Hillgrove tax fraud trial: The verdict

Richard Hillgrove, a PR adviser who has formerly worked for Dragons’ Den entrepreneur James Caan and other celebrities, has been found guilty on two counts of cheating the public Revenue.

In just over two hours the jury came to a unanimous verdict that he had dishonestly failed to make returns for VAT and PAYE to HMRC for his limited company Hillgrove Public Relations Limited.

Hillgrove remains on bail and will be sentenced at Bristol Crown Court in the next three to four weeks pending a report from the Probation Service.

Hillgrove case timeline

March 2010

● RJH Management LLP incorporated.

Nov 2010

● As PAYE debts accumulate Hillgrove seeks advice from management accountant Geoff O’Sullivan and dispenses with services of bookkeeper Howell Cook. He approaches Bishop Jones to help him out.

Jan 2011

● Time to pay arrangement agreed with HMRC on 20 January to pay back £52,000 in outstanding tax by 1 Sept 2011

● Bishop Jones accountant Louise Dale incorporates Hillgrove Public Relations Ltd, with Richard and Lois Hillgrove named as directors.

March 2011

● Hillgrove PR Ltd registers for VAT

July 2011

● Bishop Jones prepares a VAT return showing a liability of £24,000. Hillgrove tells Dale: “Hold fire with the submission”

Jan 2012

● Hillgrove ends his relationship with accountants Bishop Jones.

● The following day Michelle Jones files suspicious activity report with Serious Organised Crime Agency.

March 2012

● HMRC officials investigating Hillgrove find a copy of the Bishop Jones SAR on SOCA’s database.

June 2012

● HMRC arrests Richard and Lois Hillgrove in a dawn raid at their home in Somerset

July 2013

● Initial trial at Bristol aborted

March 2014

● Hillgrove convicted at second trial.

HMRC decided to bring criminal charges against Mr Hillgrove in 2012 when his company Hillgrove PR failed to pay £43,000 owed in PAYE and outstanding VAT of £52,000. At the same time, he also owed back taxes from a previous firm, RJH Management, that he operated as a limited liability partnership with his wife Lois.

The prosecution highlighted the celebrity PR’s extravagant spending on flowers, hotels, luxury goods and private school fees while the money he owed to HMRC went unpaid.

“Failure to pay debts is dishonest,” said prosecution QC Joss Ticehurst in his summing up earlier in the week. Hillgrove admitted in court that his spending was out of control, but said it was necessary to sustain a lifestyle that put him on an equal footing to his celebrity clients and contacts.

Dragons’ Den entrepreneur James Caan and Sting were mentioned in the course of his three-week trial, as was Hillgrove's spending on sex toys for a racy book launch.

Hillgrove also argued that he was singled out by HMRC because of his high profile and accused HMRC inspector Paul Harding of colluding with Hillgrove’s accountant Michelle Bishop, in submitting a suspicious activity report to the Serious Organised Crime Agency, which at the time was responsible for investigating money-laundering offenses.

Exclusive AccountingWEB case analysis

AccountingWEB has been following this case for nearly two years since Richard Hillgrove and his wife Lois were arrested in a dawn raid in June 2012. [All charges against Lois were dropped.]

While Hillgrove attracted attention with his celebrity connections and PR-driven defence strategy, his case is a cautionary tale for accountants about the risks they run when acting for headstrong, ethically dubious characters.

Five different accountants acted for Hillgrove during 2010-12 and four individual advisers were called as witnesses during the trial.

Michelle Bishop’s Wells-based firm Bishop Jones took on Hillgrove as a client in 2010 and helped him negotiate a six-month “time to pay” repayment schedule with HMRC for RJH Management LLP’s outstanding £52,000 tax debt in January 2011.

But as the September 2011 repayment deadline neared Bishop Jones incorporated a new limited company for him, Hillgrove Public Relations. Under HMRC regulations, however, the existing tax debts could not be switched to the new organisation. [Editor's note: the actual date of incorporation was January 2011 - see Clarification below]

When Hillgrove switched to a new accountant in January 2012 - partly on the advice of James Caan, he told the court - Bishop filed the suspicious activity report (SAR) the following day with the Serious Organised Crime Agency in her capacity as money laundering reporting officer for Bishop Jones.

The SAR  mentioned yet another company called Land of the Long White Cloud, that Bishop said was originally set up as a phoneix company. Due to ties with Downing Street, this was not actioned…" she wrote.

“In view of the excessive tax liability of RJH Management LLP,” the accountant voiced concern in her report that Harding used the transfer of his business to Hillgrove PR “to disguise the true level of tax liability.”

The existence of this document led to his criminal prosecution. For all his efforts to spin the facts of his case in his favour, Hillgrove was unable to convince the jury that HMRC had influenced the contents of this document.

This is one of the first occasions we have seen the mechanics of the money laundering regulations at work. Under the rules, accountants are required by law to report any suspicions the encounter in the course of their work that someone may have access to illicit gains. The money laundering regulations put accountants in the unenviable position of having to inform on their clients to the authorities. And in rare instances such as this, they may find themselves in the spotlight, with their integrity and professionalism called into question.

CLARIFICATION regarding Bishop Jones Accountants [added 3/7/14]

Whilst AccountingWEB has detailed above the claims made by Mr Hillgrove at court, it has been requested that in respect of fairness and accuracy the following point referred to in the court should be added to the report:

Hillgrove Public Relations Limited was in fact incorporated in January 2011.  No company referred to in these court proceedings was incorporated in September 2011.  The suggestion that the aforementioned company was incorporated as the repayment deadline neared in September 2011 is incorrect.  AccountingWEB apologises for this inaccuracy.

