Accountant jailed in £11m tax fraud

A London accountant faces eight years behind bars after being convicted of manipulating both his clients' and his own tax returns, pocketing £11m in income tax and VAT payments.

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johnjenkins's picture

Chartered Accountant

johnjenkins | | Permalink

This little note should be sent to those that want the term "Accountant" only to be used by qualifieds.

cymraeg_draig's picture

Coincidence ???????

cymraeg_draig | | Permalink

Is this a "coincidence" ?

The firm was called "CHARLTONS".  I thought it rang a bell - in 1994 an unqualified accountant named Charlton had a firm, also called CHARLTONS, and was also convicted of promoting fraudulent "tax saving" schemes.

http://www.thelawyer.com/barrister-convicted-of-tax-fraud/94673.article

 

Even more oddly, this guy is calling himself Christos Charalambous, whereas the 1994 case was a Christopher Charlton.

Probably a coincidence - but as both firms had the same name, and both are called "Chris", it makes you wonder.

Not Qualified

jacqueline.dyke... | | Permalink

In response to John Jenkins, this man lied to the Court about his qualifications.

He was actually unqualified: on 18 June 2007 the ICAEW issued a public notice (still on their website) which read:

"The following individual - who is not a current member of, and is not currently associated or connected with the Institute of Chartered Accountants in England and Wales - has given an undertaking not to pass himself and/or his firm off as a member and/or member firm of this body.

Name

Christos Charalambous

Firm name

Charltons

Address

56 Norfolk Avenue

Palmers Green

London

N13 6AG"

So, I'm afraid this is actually more evidence as to why the term accountant should be restricted to those who have undergone some sort of training.

Fancy an unqualified doctor anyone?

cymraeg_draig's picture

Jacqueline

cymraeg_draig | | Permalink

 

 

Your post makes it sound even more like the same man calling his firm "Charltons", that was convcted in 1994.

 

As regards your other point though, I have to say that I have seen far more qualified accountants jailed for fraud than I have unqualified ones. 

Possibly because being qualified makes them arrogant enough to believe they can "get away with it".

I really don't think having a professional qualification makes anyone more or less honest, or indeed more or less ethical.  Circumstances, upbringing, and many other external factors probably have far more bearing on it.

In any case, I would advise you giving up on the idea of restricting the use of the term "accountant" because it's never going to happen. 

Incidently could be a "doctor" of law, etc - but you wouldnt want me operating on you.  You see the term "doctor" is not restricted to qualified medical practitioners either.

 

 

 

davidwinch's picture

An example

davidwinch | | Permalink

The case reported in this recent newspaper article could perhaps be used by both sides of the argument!

David

johnjenkins's picture

Chartered Accountant

johnjenkins | | Permalink

From the judges comments it would appear that because Chris Charlton, or whatever, said he was Chartered the case was treated more seriously. It could follow that if the sentence bore that in mind, Mr Charlton would have grounds for appeal.

What is also worrying is that the judge said that HMRC ought to trust him because he was Chartered. In my experience HMRC do not treat qualifieds any different to unqualifieds.

if it were the same person

Anthony123 | | Permalink

it is rather disturbing that it has taken so long to catch him out again with the loss to public finances meanwhile............

cymraeg_draig's picture

The same ?

cymraeg_draig | | Permalink

if it were the same person

it is rather disturbing that it has taken so long to catch him out again with the loss to public finances meanwhile............

 

I'm not saying it IS, but it looks very suspicious to me.

Qualified or not?

PennyC | | Permalink

The quote above from ICAEW reads (my emphasis):

"The following individual - who is not a current member of, and is not currently ..."

Why the need for "current"? That might be taken as implying that he was once a member. Why not say, "who is not a current member of, and never has been ..."?

