioner (‘Dear IP’) released on 7^th February (although dated January 2023).

All three updates are covered below.

Prison sentence for Bounce Back Loan fraudster

Middlesex-based Kulwinder Singh Sidhu has been handed a twelve-month prison sentence for his abuse of the Bounce Back Loan Scheme in June 2020.

Sidhu obtained the maximum £50,000 loan under the scheme after applying on 9^th June 2020, through his haulage company Wavylane Ltd. Less than three weeks later, Sidhu filed to dissolve the business, “having transferred the funds to his personal bank account within two days of receipt.”

In dissolving Wavylane Ltd, based in Stanwell, Sidhu failed to notify the Bounce Back Loan lender – a criminal offence.

In October 2020, when the company was dissolved, the Insolvency Service discovered that Sidhu had exaggerated his company’s turnover in order to acquire the maximum loan amount, along with the transfer of the funds – first to Sidhu’s personal account and then “to his son and another company.”

Sidhu was sentenced to twelve months in prison on 13^th February at Guildford Crown Court, having pleaded guilty to charges under the Fraud Act 2006 and the Companies Act 2006 on 19^th December 2022.

About the case, Julie Barnes, Chief Investigator at the Insolvency Service said:

“Any other company directors who might be tempted into dissolving their business to try to keep public money they are not entitled to, should be aware they are risking a lengthy prison term.”

The fifty-eight-year-old also received a six-year director disqualification and a confiscation order for the full value of the loan, which he has paid in full.

Barnes added: “Our action has ensured repayment of the loan money and taxpayers have not been left out of pocket.”

Seventy-six-year-old given ten-year ban

Thomas Whyte also obtained a £50,000 Bounce Back Loan, stating that his company Fortress Restructuring Ltd had an annual turnover of £250,000.

Fortress Restructuring was liquidated and it was revealed that the company “had no trading address [and] had never traded”. In the year before Whyte made the loan application, “less than £1,000 had been received into” the business’s bank account.

Additionally, once Whyte was informed that the Secretary of State for Business had petitioned for the company to be wound up, “the balance on the company bank account reduced from £28,150 to a little over £1,590” in the space of twelve days, with payments made to Whyte among others.

The fact that Fortress had filed dormant accounts, and only £949 had passed through its bank account should have made it abundantly clear to Thomas Whyte that his company was not entitled to a £50,000 loan, yet he took it anyway and used the majority of that money for his own benefit.

The company’s liquidator – Bill Cleghorn of Aver Chartered Accountants – has recovered £37,500 of the £50,000 owed.

Rob Clarke, Chief Investigator at the Insolvency Service, said:

“The fact that Fortress had filed dormant accounts, and only £949 had passed through its bank account should have made it abundantly clear to Thomas Whyte that his company was not entitled to a £50,000 loan, yet he took it anyway and used the majority of that money for his own benefit.

“We thank the liquidator for their efforts which have seen £37,500 recovered, and repeat that we will not hesitate to take action against directors who have abused Covid-19 financial support in this manner.”

Whyte has been disqualified as a director for ten years, effective from today (28^th February 2023).

Update and guidance from the Insolvency Service

The Insolvency Service has published an update on Bounce Back Loans and advice to insolvency practitioners related to the reporting of BBLS misconduct in issue 157 of Dear IP (pdf).

Firstly, the Insolvency Service has started to share information about organisations that received loans and other support as part of Covid-19 schemes, with the expectation that this will “be useful in instances where this information has been difficult to obtain, or where it has been deliberately concealed from the office holder.”

Secondly, guidance has been issued to insolvency practitioners on reporting misconduct in relation to Covid-19 support schemes, with the Insolvency Service stating that “there needs to be clear evidence indicating that the corporate entity may have either made a false application, for instance inflated turnover figures for the purpose of a loan, or that the funds have not been used for a legitimate business purpose.”

The guidance continues: “When reporting suspected misconduct in respect of a Covid support scheme, office holders should do this using section 13 of the Director Conduct Report form (Finance Support Schemes) which has an option to include Covid support schemes.” This, essentially, further embeds Covid-19 support scheme misconduct as a standard part of the reporting process, as such suspected misconduct was previously reported under a more catch-all heading of ‘Other Investigations’ (section 12).

