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FD created fictitious suppliers to embezzle £476k | accountingeweb
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FD created fictitious suppliers to embezzle £476k

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A finance director who stole £476,626 over a 13-year period from the firm where he practised and was a principal has been excluded from the ICAEW. 

14th Dec 2022
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Neil Rowland exploited his position as finance director to make payments to himself and concealed those payments by recording the expenditure as business costs within the firm’s accounts, as detailed in December’s Institute of Chartered Accountants in England and Wales (ICAEW) disciplinary orders.

The ICAEW disciplinary tribunal heard how Rowland used a number of different methods to bilk his firm out of over £400,000, which included creating an entirely fictitious supplier to hide the payments made to himself. 

Misappropriated funds

Rowland took advantage of the firm’s use of manual cash books for the office bank account, which relied on information from cheque-book stubs, and wrote cheques to himself. As the finance director, he was in a position to withdraw funds from the bank account and then falsify the cheque-book stubs to show the cheques were to alternative suppliers. 

He was also able to hoodwink the rest of the organisation because he personally managed some suppliers rather than the purchase ledger. In these instances, Rowland would pay the supplier from his account and then he would reclaim the funds from the firm.

His misconduct only started to unravel when he started to hand over some of his finance director duties in 2019 ahead of his retirement. With a new finance director at the helm, the finance team started to become suspicious when they discovered there was some paperwork missing to support payments from the office bank account.

Following an internal investigation, the firm confronted Rowland in February 2020 about their suspicion that he had misappropriated the funds. The former FD admitted that the findings were true, but he was unable to tell them how much he had taken. 

Amount stolen

The firm initially believed Rowland had taken £574,823, but while admitting to taking £476,626 from the firm, he explained that the rest were genuine business expenditure. 

The total stolen from the firm was made up of £166,104 from the partnership (which started in 2006 when he took £8,000 and peaked in 2011 when he pilfered £52,150 but continued until 2013) and £310,522 from the company (which started in 2012 when he pocketed 52,950 and peaked the following year when he stole £86,215 but he didn’t stop looting the company’s coffers until 2018).

As a result of Rowland stealing from the firm, the profits of the company were understated from March 2007 to 2013 and the firm incurred penalties and interest.

Rowland resigned from the firm and agreed to repay the firm £500,000, covering the amount stolen and a contribution towards the firm’s liabilities to HMRC. 

Can’t justify theft

Rowland told the firm in February 2020 that he “can’t justify anything”, but in an attempt to explain his reasons, he described himself as feeling “bitter” and said he wanted to “recompense myself, in my own head for the effort that I’ve put in over and above other people”.

He added, “That money has gone, it’s not in the bank. I sit here totally disgusted with myself.”

He further expanded on his reasons later that month, writing in a letter to the firm that he worked 10 hours per week over his contracted hours and that no client had incurred greater costs because of his actions.

When the case was referred to the ICAEW’s professional conduct department in March 2021, Rowland said he was not practising as an accountant, and had been trying to resign from the ICAEW since February 2020. 

Betrayal of trust

Representing the ICAEW investigation committee at the disciplinary tribunal, Vicky Morgan concluded that Rowland’s conduct had “caused harm to colleagues, in the sense of a betrayal of trust and having to deal with the consequences of his actions, and to the business, in the sense of having liabilities to HMRC and the risk of adverse publicity”.

The tribunal viewed the complaint as “very serious” and the starting point was exclusion. Explaining the reasons behind the decision, the tribunal said: “The case involved systematic and sustained theft of large sums of money over a period of more than a decade. The theft was elaborate and sophisticated, involving a number of devices to conceal the sums that Mr Rowland was taking for his personal gain. It involved a significant abuse of trust of the senior and responsible position Mr Rowland had as finance director of the company.”

The starting point for a financial penalty was £10,000, but the tribunal reduced the sum by 30% to £7,000 due to Rowland’s admission. Rowland was also ordered to pay costs of £9,465. 

Alison Wood, Associate at Blake Morgan said:

This appears to have been a straightforward case for the ICAEW to deal with. As soon as he was caught, Mr Rowland admitted everything to his employer and appears to have engaged with his employer and with the ICAEW throughout. While he was not present at the hearing and was not represented, he made it clear he had no intention of attending the hearing and the matter was able to proceed relatively quickly to a straightforward sanction hearing. 

While it was a mitigating feature that Mr Rowland had admitted his conduct, which resulted in the fine being reduced by 30%, his explanation would not have done him any favours as he stated, "I have been so disappointed in how I’ve not been able to earn the money that I’ve earned, giving 80 pence in the pound away. Bitter for a while, suppose I saw, wrongly, a way that I could recompense myself." Furthermore, while Mr Rowland was able to demonstrate that he had repaid £500,000 to the firm and had sold his property to do so, this was never going to be enough in the circumstances of this case to reduce the penalty from the starting point of exclusion.

Upon being found out, Mr Rowland attempted to resign from the ICAEW but of course was prevented from doing so while the investigation was ongoing.

It is apparent from the decision that Mr Rowland had also put forward a further explanation for his conduct, which was excluded from the public summary. However, it was also noted that there was no independent evidence of this explanation and thus its use was rather limited at the time of the sanctions hearing. Having not attended the hearing, he was unable to expand on this or make representations about other aspects of the sanction, including the amount of the ICAEW’s costs. While Mr Rowland was retired and appeared to have accepted his fate, there would still have been a benefit to him attending the hearing, even if it was just to clarify his position and make any challenges he could to the penalty imposed.

 

Blake Morgan’s accountancy regulatory team is available to assist with any disciplinary, regulatory and compliance matters arising in the accountancy profession. Click here if you require any of their services.