Just a thought

In my experience HMRC do not treat qualifieds any different to u

PennyC | | Permalink

In my experience they do (if the private words of a former Senior Officer are to be believed).

davidwinch's picture

Previously a member of ICAEW

davidwinch | | Permalink

I found this on the web:

"Charalambous has been an accountant for over 30 years. He was the sole proprietor of Charltons Accountants. From 1979 to 2005, he was a chartered accountant. In November 2005, he was excluded from the Institute of Chartered Accountants in England and Wales for failing to co-operate with the Inland Revenue.

Due Diligence Information:

Christos Charalambous (58), date of birth 29 July 1951, an accountant of 56 Norfolk Avenue, Palmers Green, London N13, was born in Cyprus and moved to the UK in 1970. He was found guilty at Blackfriars Crown Court on 6 counts of Cheating the Revenue of GBP11m on 29 June 2010 and sentenced to eight years."

David

cymraeg_draig's picture

Qualified v QBE- risk factor

cymraeg_draig | | Permalink

Agreed Penny.  We employ qualified and QBE's and there is definitely a difference in attitude. They often try to "fob off" unqualifieds with total drivel that they wouldnt dare use on qualifieds.  Unfortunately for them they come badly unstuck when they do.  

Going back to the original point, I repeat that I have seen far more qualifieds than unqualifieds convicted of fraud. A persons qualifications mean absolutely nothing when it comes to honesty and integrity. How many doctors have been convicted of murder, teachers convicted of sex offences against children, etc. 

Indeed I would suggest that a qualified is far more likely to commit an offense as they are more likely to have access to larger sums of money, and, to have the knowledge to carry out a scam.  

 

  

davidwinch's picture

Accountants who go 'bad'

davidwinch | | Permalink

I would say that an account (qualified or unqualified) who goes 'bad' generally goes very bad.  As we say in't country, "You may as well be hung for a sheep as a lamb!".

The same is true of solicitors.

Obviously professional advisers have access to client funds and are (usually) trusted by their clients.  So if they are dishonest they can exploit their position.

David

Nick Graves's picture

Oh dear

Nick Graves | | Permalink

A perfectly valid thread descends into the usual qualified v. unqualified bickering. The same Beavis & Butthead trolling you can find on any forum and it does the image of the profession no good whatsoever. Now knock it off!

I am more interested in the detail of the case. Forgive the cynicism, but if every refund this guy obtained totalled £11m and each refund was ajudged 'fraudulent' because of a minor defect in each claim (too much laundry & clothing allowance, perhaps?) then the overlords are now at liberty to nationalise all of his assets. That's the way it seems to work in too many cases, these days.

The guy may equally be an out-and-out crook, but without reading the transcript of the trial, it's difficult to know.

Either way, that is actually the bigger picture here and not his poxy qualification.

 

 

 

cymraeg_draig's picture

Knock it off ??????????????????

cymraeg_draig | | Permalink

A perfectly valid thread descends into the usual qualified v. unqualified bickering. The same Beavis & Butthead trolling you can find on any forum and it does the image of the profession no good whatsoever. Now knock it off!

Either way, that is actually the bigger picture here and not his poxy qualification.

 

Posted by Nick Graves on Fri, 02/07/2010 - 13:16

 

 

And your authority for ordering others what aspects of the case they consider important is exactly what ?

His qualifications, or indeed lack of them, is an important issue, and, if you had indeed taken the trouble to read the full ruling and to find out what evidence was presented you would realise that if he had traded as unqualified the vast majority of these offences would not have been possible.

The judge certainly considered it an important issue, so, if you do not then it appears you are very much in the minority. That does not entitle you to be quite frankly - rude - to other posters.  To use your own phrase, your rudeness "does the image of the profession no good whatsoever".

 

 

davidwinch's picture

Confiscation

davidwinch | | Permalink

If HMRC actually paid £11 million to the convicted accountant (the AWEB report refers to him having claimed that amount) then his 'benefit' for confiscation purposes will be at least that £11 million (plus of course the near £1 million of his own tax which he evaded).  It is irrelevant for confiscation purposes that the bulk of that amount he would have passed on to his clients (what he does with the money after he obtained it is ignored).