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.

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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).

January 2023 was another busy month for such news. Here’s a roundup of what was announced:

• Barclays actively looking to recover loan funds
• Company dissolutions
• Exaggerated turnovers
• Misuse of loan funds
• A charity case

Barclays actively looking to recover Bounce Back Loan funds

In early January, City A.M. reported that “Barclays is chasing down Covid-19 business loan cash“, backed by the litigation funder Manolete Partners.

Barclays paid out nearly £11bn in Bounce Back Loans, making it the biggest lender in the scheme. Despite the loans being government-backed, Barclays is now actively pursuing “more than 100 companies that have defaulted on” repayments.

While this is the first such programme from a major lender to hit the headlines, there are other similar projects underway elsewhere in the market. Steve Cooklin, Manolete’s chief executive, “told City A.M. that outside of the Barclays project…[Manolete] has worked on a series of projects to recover ‘misappropriated Bounce Back monies’ over the last 18 months.”

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Company dissolutions

A man, from London, and Antonia Parkes, from Conwy, have been handed suspended prison sentences for their abuse of the Bounce Back Loan Scheme (BBLS).

The man obtained a £50,000 loan for his company, Digital Business Box Ltd, by overstating the business’s turnover. Only two weeks later, he applied to dissolve the company.

In what was described as “an aggravating aspect”, he also tried to secure a £50,000 Bounce Back Loan for his other company, The Home Wills Ltd, despite it being established after the cut-off point for BBLS eligibility. His application was unsuccessful.

He pleaded guilty to four offences under the Companies Act and Fraud Act, and was sentenced to 20 months imprisonment, suspended for 18 months, as well as 300 hours of unpaid work.

In a separate case, Parkes was sentenced to six months in prison, suspended for 12 months, and 120 hours of unpaid work, for an offence under the Companies Act.

Parkes secured a £20,000 loan through the BBLS, “immediately before she applied to dissolve the company.”

When dissolving her company, Conwy Valley Lodge Ltd, Parkes did not notify the Bounce Back Loan lender, despite the notification of interested parties and creditors within seven days being a legal requirement.

In a similar case that has resulted in an eleven-year disqualification for the director, David McGuinness, from Birmingham, obtained a £50,000 loan for his company, MC-Dalt Scaffolding Services Ltd, by overstating the business’s turnover. McGuinness “stated the company’s turnover as nearly £300,000 when its accounts for 2019 showed turnover of less than £20,000.”

The use of the loan funds by McGuinness is questionable, with £15,000 transferred out of his business account the day after receiving the loan with the bank reference ‘Dave’, and “[a] further £35,000…transferred to various third-parties.”

McGuinness applied to dissolve MC-Dalt Scaffolding Services Ltd only two months after securing the Bounce Back Loan. He did not notify interested parties and creditors, including the lending bank.

Peter Smith, Deputy Head of Insolvent Investigations at the Insolvency Service, said: “David McGuinness clearly abused it by making false declarations to his company’s bank.”

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Exaggerated turnovers

Directors inflating their company’s turnover in order to secure more money through the Bounce Back Loan Scheme is a common theme of these monthly news roundups.

Mathius Thompson, from Birmingham, took out a Bounce Back Loan worth £50,000 through his company, West Midz Cars Ltd, in May 2020. In his application, Thompson stated that the business’s turnover for the relevant year (2019) was £287,500. In the Insolvency Service investigation which followed the used car salesroom company’s liquidation in August 2021, investigators found that the company’s actual turnover for the period was £2,500 – more than 100 times less than Thompson had claimed. Thompson has been banned from holding directorships for eleven years from 30^th January 2023.

Muhammad Arif, from Uxbridge in London, ran a clothing business for nearly ten years, trading as Ayesha Boutique. He applied for the maximum Bounce Back Loan amount of £50,000 in June 2020, based on a stated turnover of £219,000. In reality, his turnover was “around ten times less than he had claimed in the application.”

In addition, the Official Receiver has been “unable to verify the explanation [Arif] gave to account for…payments” made using the loan monies.