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Replies (17)

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By Paul Crowley
14th Dec 2022 09:29

What a complete bargain of a fine

Thanks (4)
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By Paul Crowley
14th Dec 2022 09:38

Every single case for ICAEW gets listed and linked to each month by Aweb.
No other body cases ever get linked to by Aweb. No that's wrong. I think there might have been one in the last four years or so.

Thanks (3)
Replying to Paul Crowley:
Tom Herbert
By Tom Herbert
14th Dec 2022 10:48

Hi Paul, hope all is well. It's a fair point that we do feature ICAEW disciplinaries more than other bodies, and that's something we're working on remedying to some degree (staffing levels notwithstanding).

M'learned colleague Hattersley is off for a few days, so to leap to his defence, we don't cover every single ICAEW case (usually five or six cases are listed in each disciplinary release), and I believe an ACCA case is on the way (we also ran an ACCA case recently - link here https://www.accountingweb.co.uk/practice/general-practice/practising-cer...)

We'll keep an eye on things, but do continue to keep us honest ;-)

All the best,

Tom

Thanks (2)
Replying to TomHerbert:
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By Paul Crowley
14th Dec 2022 12:27

ICAEW is easy
A complete monthly listing that you always link to
ACCA is more difficult
2 listings for each case. The actual, and the reasons
JUST SO MANY. Usually cheating in exams and fictional work placements.
The one you linked is the only one I remember and indeed I commented on

I have never tried the tax bodies, bookkeepers , AAT, minor accounting bodies or even the Scots or Irish
But if there have been no disciplinaries for the past five years then fair play to their members.

Thanks (0)
Danny Kent
By Viciuno
14th Dec 2022 09:42

"Rowland was also ordered to pay costs of £9,465....This appears to have been a straightforward case for the ICAEW to deal with. As soon as he was caught, Mr Rowland admitted everything to his employer and appears to have engaged with his employer and with the ICAEW throughout....and the matter was able to proceed relatively quickly to a straightforward sanction hearing"

For the avoidance of doubt, obviously not condoning the guy - but £10k costs (more than the fine!) for an open and shut case where he admitted everything is taking the proverbial. Ludicrous, the disciplinary committee need to have their costs audited!

Thanks (5)
Replying to Viciuno:
By ireallyshouldknowthisbut
14th Dec 2022 11:02

ICAEW costs of these are completely out of control.

They seem to be KPMG partner premium priced "government contract" changeout rates.

Thanks (2)
paddle steamer
By DJKL
14th Dec 2022 10:03

Perhaps the firm itself ought to have been sanctioned for its apparent poor internal controls- it seems nobody seriously considered the idea of separation of duties and instead permitted the party paying some suppliers to manage those self same suppliers.

Thanks (5)
Intercity
By Mr Hankey
14th Dec 2022 12:55

Goodness me, how do people like this sleep at night?

I wouldn't misappropriate funds in the first place as I have a conscience, but the constant worry of being caught hanging over my head would certainly stop me from leading a normal happy life. The feelings of anxiety and guilt would eat me up.

Thanks (2)
Replying to Mr Hankey:
the sea otter
By memyself-eye
14th Dec 2022 13:21

They get used to it.
He took 'only' £8k back in 2006 and like the naughty schoolboy raiding the fridge, when nobody noticed, it became easier each year.
Saw a similar scenario recently with a members club (smaller numbers, but one man having control of too many of the levers of finance). He too admitted everything and paid the money back.
Cost him every shred of honour though.

Thanks (2)
Replying to Mr Hankey:
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By lme
15th Dec 2022 10:16

The best control is prevention. Seems this guy, like others, couldn't stop once he started and ended up wrecking his self respect as well as his and his firm's reputation. People sometimes seem to stumble into it and then lose the plot so it snowballs, eg one case memorable to me started with someone accidentally submitting an expense claim twice.

Thanks (0)
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By MDK45
15th Dec 2022 10:09

I still wake up sweating sometimes thinking I am back in my accountancy finals! There's not enough money in the world to tempt me over to the dark side and have that effort striked out!

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By HopelessUnbeliever
15th Dec 2022 10:11

Why is this guy not being prosecuted?

Thanks (1)
Replying to HopelessUnbeliever:
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By Paul Crowley
15th Dec 2022 11:49

He was
30 Months
It is in the report

Thanks (0)
Out of my mind
By runningmate
15th Dec 2022 10:15

It is a recurring theme in 'theft from employer' cases that the thief believed himself to be entitled for some reason to more than he was getting. That's motive - then if you add opportunity you get the result we have here!

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By tenniscourt
15th Dec 2022 11:10

I told my clients in 1985 to go down to their admin offices, ask where the purchase invoices where and thumb though them - their accountant was paying herself with suppliers that they thought they did nt use anymore. These days CHECK the invoices, get down from your high perch & do a spot check. Even I got ripped off my the salaries lady paying herself too much - I should have checked the cheques at random intervals...... check check at random intervals - yep you will be a dragon but better that £m down !!

Thanks (2)
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By SJH-ADVDIPMA
15th Dec 2022 13:40

All this, "i was bitter" etc, is a mask, when caught, rather than saying the socially unacceptable "yes im thoroughly and perennially dishonest, dont leave your wallet alone with me" a story is concocted, and may even be somewhat believed by the perpetrator.
I assume the money would not be paid back without the possibility of police involvement.

Thanks (0)
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By mahreda
09th Jan 2023 07:23

I thought Neil Rowland was a man of integrity when he played basketball stars and talked to him, I didn't expect him to have embezzled such a large amount of money.

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