Also, since he will be deemed to have a 'criminal lifestyle', it will be assumed that whatever he received is proceeds of crime.  It is for him to show that not all of it was - either because some claims were entirely legitimate, or because refunds were due to some clients but in smaller amounts.

Once his 'benefit' figure has been established it is for him to satisfy the court (if he can) that he has insufficient assets to pay that amount.  If he manages to do this the amount he has to pay will be reduced to equal his gross assets less secured liabilities.  So, in any event, he will be financially 'cleaned out'.

David

memyself-eye's picture

So he's to blame...

memyself-eye | | Permalink

For HMRC failing to snd me a £900 client refund despite having requested it four times in the last 3 months!

That's all right then.

cymraeg_draig's picture

Illusionists

cymraeg_draig | | Permalink

For HMRC failing to snd me a £900 client refund despite having requested it four times in the last 3 months!  That's all right then.      Posted by on Fri, 02/07/2010 - 14:23memyself-eye

 

I think you can place the blame for that at the feet of that well known firm of financial illusionists, famed for their ability to make vast sums of money disappear -  B'Liar, Brown, Darling & Co.

stepurhan's picture

Reduction of benefit?

stepurhan | | Permalink

With regards to the £11 million. If he can prove that he transferred some of that on to clients, would that reduce his benefit? The fact that he was taking out "fees" of at least 15% would mean the amounts wouldn't match of course.  However, the receipts from HMRC would be in respect of specific individuals so payments to those individuals could potentially be identified as remittances of the residue.

Also, what is the position of the individuals themselves? Yes, their accountant submitted the fraudulent information but, even without detailed knowledge of the UK tax system, didn't they think things were a bit odd? They never signed anything that was submitted and were presumaly receiving substantial income (albeit across his whole client base) to warrant the level of refunds received. Does ignoring the abnormalities and just accepting the amounts they were receiving make them party to the fraud?

With regards to the qualified/unqualified debate, I think the judge was wrong in his statement regarding Chartered being more trustworthy (regardless of the fact that he wasn't anyway it would appear). A qualification is simply proof that an individual has acquired a certain level of knowledge and then mainitained it through CPD. Being unqualified simply means they MAY not have that level of knowledge (though many qualified by experience will) It doesn't have any bearing when it comes to criminal activity. Losing your qualified status is a minor consideration if criminal charges are successfully pressed against you.

Nick Graves's picture

A cause for concern itself

Nick Graves | | Permalink

That's precisely where it seems to get fraudulent the other way;

I know of one case where the turnover of a genuine business was ajudged the 'proceeds of crime', despite the fact that it was paying its taxes, payroll, rates, etc, legitimately. The directors fell foul of a planning notice to cease trading and believed they could continue to trade under appeal (which they lost). The directors now have (lifetime) confiscation orders against them of significant sums. It was also reported in a style which suggested the directors directly benefitted from the turnover and not the net profit.

It seems a totally disproportionate use of the legislation and I wonder if this maybe also turn out to be the case here.

So although my earlier comment may have proved suitably offensive, getting hung up on the usual slanging match over a disbarred accountant is to become distracted from what may be an important issue for the industry in future. On the back of sometimes onerous MLR provisions, I could foresee a regular accountant who has made a genuine error, or who cannot prove he genuiely made an error, getting caught up with the same accusation.

I'm not trying to excuse crooked or useless accountants. I am genuinely concerned about the way some of these cases appear to go.

 

 

 

 

 

 

 

 

 

 

cymraeg_draig's picture

Proceeds of Crime Act

cymraeg_draig | | Permalink

The Proceeds of Crime Act like so much of Labour's legislation, was ill conceived, and badly drafted.  A room full of semi literate chimps could have drafted it better - unfortunately they didn't let the Cabinet do it.

It certainly had more to do with boosting the treasury coffers than it had to do with justice, and works on the NuLabour principal of "guilty till proven innocent". 