Arif applied for his own bankruptcy and was made bankrupt in December 2021 owing more than £50,000. He has been made the subject of bankruptcy restrictions lasting ten years for his abuse of the Bounce Back Loan Scheme.

Vasile Matcas, from Haverhill in Suffolk, also claimed the full £50,000 available under the scheme for his business, Matcas Ltd. Matcas stated a company turnover of £280,000. However, investigators found that Matcas Ltd’s actual turnover was under five times less than that, at only £49,200.

When Matcas Ltd went into liquidation in July 2021 – at that time trading as a carwash – it owed “the full amount of the loan”.

Matcas was disqualified as a director for ten years.

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Misuse of Bounce Back Loan funds

Under the terms of the Bounce Back Loan Scheme, loan funds had to be used for the economic benefit of the company.

Ioan Mociar made payments of nearly £40,000 from his business’s bank account during a three-week period in 2020, after securing a £41,000 Bounce Back Loan, “without any evidence to show that they were for the economic benefit of the company.” Additionally, Mociar’s business, Midi Construction Ltd, had claimed more money than it was entitled to under the scheme, as Mociar’s estimated turnover for the building company and the actual turnover at the end of the first year of trading (to the end of May 2020) were wildly different. Mociar has been disqualified for eleven years.

Moira Wood has been banned for eight years for her misuse of Bounce Back Loan funds obtained through her IT consultancy, Clockwork Compliance Services Ltd. Wood secured a £24,000 loan in September 2020, then “transferred £23,400 to herself between October 2020 and January 2022, just before the company folded, with no evidence that the money had been used for the benefit of Clockwork Compliance Services.”

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A charity case

And finally, Darren Baker has been banned from becoming a director for seven years, effective from 15^th December 2022 (first reported in January).

Baker secured £50,000 from the Bounce Back Loan Scheme – an initial loan of £45,000 and a £5,000 top-up – through his charity, The Leanne Baker Trust. Baker claimed the charity’s 2019 turnover was £200,000. In reality, it was around £26,000, meaning the charity was not eligible for funding under the scheme.

Baker then put around £38,000 of the loan to personal use, including “over £25,000 to pay off personal legal fees”.

“Despite the humanitarian purpose of the trust as established, Darren Baker took advantage of the support available during this difficult time for his own personal gain”, said Rob Clarke, Chief Investigator at the Insolvency Service.

On a rare positive note in these announcements, the charity’s liquidator “has subsequently recovered the full amount” of the Bounce Back Loan.

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).

December 2022 was another busy month for such news. Here’s a roundup of what was announced:

• A repeat offender
• False details from bankrupts
• Abuse through two companies
• Exaggerated turnover
• A lack of record-keeping
• A full house of BBLS offences
• Repaid in full

A repeat offender

A London letting agent who made four applications to the Bounce Back Loan Scheme has been handed an eleven-year director disqualification.

Laszlo Szabo obtained £100,000 from the scheme through three successful applications to two different banks. Szabo was only rejected during his fourth attempted application.

In October 2020, Szabo first applied for a £38,000 Bounce Back Loan for his Holloway Road-based Letting Base Ltd, and the loan was made available to the company almost immediately. Against the terms of the scheme, Szabo then applied for a second loan from a different bank, only five days after his first application. He obtained the maximum £50,000 loan available under the BBLS.

Ten days later, Szabo returned to the first bank and successfully requested a top-up of £12,000 to the initial loan (in itself allowable under the terms of the scheme, but taking his company’s borrowing further above the overall Bounce Back Loan limit).

With £100,000 banked so far, the next day, Szabo applied for another top-up – this time from the second bank and for the maximum £50,000 again. This was not permissible under the terms of the scheme and was rightly rejected by the lender, presumably because they could see that Letting Base Ltd had already been given a £50,000 loan from their own records.

The Insolvency Service started to investigate Letting Base Ltd in 2022, when the company went into liquidation “owing more than £243,000, including the full £100,000 of the Bounce Back Loan money”.

Deputy Head of Investigations at the Insolvency Service, Nina Cassar, said:

“Laszlo Szabo made false declarations to his company’s banks, and then entered liquidation having made no repayments towards its Bounce Back Loans, which resulted in a loss of £100,000 of public funds.