 

Richard Hillgrove could appeal the verdict, so if you do comment below, please avoid discussing his guilt and stick to the professional issues involved.

Comments

.    1 thanks

ireallyshouldkn... | | Permalink

Very glad to see HMRC pursuing these sorts of cases. 

It is interesting to note all the accountants he had gotten through in quick succession got called up to the trial. 

Need more of this    2 thanks

secondhand_22 | | Permalink

Need more prosecutions of people who spend the PAYE and VAT money on themselves.  It was never theirs.

But I don't like the fact that so many details are available about the ML report and who submitted it.  I wouldn't like it if it had been my firm's report.  All the more reason to stay away from clients who may need reporting I suppose - I already try to avoid them as if they won't pay HMRC then they probably won't pay me either!

johnjenkins's picture

If I had    1 thanks

johnjenkins | | Permalink

been a jury member I would also have found him guilty.

Most people who owe VAT and PAYE do not get prosecuted. However when the dishonesty is as blatant as this case (jury only took 2 hours. I bet they didn't even take that long) there is no other option.

Breaking ground for HMRC. Now we wait for directors of limited companies to be prosecuted.

Locutus's picture

Money laundering reports    1 thanks

Locutus | | Permalink

secondhand_22 wrote:

Need more prosecutions of people who spend the PAYE and VAT money on themselves.  It was never theirs.

But I don't like the fact that so many details are available about the ML report and who submitted it.  I wouldn't like it if it had been my firm's report.  All the more reason to stay away from clients who may need reporting I suppose - I already try to avoid them as if they won't pay HMRC then they probably won't pay me either!

To be honest, I was a bit shocked that the ML reports became public knowledge.

The more I read about the case, the more I disliked the guy on trial.

davidwinch's picture

Confidentiality of Suspicious Activity Reports    6 thanks

davidwinch | | Permalink

I think this does highlight an issue regarding Suspicious Activity Reports.

Clearly an SAR was submitted to SOCA which triggered an investigation by HMRC.  No problem with that.

But equally clearly the fact of that report & the content of it has become public knowledge and the author of that report found herself put in the witness box and questioned about it, her motives for submitting it, and whether it was submitted as some sort of a conspiracy with HMRC.

Appearing in court - and having this matter hanging over her for a couple of years - must have been something of an ordeal (to say nothing of it being a distraction from ordinary work).

I think that will be a worry to others who are submitting, or have submitted, SARs about their clients or others.

David

johnjenkins's picture

The beauty about

johnjenkins | | Permalink

our criminal justice system is that you are innocent until PROVEN guilty. So the defence had every right to cross examine the author. I very much doubt if people make these reports unless they are positive something is wrong. I certainly wouldn't. All witnesses going to court have the same harrowing experiences - that is part of our judicial system.

glenbogle's picture

Whenever there's a problem.......

glenbogle | | Permalink

.......The client will identify the account as the source of all of their troubles.

This man was in the public eye and building reputations for others but obviously keeping "house clean " in terms of his business affairs was beneath him. Or he expected to bluff his way through. He did the actions described and whatever the intent he should be responsible. He probably upset HMRC officers  when interviewed by them and set the wheels in motion. 

The disclosure of SOCA reports is troubling. If a professional makes a report in confidence do they not have any right to protection of their identity?

A lesson to everyone to pay attention to not give suspicion to others with HMRC about. Rather to ensure that everything is done properly and go speedily with a proposal to HMRC if you are stuck over paying a liability.

 

glenbogle's picture

Reports

glenbogle | | Permalink

 Trouble is that you never know when you are going have to make a NCA  report.

carnmores's picture

unless you were there you shouldnt

carnmores | | Permalink

Say that you would have found him guilty he is at the low end of PR and uses highly dubious tactics however i perceive this to be the revvenge of the PAYERrs and that is a worry so incorporate ALL ?

Court Appearances and Suspicious Activity Reports    1 thanks

Pete9251 | | Permalink

I concur with the comments made by davidwinch.

In 1997, I spent an aggregate 10 hours in a witness box, four appearances spread over around eight weeks in a single fraud trial prosecuting events that had allegedly occurred eight years earlier! With the passage of time, I was lulled into thinking that nothing further was going to proceed - I had by that time moved on in my career. I suppose that the ordeal was concentrated into a shorter period as a consequence. While I understand that a sanction was applied, I do not think that it was to the level aspired. I think that the cost of the case must have been disproportionate, particularly in view of the age of the evidence. Incidentally, I never saw the judge wielding a gavel: I think that in the UK that is the preserve of auctioneers.

Ten years later, on an unrelated matter, I had to submit an SAR. Happily, nothing further happened that impacted personally on me. So SARs probably remained confidential most of the time.

Here's looking forward to a quiet life!

what if he had made returns    1 thanks

ted.henderson | | Permalink

"that he had dishonestly failed to make returns for VAT and PAYE to HMRC for his limited company Hillgrove Public Relations Limited."

If he had made honest returns but the company had failed to pay and had gone broke would he have got away with it?

davidwinch's picture

Making honest returns    2 thanks

davidwinch | | Permalink

ted.henderson wrote:

"that he had dishonestly failed to make returns for VAT and PAYE to HMRC for his limited company Hillgrove Public Relations Limited."

If he had made honest returns but the company had failed to pay and had gone broke would he have got away with it?

Mr Hillgrove was convicted of offences which necessarily involve dishonesty.  Had he honestly made PAYE & VAT returns then he might still have been accused of an offence if it was alleged that he intended never to pay the sums shown as due on those returns - and evidence in support of that might be the expenditures on other things if that left insufficient monies to pay HMRC.  However that would be a different (and IMHO a much weaker) case.

The position then might be more like that of David Lowe (who was not the subject of a criminal prosecution).

David