Certainly it is one of the laws which the entire legal profession believes should be either repealed, or extensively modified.

Firstly ONLY the actual proceeds of a proven crime should be forfeited, anything more constitutes state theft.

Secondly, those proceeds should, if justice is to be served, be returned to the victim of the crime - not the state. (In the case of tax evasion etc of course the state is the victim). 

For thirteen years justice has been increasingly undermined, and the British concept of fair play has given way to a vindictive overbearing state machine which treats it's citizens as little more than slaves to be abused without recourse. We see this every day when HMRC levy "penalties" (fines by another name) on innocent taxpayers and place the entire burden upon the taxpayer to prove his innocence, rather than on HMRC to prove his guilt. 

This is no longer Great Britain, it is fast becoming a pseudo-communist third world country where dictators like Mugabe would feel right at home, and the Proceeds of Crime Act is just a part of that abuse of our nation.  One can only hope and pray that the new government will act swiftly regarding this and other abuses of justice. 

 

 

  

davidwinch's picture

Benefit for confiscation purposes

davidwinch | | Permalink

The courts have often expressed the view that the Proceeds of Crime Act 2002 (which replaced earlier similar legislation in the Proceeds of Crime Act 1995 and earlier Acts) is "Draconian" and was intended by parliament to be severe.

If a defendant obtains property (i.e. in the legal sense, meaning an asset of any description) or a pecuniary advantage (meaning he avoids a liability) then his 'benefit' is equal to the amount he obtains.

Numerous cases have consistently said that 'obtain' does not mean 'retain' and it speaks of what is received not what is gained.  In accounting terminology, it is akin to 'turnover' rather than 'profit'.

It is also true in law that where 'property' is obtained jointly by more than one person then each of those persons obtains the whole of it.

So in the case of the two people who operated the 'park and fly' facility near Stansted Airport as a partnership business (in contravention of a enforcement notice obtained by the local authority requiring them to cease the activity) each partner obtained a benefit of the entire turnover of the partnership business over the period after the issue of the enforcement notice (which was £1.8 million).

The confiscation orders made against them cleaned each of them out financially.  One had virtually no assets but the other had assets of £760,000 and was ordered to pay that amount (in addition to being fined £15,000 plus £20,000 costs for the actual offence of breaching the enforcement notice).

When making the confiscation orders the judge said:

"I have received the strong impression that neither the [defendants] nor … their accountant appreciated fully the risk that the companies and individuals involved in the park and ride operation faced from confiscation proceedings. They have treated the illegality of the operation as a routine business risk with financial implications in the form of potential fines or, at worst, injunctive proceedings. This may reflect a more general public impression among those confronted by enforcement notices with the decision whether to comply with the law or to flout it. The law, however, is plain. Those who choose to run operations in disregard of planning enforcement requirements are at risk of having the gross receipts of their illegal businesses confiscated. This may greatly exceed their personal profits. In this respect they are in the same position as thieves, fraudsters and drug dealers."

The Court of Appeal commented that they entirely agreed.

Although the amount each defendant was ordered to pay was less than the £1.8 million 'benefit' he 'obtained' the Crown have the option to apply to the court to come back to them for the rest if they acquire assets in later life.

That and other cases are covered in my recent article on confiscation cases.

David

www.AccountingEvidence.com

davidwinch's picture

The position of the clients

davidwinch | | Permalink

Whilst the accountant can be subject to confiscation in an amount of £11 million (plus his own tax evasion of £1 million) and this is NOT reduced by amounts he had passed on to clients, the clients (if they have been dishonest and have received refunds which they knew they were not entitled to obtain) also commit offences.

If convicted they too could be subject to confiscation based on the refunds they obtained (which I expect would be limited to the 85% they actually received).

This would mean that if the accountant and the clients had sufficient assets the confiscation orders made could amount to up to 185% of the tax lost.

But, as I said, confiscation law is recognised to be "Draconian" and in practice the defendants' lack of assets would probably not result in a recovery of more than 100% of the tax lost.