“His blatant and repeat abuse of taxpayer’s money has resulted in a lengthy disqualification, which will serve to safeguard the economy from traders who exploit financial support packages designed to help UK businesses.”

As is implied by Cassar’s statement, it is “unlikely” that the loans will be repaid.

Szabo’s ban began on 12^th December 2022 and last for eleven years.

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False details from bankrupts

Two cases now of bankrupts who have been made subject to additional bankruptcy restrictions due to their abuse of the Bounce Back Loan Scheme. While both cases were finalised earlier in 2022, they were first reported in December.

Nadia Butt, from Birmingham, obtained a £50,000 Bounce Back Loan by stating that her business had been trading on 1^st March 2020 and that “her anticipated turnover was £220,00” – neither of which were true.

Despite stating that she wished to “start an online consultancy”, Butt paid out the loan money to family members and a friend, with no evidence that the payments were for the benefit of the business.

She was made bankrupt in August 2021 and the Official Receiver discovered details of the loan when they were appointed as her trustee.

Butt is now subject to an eleven-year bankruptcy restrictions undertaking.

Dorota Suchocka, of Barnes in London, secured three Bounce Back Loans in October 2019 worth a total of £75,000. In the applications, “Suchocka used a fake employer and inflated her income as being four times higher than what she earned as a mini cab driver.” In fact, her average monthly income was lower than the combined monthly repayments across the three loans.

Suchocka was made bankrupt in October 2021 and has been subject to a ten-year bankruptcy restrictions undertaking since 30^th May 2022, following an investigation by the Official Receiver while appointed as her trustee.

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Abuse through two companies

Forty-three-year-old Shahzad Arshad, from Glasgow, ran two companies until January 2022, by which point both had entered liquidation.

Through Town Discount Ltd and Naz Accessories Ltd, Arshad successfully applied for £100,000’s worth of Bounce Back Loans – the maximum £50,000 for each company.

Insolvency Service investigators found that Town Discount Ltd was ineligible for the scheme, as it had not started trading until February 2020. Arshad stated that Naz Accessories Ltd’s turnover was more than twice the actual figure of £98,300, meaning the company was only eligible for up to £24,500 under the scheme and not the £50,000 secured by Arshad.

The director was banned for eleven years from 21^st November 2022.

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Exaggerated turnover

Savio Pereira, of Market Harborough, has been disqualified for eleven years for exaggerating his company’s turnover in a Bounce Back Loan application and seemingly using the loan funds for activity unrelated to the “economic support” of his business.

Pereira secured a £50,000 Bounce Back Loan for his company Himalayan Zest Takeaway Limited which traded in Lutterworth until November 2021 when it went into liquidation.

The director paid £10,000 of the loan to himself, withdrew £16,800 in cash and paid £28,000 to an unknown recipient.

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A lack of record-keeping

Sajid Valimohammed, of Leicester, has been disqualified for eight years for misconduct including abuse of the Bounce Back Loan Scheme.

Valimohammed’s company, J Dee Designs Ltd, went into liquidation in December 2020, triggering an Insolvency Service investigation. The investigation showed that the director failed to keep sufficient records, including company accounts. As a result, Valimohammed was unable to prove that withdrawals of around £315,300 from the company’s account – including 199 transfers totalling £286,000 to Valimohammed’s personal account – were transactions “for legitimate trading activity”.

£30,000 of this total came from a Bounce Back Loan. The director’s lack of record-keeping meant he was unable to show “whether the loan money had been used for the benefit of the company.”

Furthermore, investigators could not “verify whether J Dee Designs had paid the correct amount of tax it owed, or to ascertain the true financial position of the company when it went into liquidation, including whether liquidators would be able to make any recovery of debts.”

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A full house of BBLS offences

John McGarvey’s abuse of the Bounce Back Loan Scheme ticked so many of the boxes we see in different BBLS announcements, that we published a full article about his case when it was first reported on 8^th December 2022.

McGarvey obtained more than the maximum allowable total, across more than one loan, by overstating his company’s turnover and he then used the money “for personal gain”.

Read the full article.

