False filings prosecution a ‘pyrrhic victory’ for Companies House

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A businessman who registered a company to former business secretary Vince Cable to demonstrate how easy it is to lodge false details with Companies House has been fined for deliberately falsifying information.

Company director Kevin Brewer was ordered to pay over £12,000 after pleading guilty to filing false information on the UK’s company register.

However, critics have labelled it a “pyrrhic victory”, as Brewer claims to have taken the action to highlight a loophole in the UK’s corporate registry. Instead, he became the first person to be prosecuted in the UK for falsifying filings.

Accountants have previously expressed concern at the ambiguity in anti-money laundering regulations that allows criminals to incorporate directly with Companies House.

Two’s company

Brewer, the owner of Birmingham-based consultancy National Business Register, concocted the stunt to demonstrate that anyone could form a company in the UK, giving any name or address they wished. Using the Companies House online service he paid £12 each to register two fake companies.

First, in 2013 he registered John Vincent Cable Services Ltd on Companies House, making former Business Secretary Vince Cable a director and shareholder without his knowledge.

Brewer then claims to have written to Cable to inform him of the loophole and the company was dissolved and taken off the company register. Brewer also publicised this via an article in the Mirror.

After perceiving no action being taken on the issue he formed another company in 2016, Cleverly Clogs Ltd, making Baroness Neville-Rolfe – the Minister with responsibility for Companies House – James Cleverly MP and an imaginary Israeli national, Ibrahim Aman, all directors and shareholders without their knowledge.

Again, Brewer claims to have informed the government of his actions and the reasons behind them. This time Companies House dissolved the company, took it off the company register and prosecuted him under section 1112 of the Companies Act 2006, which sets out the criminal offence of providing false information on the company register.

Brewer pleaded guilty at a hearing at Redditch Magistrates’ Court and was fined £1,602, ordered to pay costs of £10,462.50 and charged a victim surcharge of £160.

‘Right to take action’

Vince Cable, now Liberal Democrat leader, told the Financial Times the punishment seemed “heavy handed”, but added that Companies House was right to take action against the fraudulent use of names, which is a “growing concern”.

Baroness Neville-Rolfe told the FT the first she heard of the matter was when she received a letter at her private address informing her of her new directorship, and she felt it was a “pretty serious” matter. “It’s not a very pleasant thing to happen to you,” said Neville-Rolfe, “and I felt it was fair enough to assist in the prosecution.”

A Companies House spokesperson told AccountingWEB that its records were under “constant scrutiny” by law enforcement agencies, and were a “powerful tool for identifying inaccurate or fraudulent information”.

The spokesperson also said that Brewer had been warned not to proceed with the registrations and reminded of the law.

Prosecution ‘beyond comprehension’

However, the prosecution has been labelled by one commentator as a “pyrrhic victory”. For Richard Osborne, managing director of eFiling, the case exposed the loophole which makes Companies House, and the UK, a soft target for real criminals.

“The government’s line was that he [Brewer] founded those companies with the intention of making profit off the back of the ministers’ names. Why would he do that and then write to the ministers involved telling them what he had done and asking for a meeting to highlight the problems? It’s beyond comprehension.

“The government’s press release basically vindicates their line on not changing the legislation. But out of all the 4,000 beneficial owners of companies who are under the age of two, the thousands of register companies that Transparency International have linked to fraud, they chose to prosecute the one person who wrote to them to tell them this needs to be sorted out.”

Almost 700,000 companies are created each year in the UK. A recent report from Transparency International flagged that Companies House currently has only six members of staff responsible for policing the 4m UK companies current registered, while Global Witness claims that almost a tenth of registered companies had broken UK rules by failing to name their controlling shareholders.

About Tom Herbert

Tom is editor at AccountingWEB, responsible for all editorial content on the site. If you have any comments or suggestions for us get in touch.

Replies

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20th Apr 2018 10:09

There is not really much to say about this is there?
Same old. Go for the soft targets. How will GDPR help Companies House?
I set up a company years ago to show a friend how easy it was. Nothing has changed. The Russians must be having a field day.
Chris Akabusi said it on sky news the other morning "what is this country coming to".
Still we've got Enoch's speech to celebrate or not as the case may be.

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20th Apr 2018 10:54

Ok so they have fined the Kevin Brewer for doing this, BUT what have they done about stopping the formation of false company's and false company director's.

Probably sweat FA

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to Darryl Gibson
21st Apr 2018 21:02

Definitely sweet fa. The government is keen on money laundering because the money washes through the UK banking sector and the banks donate to the Tories. Simples.

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20th Apr 2018 11:17

Well written Tom...so "the FIRST person to be prosecuted in the UK for falsifying filings" is the person that is doing the country a service for highlighing issues that need addressing.

The FIRST prosecution for falsifying fillings. Do they check anything? Are they bothered at all?

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to Balancing
20th Apr 2018 15:10

And does this not make a joke of MLR due diligence requirements in relation to checking Companies House?

A joke and a waste of our time if Companies House don't check anything.

Should this not be raised by the bodies involved for their members?

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20th Apr 2018 12:20

Heavy handed? Companies House?
Talk about a sledgehammer to crack a nut! Didn't the Judge take into account intention? Why did CosHse prosecute in those circumstances? What are they doing about all the other maliciously false information that is filed?
I think we at AccountingWeb should set up a Kevin Brewer Appeal Fund so he can appeal against this swingeing and outrageous penalty -- I am happy to start it off with £50 if AW would like to set it up.

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to Jack the Lad
20th Apr 2018 12:35

Whilst I agree with you totally, as he pleaded guilty I doubt if an appeal would even be granted by the powers that be, let alone get the fine vacated.

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By cbp99
20th Apr 2018 13:47

On another Companies House issue, I am currently awaiting a reply to my question to Companies House why they are sending out reminder letters by post which include the company number and authorisation code, which would enable anyone who intercepted this to fraudulently take over the company.

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20th Apr 2018 14:05

First to be prosecuted, not the first to be reported. messy divorce client of our one director filed 38 false amendments at Companies House, their response was "this is not something that Companies House has any power to look at"!

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20th Apr 2018 14:40

Take the Michael of these idiots and you will be in trouble.
Fact is you can register what ever you like, file what ever you like, use companies house freely for criminal purposes, fraudulent trading, tax evasion, long firm fraud, dodgy tax schemes, Employment tax evasion etc etc etc
If he hadn't told them he would have got away with it. Really the Mirror ought to publish all the other cases we know about.
Why was this case chosen rather than the thousands of others that are reported and must be seen every day.

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20th Apr 2018 15:20

How did Companies House find out that this "crime" had been committed?
It looks as though some guy called Kevin Brewer may have acted as an informer here.
I think he should get a reward for identifying the "criminal" and reporting him.
Does £20,000 sound about right?

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to Joe Soap
20th Apr 2018 17:18

Great idea Joe!

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23rd Apr 2018 10:49

Let hope after this, they will hopefully come up with tough measures

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