As far as I am aware the courts have not reduced confiscation orders on the grounds of multiple recoveries being excessive and the principle of multiple recovery is recognised and accepted by the courts.

David

cymraeg_draig's picture

Not draconian - unjust

cymraeg_draig | | Permalink

David - the word you should use is not draconian - the word is unjust, and against natural justice. For this reason this despicable law must be drastically changed.

Let's say for example, I work all my life, I'm honest, upright, and hard working, and I end up with a house and savings worth £1million. Definitely NOT the proceeds of crime.  I then make a fraudulent claim for a £1million tax refund for a client who was actually only entitled to £900,000.  I obtain the refund, skim £100,000 off the top, and hand the client what he was legally entitled to reclaim.

Now setting aside the logic of the lunatic asylum, which the Proceeds of Crime Act uses, I have actually gained £100,000 as a result of that crime.  No more and no less. Similarly HMRC have lost £100,000 as the rest (£900,000) was legally due to the client.

Yet, under this stupid piece of Micky Mouse legislation I would be subject to a £1million confiscation order and would lose (or more precisely my family would lose) all that I had worked for.

And "the state" has made a nice little £900,000 profit.

As I said, legalised theft and one of the most disgraceful perversions of natural justice ever to make its way into law.  

 

 

 

davidwinch's picture

Claims which are partly legitimate

davidwinch | | Permalink

C_D

I expect you are familiar with the case of the pharmacist Mr Shabir who made monthly claims to the NHS for providing medicines on prescription.

In among the volume of legitimate prescription details he added a few extra fraudulent items.  By this fraud it appears that he added perhaps about £100 to each of several monthly claims.

The value of the fraudulent items was thought in total to be £464 but these formed elements of several much larger monthly claims.  The value of those monthly claims was £179,731 and each monthly claim was settled by a single payment to Mr Shabir.  Of course, strictly speaking, each of these claims was a false claim and each payment was a payment obtained by deception.  Mr Shabir was convicted of obtaining the payments totalling £179,731 by deception. Mr Shabir's benefit from the deceptions was therefore £179,731.

The criminal lifestyle assumptions also applied and further benefit was assumed.  So a confiscation order was made against Mr Shabir for a little over £212,000.

On appeal it was held that the confiscation proceedings were an abuse of process (because of "the [prosecution's] contention that the defendant had benefited to the tune of over £179,000 when in any ordinary language his claims were dishonestly inflated by only a few hundred pounds"). The confiscation order was quashed and instead a compensation order was made in the sum of £464.

But the facts were special and it is not commonplace for a confiscation order to be quashed as an abuse of process.

Whether the fraudulent accountant would get any reduction for refunds genuinely due is very much open to question.

David

P.S.  I should point out that in the majority of cases in which I am involved I am instructed by the defence and part of my role is to examine the facts to ensure that any assertions made are properly examined against the evidence.

cymraeg_draig's picture

but they "could"

cymraeg_draig | | Permalink

My point is not that they would ...... but, that it is wrong that they even could.  As I said, a bad law that a room full of chimps could have done a better job of drafting.

davidwinch's picture

Meaning of words

davidwinch | | Permalink

C_D

In confiscation law words used have significantly different meanings from their everyday English usage.

So "confiscation" is not about confiscating the defendant's assets (it is about ordering him to pay a sum of money).

A defendant's "benefit" is not about the amount by which he benefits, it is about the 'turnover' of the criminal conduct in which he is involved plus the assumed benefit under the statutory assumptions.

A defendant with a "criminal lifestyle" is not one who has a lifestyle of crime - conviction for a single offence can be sufficient to establish a 'criminal lifestyle' (for example, the sale at a car boot sale of a 'pirate' DVD)

A defendant's "available amount" is not the amount he has available, it is (normally) his gross assets less secured liabilities.