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Repaid in full

And to end on some relatively good news – a £50,000 Bounce Back Loan which was falsely obtained by Alexander Cooper, from Glasgow, for his company Traprain Homes Ltd in June 2020 has been paid back in full “following recovery action by the company’s liquidator.”

Cooper stated the company’s turnover as £1,014,930 in his application, leading to him obtaining the maximum loan amount. However, Traprain Homes Ltd was insolvent at the time of the application, having lost more than £113,000 in the preceding period. The company had stopped trading some four months before Cooper applied for the Bounce Back Loan.

The director paid himself the full amount of the loan he acquired for Traprain Homes Ltd – the majority of it after moving it between the company’s various bank accounts.

Cooper was banned for ten years from 14^th November 2022.

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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The sole director of a surveyor’s firm, CKO Civil Engineering and Surveying Limited (CKO), has been disqualified for eleven years for his abuse of the Bounce Back Loan Scheme (BBLS).

John McGarvey, from Rutherglen (a town on the outskirts of the centre of Glasgow), falsely claimed two Bounce Back Loans worth a total of £100,000 and used the money “for personal gain.”

In addition to claiming two loans each at the maximum amount allowed under the scheme (companies were limited to one £50,000 loan or multiple loans totalling no more than £50,000) and using the funds for his own use (instead of “for the economic benefit of the business”), McGarvey also exaggerated his company’s turnover in order to obtain the loans.

The BBLS allowed companies to apply for loans of up to a quarter of their 2019 turnover to a maximum of £50k. McGarvey’s applications through CKO stated the company’s 2019 turnover as £225,000 (in a July 2020 application) and £218,000 (in an application the following month). In reality, CKO’s “most recent accounts showed a turnover of only around £46,400.” Therefore, CKO was given loans worth more than eight times the amount it was eligible for.

CKO, based in Kirkinitlloch (also near Glasgow), entered a creditors voluntary liquidation (CVL) owing around £183,000 in November 2021. The liquidation process triggered an Insolvency Service investigation, which revealed the Bounce Back Loan Scheme abuse.

McGarvey’s disqualification started on 28^th October 2022 – the details of the case have only been announced by the Insolvency Service today (8^th December 2022) – and lasts for eleven years.

Of the case, Steven McGinty, Insolvency Service Investigation Manager, said:

“Not only did John McGarvey grossly exaggerate the company’s turnover to secure an initial loan, he also applied to a second bank for another loan his company wasn’t entitled to. To compound his actions, he used the money for his personal gain.

“His eleven-year ban should serve as a warning that if you abuse government support, we will use our full powers to bring you to account.”

McGarvey’s case was settled through a disqualification undertaking, which was accepted by the Secretary of State. Disqualification undertakings are the administrative equivalent of a disqualification order but do not involve court proceedings.

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

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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).

November was a particularly busy month for such news, with ten separate announcements detailing a total of 137 years of director disqualifications and bankruptcy restrictions published.

Here’s a roundup of what was announced.

• The consequences of being uncooperative
• Restrictions on top of restrictions
• More overstated turnovers
• Non-business use
• No eligibility

The consequences of being uncooperative

Beginning our November roundup is the most stringent punishment announced this month.

A thirty-four-year-old man from Middlesbrough has been handed a prison sentence of fifteen months, suspended for eighteen months, for his abuse of the Bounce Back Loan Scheme.

Ben Hamilton successfully applied for a Bounce Back Loan (BBL) in May 2020 for his business, Netelco Ltd. Once the loan funds had been paid into Netelco’s bank account on 14^th May 2020, the following day, Hamilton filed to dissolve the company.

The company dissolution process dictates that creditors must be notified of the application within seven days. Hamilton failed to notify the institution that provided Netelco with the BBL – a criminal offence.

Initially, Hamilton refused to cooperate with the Insolvency Service investigation team, including non-attendance at an interview with the investigators. It took a restraining order on Hamilton’s bank accounts (under the Proceeds of Crime Act) to convince him to engage in the process, at which point he repaid the loan in full.

Julie Barnes, Chief Investigator at the Insolvency Service said: “This was a clear case of attempted fraud by a company director who thought he could abuse the Covid-19 financial support schemes and get away with it.”

