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.

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

Five cases end in bankruptcy restrictions

On 5^th 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 25^th 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 4^th 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)343 515 8686 or via our contact form.

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

 

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An unemployed man from Leamington Spa has been given ten-year bankruptcy restrictions for securing a £50,000 Bounce Back Loan for his business that had never traded.

Zahoor Ahmed Chaudry applied for the loan in June 2020, despite his company being ineligible under the scheme. Moreover, in his application, he fabricated a £200,000 turnover, so he could be given the maximum loan available (£50,000).

Chaudry, 49, filed for bankruptcy in December last year, leading the Insolvency Service to investigate his financial conduct. He initially claimed “that his recently deceased wife had taken control of his bank account and spent the money without his knowledge.”

Investigators found that Chaudry used £40,000 of the loan to pay a law firm, for which he then “provided a glowing review on their website”. Chaudry also denied posting the review.

Kevin Read, Official Receiver at the Insolvency Service, said: “those like Zahoor Chaudhry who have cynically abused the scheme should expect to be caught and punished.”

A ten-year bankruptcy restrictions undertaking from Chaudry was accepted by the Secretary of State for Business, Energy and Industrial Strategy, effective from 20^th June 2022.

Bankruptcy restrictions undertakings have the same effects as orders, but are settled outside of court. The restrictions include needing to disclose your status when applying for £500 or more of credit and a ban from holding company directorships without the court’s permission.

On a positive note, the Official Receiver expects to recover some or all of the money, having instructed lawyers on the matter.

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.

Rupinder Kaur Thaker has been disqualified from running companies for seven years, following an investigation by the Insolvency Service.

Thaker was the sole director of TKML Limited when it entered into creditors’ voluntary liquidation (CVL) last year, triggering the investigation.

TKML Limited was given a £45,000 loan under the Bounce Back Loan Scheme during the coronavirus pandemic, which appears to have been abused by Thaker. The loan amount was likely more than her business was eligible for, funds were transferred to her personal account and withdrawn as cash, and there is little evidence that the loan was used to support her business.

The Bounce Back Loan abuse is the headline element, as far as the Insolvency Service is concerned, as they continue their push to address the misuse of pandemic-related support schemes. However, there was much more at play in this particular case.

“More than £250,000 paid out of the company bank account remains unexplained”, as the Essex resident “had failed to preserve and/or maintain adequate accounting records or failed to deliver them to the liquidator.” And it is this lack of record-keeping that was cited in Thaker’s disqualification undertaking, effective from 2^nd August 2022 for seven years.

Additionally, there were “several inconsistencies” in Thaker’s filings for TKML Limited. The nature of business for the company was listed as ‘take-away food shops and mobile food stands’ at formation, but TKML Limited appears to have operated as a catering and décor supplier for weddings, while Thaker’s occupation is listed as a ‘publicist’. Perhaps an early indicator of the poor record-keeping that would follow before TKML Limited’s CVL.

About the investigation, Lawrence Zussman, Deputy Head of Insolvent Investigations, said: “Despite repeated requests for books and records, Rupinder Thaker failed to provide the liquidator [from Turpin Barker Armstrong] with any evidence that could have helped explain the legitimacy of the company’s financial affairs. Especially the £45,000 bounce back loan intended to support viable businesses during the pandemic.”

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.

The sole director of Al-Amir Ltd, a grocer and butcher in northwest London, has received a ten-year disqualification from running companies after abusing the Bounce Back Loan Scheme during the Covid-19 pandemic.

Abbas Abo Kifayah used the majority of a £50,000 loan as personal income, rather than on his company, with £43,200 transferred into his personal bank account. The loan was secured under false pretences, too, as Kifayah inflated turnover figures in his application.

Wembley-based Al-Amir Ltd went into creditors voluntary liquidation (CVL) in July last year, with Zain Iqbal of Cooper Young appointed as the company’s liquidator. The CVL triggered an investigation by the Insolvency Service which uncovered Kifayah’s abuse of the loan scheme.

Lawrence Zussman, Deputy Head of Insolvent Investigations, described how Kifayah “abused the government’s support when he inflated his company’s turnover in order to receive the maximum loan before squandering the money rather than use it to benefit his business.” He also cautioned: “Ten years is a significant amount of time to be removed from the corporate arena and Abbas Kifayah’s disqualification should serve as a clear warning that we will take decisive action to protect the public and the taxpayer.”

In addition to the large sum transferred by Kifayah to his personal account, he withdrew £2,250 of the loan in cash and sent around £3,000 “to a third party”. The 37 year old told investigators he used the loan “to pay his salary[,]…his backdated salary and [for] personal use.” The Insolvency Service said that “investigators could not find any evidence that any of the money was used for the benefit of the company.”

Kifayah’s disqualification undertaking was accepted on 30^th June 2022. It is effective from today (21^st July 2022) for ten years, and stops Kifayah “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

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

 

The Insolvency Service has announced the latest punishments handed out to two directors who abused Covid-19 financial support.

