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
● RJH Management LLP incorporated.
● 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.
● 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.
● Hillgrove PR Ltd registers for VAT
● Bishop Jones prepares a VAT return showing a liability of £24,000. Hillgrove tells Dale: “Hold fire with the submission”
● Hillgrove ends his relationship with accountants Bishop Jones.
● The following day Michelle Jones files suspicious activity report with Serious Organised Crime Agency.
● HMRC officials investigating Hillgrove find a copy of the Bishop Jones SAR on SOCA’s database.
● HMRC arrests Richard and Lois Hillgrove in a dawn raid at their home in Somerset
● Initial trial at Bristol aborted
● 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.
Richard Hillgrove could appeal the verdict, so if you do comment below, please avoid discussing his guilt and stick to the professional issues involved.