Hamilton was sentenced at Teeside Crown Court on 15^th November 2022 and ordered to pay costs of £2,500 in addition to the suspended sentence, having pleaded guilty to charges on 14^th October at Teeside Magistrates’ Court.

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Restrictions on top of restrictions

Simon King, from Plymouth, was already subject to a five-year bankruptcy restriction for Bounce Back Loan abuse when he was handed a ten-year director disqualification effective from 7^th November 2022 for further abuse of the scheme.

King’s bankruptcy restrictions relate to his false claim of a £50,000 BBL as a sole trader under the name Blackfriars Contracts Division – a loan he wasn’t entitled to.

An investigation has since found that King obtained two additional loans under the BBLS totalling £80,000, which is more than the £50,000 maximum allowed by the scheme.

King ran Blackfriars Contract Ltd, a printers in Plymouth, until December 2020 when the company went into liquidation with debts of over £230,000 including the full Bounce Back Loan amounts.

Mohammed Subhan ran a restaurant in Dudley through his company Zara Spice Limited, as well as a catering business called Thania Spice. He applied for his own bankruptcy in March 2022, with the Official Receiver appointed as his Trustee.

The Official Receiver found that Subhan had obtained £70,000 under the BBLS through his self-employment business, Thania Spice. Subhan exaggerated his turnover when applying for the loans. He was able to acquire a £50,000 loan, initially, by stating a turnover of £200,000. In reality, his turnover for the relevant period “was closer to £3,000 to £4,000” – fifty times less than he claimed.

Subhan went on to successfully apply for two more loans. He “withdrew more than half the funds in cash” and spent thousands on expenses which weren’t for the benefit of his business.

As a result of the findings, Subhan has been given an additional eleven years of bankruptcy restrictions.

“He posed a significant risk to creditors and eleven years of restrictions will severely curtail Mohammed Subhan’s ability to abuse his future lenders”, said Karen Fox, Deputy Official Receiver.

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More overstated turnovers

Directors overstating their company’s turnover for 2019 (the relevant period for the BBLS application) is a common theme in many of the cases reported by the Insolvency Service.

Anthony Killarney, from Brentwood, successfully applied for a £50,000 loan by stating his company’s turnover was £600,000. However, the turnover for K11 Developments Ltd – Killarney’s property development company – was actually £0 for 2019 and for the two previous years. The company went into liquidation at the end of 2021, owning nearly £400,000. Killarney has been disqualified as a director for eleven years.

Shafiqur Rahman claimed a £25,000 loan for his sports coaching business in Manchester – “more than eleven times the money to which the business was entitled”. Rahman also spent £20,000 of the loan, paid to his company Aspire Sports Coaching & Partners Ltd, “without being able to prove it had been used to support the company.” He has received an eleven-year ban.

Nija Bite Limited director Malcolm Forbes obtained the maximum £50,000 BBL by claiming a turnover of £225,000. However, the takeaway and mobile food stand business’s actual turnover “was closer to £24,000”, which would have made Forbes’ company eligible for a £6,000 loan. Forbes has been given a ten-year director ban.

Similarly, Avin Habash falsely stated the turnover of his takeaway business, Hot Spot Liverpool Limited, was £200,000 – around double the actual figure – when applying for a £50,000 BBL. Habash has been banned for ten years, as well.

Michael Hansen claimed a £160,000 turnover for his company, MH Property & Engineering Services Limited, when it was, in fact, £8,294. Hansen obtained a £40,000 loan under the BBLS, rather than the £2,000 (approx.) loan his company was entitled to. Further compounding the situation, Hansen transferred £24,600 of the loan monies to himself over a ten-month period and “was unable to show investigators that the money had been used for the economic benefit of the company.” He, too, has received a ten-year director disqualification.

Jason Meads obtained £37,500 from two Bounce Back Loans by falsely claiming the turnover of his business, Hodl Clothing Limited, was £150,000. In reality, the company’s 2019 turnover was nil. He has been banned for ten years.

Another takeaway owner, Muhammad Rais from Leicester, stated his company’s turnover was £200,000, entitling him to the full £50,000 BBL. However, Lokma BBQ Ltd’s actual turnover was approximately £74,000, meaning Rais received more than twice the amount he should have from the scheme. “Rais has agreed with the liquidator to re-pay £8,000 of the money owed through monthly installments.” He has been disqualified for nine years.