These are two in a string of recent announcements (see News from 27^th June, 23^rd June, 22^nd June, 20^th June and 7^th June), with official data from the Insolvency Service further illustrating the extent of their work in this area over recent weeks and months.

Of the 99 director disqualification outcomes published in Q1 of the 2022/23 financial year, nearly 40% of them mention Covid-19 support schemes. The most cited pandemic-related conduct being abuse of the Bounce Back Loan Scheme (in 37 disqualification outcome summaries).

And the Bounce Back Loan Scheme (BBLS) was at the heart of Grigorijs Hacaturjancs’ ten-year disqualification announced at the end of last week. The director of online retailer Beauty&Melody Shop Ltd (not connected to a chain of salons in London with the same name) applied for, and obtained, a £50,000 loan from the BBLS in May 2020. Three issues with this application have since been highlighted:

1. The company was ineligible for the scheme as an online-only retailer, i.e. a business that wasn’t directly affected by coronavirus-related restrictions.
2. Beauty&Melody Shop Ltd had ceased trading more than a year before the application was made.
3. Hacaturjancs “inflated the company’s turnover on the BBL application in order to secure the maximum £50,000 available through the scheme.”

Furthermore, the company then made “a payment of nearly £50,000” to a Slovakian business, two weeks after receiving the loan monies. While Hacaturjancs described this as a payment to a supplier, there was no evidence that the two companies had ever done business together before, and Beauty&Melody “received no goods or services in return for the payment.”

The other case reported by the Insolvency Service on 1^st July also involved an £18,000 loan from the BBLS, as well as a £25,000 local council grant. Rathudi Mahesh Manglanand is now subject to a nine-year bankruptcy restrictions undertaking, after admitting he spent most of the funding on alcohol and gambling.

The sole trader, from Pontypridd, ran a restaurant in Cardiff, which ceased trading before the Covid-19 pandemic. This didn’t stop Manglanand from successfully applying for a £25,000 grant in April 2020 and an £18,000 loan a month later.

Manglanand told Insolvency Service investigators that “he had lost around £30,000 through gambling in the space of a year.”

The restrictions placed upon him came into effect on 20^th June 2022. Hacaturjancs’ disqualification is effective from 12^th July 2022.

In both cases, the individuals had voluntarily entered into insolvency proceedings – Hacaturjancs placed his company into voluntary liquidation in July 2021; Manglanand applied for his own bankruptcy in the same month – which triggered investigations by the Insolvency Service. The current assessment by the liquidator is “that Hacaturjancs has no personal assets”, while “the Official Receiver is assessing assets available” in Manglanand’s case.

These announcements at the beginning of July suggest that the pace of the response to Covid support scheme abuse we saw in Q1 will continue in the second quarter.

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

 

The owner and sole director of a pizza takeaway in Manchester has been sentenced to two years in prison for fraudulently obtaining a Bounce Back Loan during the Covid-19 pandemic.

Abdulrazag Zagroba applied for a £20,000 loan under the Covid support scheme in June 2020, two weeks after applying to dissolve his company Amigo Pizza (Manchester) Ltd.

In applying for the Bounce Back Loan, Zagroba “signed the loan declaration stating the company would be able to make repayments” and he failed to tell the lender that he had started the dissolution process.

Zagroba, 54, told investigators from the Insolvency Service that he had “no intention of using the Bounce Back Loan for the business.”

Amigo Pizza (Manchester) Ltd ran a pizza takeaway in Stretford, Manchester from January 2020 until October 2020, when the business was dissolved. The loan taken out by Zagroba became due for repayments in June 2021, when the company was no longer active.

Rather than use the funding for his takeaway business, Zagroba sent £14,000 in cash to family living abroad, with friends apparently transporting the money. He also bought and insured a car.

“Covid loans were designed to support viable businesses during the pandemic. Abdulrazag Zagroba, however, cynically sought to exploit the covid loan scheme and by dissolving his company, he intended to frustrate any attempt by the lender from taking action to recover the outstanding loan.”

Julie Barnes, Chief Investigator at the Insolvency Service

Zagroba’s sentencing on 24^th June 2022 at Manchester Crown Court signalled the first successful criminal prosecution for a Bounce Back Loan fraud.

He pleaded guilty to the charges of fraud by false representation under Section 2 of the Fraud Act 2006 – which carries the 24-month prison sentence – and an aggravated striking off offence under the Companies Act 2006 (20 months’ imprisonment, to run concurrently).

As well as a two-year imprisonment, the Manchester resident has received a ban from holding company directorships for seven years.

The Insolvency Service’s Julie Barnes went on to caution that “this sentence should serve as a warning to others who engaged in this behaviour, and they should come clean and repay the money before it is too late.”

Fraud investigations by ESA Risk

If you suspect that a fraud has occurred within your business and need advice or support on the next steps, we’re here to help.

Contact Mike Wright, Risk Management & Investigations Consultant, at mike.wright@esarisk.com, on +44 (0)343 515 8686 or via our contact form, to find out more.