An "injustice" under section 10(6) PoCA 2002 does not arise simply because the outcome of the confiscation proceedings is not just, it is limited to issues (such as double counting) arising from the operation of the statutory assumptions in practice.  The law does not allow the judge discretion to make the order which he would consider to be appropriate and just (except in the particular circumstances set out in section 6(6)).

This is not, in my view, poor drafting of the statute.  It was the deliberate policy of governments who introduced this legislation from the Drug Trafficking Offences Act 1986, the Criminal Justice Act 1988, the Drug Trafficking Act 1994, the Proceeds of Crime Act 1995 and culminating in the Proceeds of Crime Act 2002.  PoCA 2002 was the fifth major piece of legislation on confiscation.  Government must have known what it was doing!

David

cymraeg_draig's picture

Innocent till proven guilty ........ not under Labour legislati

cymraeg_draig | | Permalink

The law does not allow the judge discretion to make the order which he would consider to be appropriate and just (except in the particular circumstances set out in section 6(6)).

David

Posted by davidwinch on Sat, 03/07/2010 - 08:05

 

Which simple fact says it all. It was deliberate Labour policy, no doubt driven by the ultmate control freak Brown, to impose his "one size fits all" policies on every aspect of our lives including the courts. No group in Britain was more interfered with by Labour than the judiciary.

It is for this reason that there is now a campaign in the profesion to have Labour's sentencing guidelines which were not guidelines but "orders" revisited and consigned to the dustbin. Justice cannot ever be done where the court's options are in any way resticted because, as you are probably as aware as I am, every case is different.

I was particularly heartened by the recent statement by Ken Clarke, who seems to be acknowledging that the purpose of prison is to protect society, not to seek revenge. Perhaps now we will actually move towards incarcerating those who present an ongoing danger to others, and not imprisoning those whose crimes, whatever they are, where there is nothing to indicate any future risk to society.

 

 

 

This is not, in my view, poor drafting of the statute.  It was the deliberate policy of governments who introduced this legislation from the Drug Trafficking Offences Act 1986, the Criminal Justice Act 1988, the Drug Trafficking Act 1994, the Proceeds of Crime Act 1995 and culminating in the Proceeds of Crime Act 2002.  PoCA 2002 was the fifth major piece of legislation on confiscation.  Government must have known what it was doing!

David

Posted by davidwinch on Sat, 03/07/2010 - 08:05

 

 

I'm aware of the bizarre definitions applied - that alone shows this law to be poorly drafted when it has to alter the true meaning of words. Yes, government probably did know "what it was doing", and what it was doing had more to do with swelling government coffers than with justice.

This law is, quite simply, organised theft by the state and bears more resemblance to Mugabe's state grab of farms than it does to justice.

By referring to "criminal lifestyle" it actually turns justice on its head and places the burden on the defendant to prove his innocence rather than on the state to prove his guilt.

 

Even in my own specialist area we have seen several attempts by the last labour government to interfere. How any government could say that it "wanted more rape convictions" and intended to change the evidential requirements to ensure that happened absolutely beggers belief.  Again no thought was given to actually getting to the truth, or to justice.  It was all about giving the perception of being "tough on crime" - a public relations excercise with the facts, truth, and justice, trampled underfoot.

 

 

davidwinch's picture

Government removal of judicial discretion

davidwinch | | Permalink

C_D

I agree that the last Labour government sought to restrict judicial discretion in sentencing in various areas.

With regard to confiscation however judicial discretion was removed by the previous Conservative administration by the Drug Trafficking Act 1994 and the Proceeds of Crime Act 1995.

At that time Ken Clarke was a leading member of the cabinet (as Chancellor of the Exchequer - John Major was Prime Minister).

The later moves by the Labour administration could be seen as merely a continuation of the policy initiated by the Conservatives.

Whether the current government will seek to amend the confiscation law remains to be seen.

With regard to using words as labels in legislation and giving them a meaning different from that in everyday English - that surely has a long history.  As just one example see the definition of "gain" in section 34 Theft Act 1968, “gain” includes a gain by keeping what one has . . .

David