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Non-business use

Another term of the Bounce Back Loan Scheme was that funds must be used only for the economic benefit of the company obtaining the loan.

Kamil Ozkan ran Martinos Italian Kitchen in Peterlee through the company Papa Peterlee Limited. Ozkan legally obtained a £50,000 Bounce Back Loan, but transferred around £37,500 of the loan monies to his personal account. As a result, Ozkan has received a six-year director disqualification.

Lee Mankelow, from Nottinghamshire, also claimed a £50,000 loan, which his company, Wolf Timber Ltd, was eligible for. However, Mankelow transferred all of the £50,000 to a former director of the business, the day after receiving the loan funds. He, too, has been banned for six years.

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No eligibility

Some directors applied for Bounce Back Loans for businesses that were not even trading at the time of the Covid-19 pandemic.

Thirty-one-year-old Lavinia-Larisa Mociar obtained a £50,000 loan for L&M Construct Ltd, based in Harrow, London. Her company had ceased trading a year before she applied for the BBL.

In addition, Mociar overstated the company’s 2019 turnover and withdrew the loan funds as cash – both against the terms of the scheme. She has been disqualified for eleven years.

David Okot has also been banned for eleven years, after he applied for a £50,000 loan for B&S News Ltd which traded as B&S Newsagents in Lewisham, London, but closed down in January 2020 – six months before Okot applied to the BBLS.

And finally, Selvendran Ramar, from Southampton, obtained a £45,000 Bounce Back Loan in July 2020. He stated the turnover of his business, SJSA Ltd, was £180,000 a year. To be eligible for the scheme, businesses had to have been trading on 1^st March 2020. SJSA Ltd was not incorporated until 30^th March 2020. And, by the time of Ramar’s application, the company had made only £5,500 in three months.

Further breaking the terms of the scheme, Ramar then transferred £35,000 of the loan to his personal account and the remaining amount to a family member.

Ramar has been disqualified as a director for eleven years, and the Liquidator – Begbies Traynor Group – has so far recovered £25,000 of the loan.

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).

October was another busy month for such news. Here’s a roundup of what was announced.

• Bounce Back Loan eligibility questions and unexplained transactions
• Overstated turnover
• Twelve-year ban for director who bought house with loan funds
• Company wound up for Bounce Back Loan Scheme abuse
• Insolvency and debt investigations

Bounce Back Loan eligibility questions and unexplained transactions

Our first story actually broke on the last day of September.

Southampton-based director, Marian Daniel Clipici, has been banned from running companies for seven years for “failing to keep adequate accounts while his business was trading.”

The Romanian national appears to have been involved in a number of companies including a food shop and a construction business, Dahlial Limited. Dahlial Limited traded from November 2017 to September 2021, before going into liquidation, which led to an Insolvency Service investigation after the liquidator “identified a number of concerns”.

At the point where the company entered insolvency proceedings, Dahlial Limited owed £60,396, including more than £7,000 in unpaid tax and £40,000 against a Bounce Back Loan (BBL). Clipici’s lack of record keeping meant he was unable to prove that the company was eligible for the loan, nor could he explain satisfactorily that the loan funds were used to benefit the business. Clipici withdrew £30,000 from his business’s bank account in the four months following the Bounce Back Loan payment in May 2020, with no evidence that the money was used to pay “subcontractors and business expenses”, as he claimed.

As well as the BBL irregularities, “Clipici was unable to account for more than £530,000 paid into the business bank account” over a two-year period and for a similar amount of outgoings.

Lawrence Zussman, Deputy Head of Insolvent Investigation at the Insolvency Service, said: “Maintaining adequate company accounting records is a statutory requirement for all directors, and is vital to ensure company transactions are legitimate.”

In a similar case, Abul Kalam, from Birmingham, has been disqualified as a director for seven years, as he was unable to explain his Pembroke restaurant’s income and expenditure totalling more than £400,000.

