ICAEW member excluded after destroying evidence
ICAEW has excluded an accountant who defied his managing partner and destroyed evidence following his involvement with a defamatory website.
The long running and complicated story contained bundles of evidence that ran over 3000 pages, with a plot that involved accusations of fraud, destroying evidence, lying to the managing partner, and a conflict of interest.
As reported in ICAEW’s February’s disciplinary report, the case finally reached its conclusion after ten years of misconduct, with the accused being excluded from the ICAEW and receiving fines of £10,000 with costs of £60,000.
The case dates back to the initial complaint in which the accountant, Jeremy Newman, was providing professional services to two separate groups (Group ‘C’ and Group ‘L’) in the knowledge that their interests were in conflict.
Running over a total of 82 pages, the Investigation Committee's case stated that Group ‘L’ was working on a major construction project in St Vincent as a developer. The project involved building a high-end holiday resort with luxury individual properties.
Group ‘C’ then began working as the main contractor for the project.
Newman provided accounting services, including tax advice, to both groups during their time working on the construction project. The report stated that there was “evidence that neither ‘L’ or ‘C’ Group were particularly assiduous with their record keeping and documentation”.
There were reportedly no safeguards in place to allow for objectivity or confidentiality, and the accused failed to remove himself from the position he was in with either party despite being aware of their opposing interests.
The ICAEW tribunal said it was “entirely inappropriate” for Newman to be acting for both entities in these circumstances, and concluded that Newman’s plan to have “a foot on both sides of the information barrier” was bound to cause conflict.
While there were two offices delegated to focus on each group within the firm, Newman was found to be directly “acting for both and in respect of the same building project”.
Newman stated that he “straddled the wall” which separated each group, and if he could “have [his] time again” he would have acted differently.
The relationship between the two groups continued to deteriorate as a result of the situation, leading to Newman’s first complaint.
Newman was then found to be involved in the administration of a website, the main purpose of which was to promulgate an opinion that Group ‘L’ was operating as a fraudulent enterprise designed to con investors out of their money.
Newman accepted that he had been administrator of the website and had also been responsible for some of the early content, but that the author of the main articles and contributor of content was Mr ‘M’, who turned out to be the driving force behind the rival Group ‘C’.
The accused admitted that he and Mr ‘M’ became close and ultimately clouded Newman’s judgement about the defamatory nature of the website.
The report stated that Newman’s written evidence suggested that he had become involved with the website under the opinion that ‘exposing’ Group ‘L’s supposedly fraudulent activity was a matter of public interest.
However, the disciplinary committee described the content of the website as going “far beyond what could ever be described as being in the public interest”.
The content was reportedly derogatory, potentially defamatory, offensive and inappropriate: “The content and tone of the site was such that in our view no professional accountant should ever have involved themselves in such an enterprise regardless of motive,” the report stated.
Subsequently, Newman was then found to have deleted vital evidence such as emails off his computer after receiving the allegations pertaining to his involvement in the website.
In an email exchange with his managing partner, Newman stated: “The position with ‘L’ is a mess, so we’re trying to get as much protection for ‘C’ group in places we can, and get as much cash upfront as possible.”
The disciplinary committee found that the exchange clearly demonstrated that there were problems between the two groups, and that Newman was effectively having to choose which to prioritise on which issue.
Newman’s managing partner at the firm then asked if he was involved with the website and whether he assisted Group ‘C’ in making a report to the SFO about ‘L’.
The accused denied the allegations to his managing partner. The partner told him not to destroy any evidence on his computer, which Newman was again dishonest about.
He went on to destroy the evidence in the knowledge that it might be relevant to future legal proceedings.
The third allegation resulted in Newman being excluded from the ICAEW and recieving the aforementioned fines.
The report stated the first and second allegations were so serious that they may have merited exclusion as stand-alone complaints.
Chris Cope, consultant to Blake Morgan LLP, comments:
This was a complex case involving over 3,000 pages of documents with three days involved in the hearing of evidence and a further day devoted to sanctions.
It was significant that the defendant represented himself. In fact, the Investigation Committee was represented by two barristers. In giving evidence, Mr Newman was, in the words of the tribunal, consistent, impressive and truthful. Nevertheless, the tribunal concluded that two out of the three elements of the third complaint involved dishonesty and a very serious failure to comply with the fundamental principle of integrity. The defendant had, furthermore, destroyed evidence, knowing that it might be relevant in future legal proceedings. Exclusion was therefore inevitable.
A fine of £20,000 was considered appropriate, but this was reduced by 50% due to the defendant’s finances.
We do not know how much was incurred by the Institute by way of costs, but the findings indicate that the actual costs were of a much larger sum than £100,000. The Investigation Committee limited the costs that it sought to £100,000. However, two complaints were found not proved. Again, the tribunal took into account not only that, but also the defendant’s financial circumstances. He was ordered to pay costs of £60,000, no less than £40,000 less than the figure sought by the Investigation Committee.
This case reached the Disciplinary Committee on 2 September 2020. The first complaint dates from 2009/10; the second from 2011/12 and the third from 2010/12. It would be helpful if there was as explanation provided as to why such historic matters have taken so long to reach the Disciplinary Committee.
If you are presently subject to a complaint or want more information about Chris Cope and Blake Morgan LLP, solicitors, you can visit their website here.