Tag: Insolvency

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:

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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:

 

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).

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

 

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:

 

Download your copy

 

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.