The bank account for his company, Choose Chilli Ltd, showed income of £178,000 and outgoings of £241,000 between December 2019 and July 2021. Kalam was unable to produce “adequate invoices or records to verify the amounts”, with the large sums of money appearing particularly suspicious as the period included Covid restrictions and lockdowns which would have impacted his restaurant, Mehfil’s.

In addition to the £178,000 mentioned, Kalam successfully applied for a £25,000 Bounce Back Loan in 2020 and a £10,000 top-up in March 2021. The forty-eight-year-old was unable to demonstrate that the loan funds had been used to benefit his business. The loans were part of around £70,000 the company owed when it went into voluntary liquidation in July 2021.

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Overstated turnover

Businesses were able to borrow up to a quarter of their 2019 turnover (capped at £50,000) under the Bounce Back Loan Scheme.

Monica Coyle, from Kilmarnock, ran a health and wellbeing company – Positive Pulse Limited – during the Covid pandemic, offering “health checks to employees of businesses.” She received a £30,000 Bounce Back Loan after falsely declaring the company’s turnover as £130,000 in her application – a 2,500% increase on the true figure of £5,000.

Additionally, more than £26,000 of the loan was spent “on personal use.”

As a result, Coyle has received a ten-year ban from holding company directorships.

Insolvency Service Investigation Manager Steven McGinty said that Coyle “exploited the [Bounce Back Loan] scheme and took taxpayers’ money during the pandemic which she knew she was not entitled to.”

Similarly, Vicki Holland and Darren Trutt, from Harlow in Essex, have been disqualified for nine years and seven years respectively for overstating the turnover of their business, Crepe Heaven Ltd, when applying for a £20,000 Bounce Back Loan.

Holland claimed that the company’s turnover in 2019 was £100,000 – more than seven times the actual amount of £13,000.

As co-director, Trutt has been banned “for his part in allowing Crepe Heaven to overstate its turnover on the BBL application.”

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Twelve-year ban for director who bought house with loan funds

The longest ban on this month’s list is reserved for a property director who obtained three Bounce Back Loans and used the funds to purchase a house, which he then sold on, pocketing the cash from its sale. Brendan Gaughan has received a director disqualification of twelve years, as a result.

Gaughan was director of Gaughan Group Ltd, Gaughan Property Ltd and Rentl Property Ltd, all incorporated in February 2020. The companies did not start trading until April 2020, meaning they were ineligible to receive funds under the BBLS, which required companies to have been trading on 1^st March 2020.

Despite that, Gaughan was able to take out Bounce Back Loans for each of his three companies. The three loans totalled £135,000.

The Glaswegian moved all the funds into one account and bought a property worth around £160,000 with the money. Less than a year later, in March 2021, he sold the same property for around £140,000, and transferred to his personal account £100,000 of the proceeds.

Steven McGinty, Investigation Manager at the Insolvency Service said: “Bounce Back Loans were made available for trading companies adversely affected by the pandemic. Brendan Gaughan should have known his companies weren’t entitled to the loans, yet he took them anyway and used the funds for personal gain.”

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Company wound up for Bounce Back Loan Scheme abuse

Finally this month, Keysholders Ltd has been wound up by the High Court for abuse of Covid-19 support schemes including Bounce Back Loans.

Applications were made on behalf of the company – not always successfully – to the Job Retention Scheme and the Coronavirus Business Interruption Loan Scheme, as well as the BBLS.

The company did obtain a Bounce Back Loan of £40,000 in May 2020, having stated its 2019 turnover was more than three times the actual amount (£200,000 instead of £65,000). The firm had been dormant since March 2019, too, therefore it was ineligible for the scheme in the first place.

By August 2020, Keysholders’ 2019 turnover was further inflated to £550,000 (more than eight times the true figure) in the next – unsuccessful – application, this time to the Coronavirus Business Interruption Loan Scheme for £250,000.

A few months later, the company obtained a grant of £20,000 through the Job Retention (‘furlough’) Scheme. Employment contracts show that the staff member this grant related to was employed after the date that would have made them eligible for the scheme, however.

The sole director when Keysholders Ltd was wound up in June 2022 (the case has only now been publicly reported by the Insolvency Service) was Olayinka Adediran.

The Official Receiver has been appointed Liquidator of the company.

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