Poor Record of the UK in Combatting Corporate Fraud

Posted on June 24, 2013

We have been saying on this website for some time that the UK lags well behind the USA in combatting corporate fraud.

Now, even the politicians in the UK are waking up to this fact. We re-produce here an article written by Emily Thornberry, MP, Shadow Attorney-General which appeared in “The Times” (of London) on June 20, 2013.

We have faced huge difficulties in persuading the authorities in the UK to investigate the widespread fraud at Tiuta plc.

There is a complex series of issues to resolve. The first is that most policemen in the UK would rather catch burglars rather than white-collar criminals. The second is that insufficient resources are provided to the police to investigate crimes and trace missing monies. The third is that the Financial Services Authority (now the Financial Conduct Authority) has not devoted sufficient resources to securing evidence of wrongdoing and launching preliminary investigations and passing on evidence of crime to the police where regulated companies, such as Tiuta plc, are involved. The fourth is that the FCA sees itself as a regulator and therefore it does not see its role as securing evidence or investigating fraud. A ponzi scheme, such as the Connaught Income Fund, Series 1 is viewed as a police matter. In fact, the police require material assistance from the regulator in order to be in a position to launch an investigation. Since regulated parties were involved, such as Capita, the regulator should have a major role.

In respect of the fraudsters at Tiuta and Connaught Asset Management, we are well aware that many investors and MPs are disgusted that it is taking so long for a criminal investigation to be launched. We are still hoping that the desire of right thinking people for justice will be met in due course. However, there are many barriers to be overcome. We hope that investors will continue to pressure their elected representatives and the Metropolitan Police to mount a full-scale investigation. We hope that investors will also write to the Financial Conduct Authority to ask that action is taken in relation to the crimes that are relatively simple to understand such as:

(a) the financial returns made by Tiuta plc to the FSA were fraudulent (as they showed that Tiuta was solvent when in fact it was trading whilst insolvent); and

(b) Connaught Asset Management undertook regulated activities such as running a sales team to sell the Fund to IFAs and their clients.

These matters are entirely different from the fraudulent accounting at Tiuta, the misappropriation of monies by Tiuta, the operation of a ponzi scheme by Tiuta and Connaught Asset Management, the publication of a fraudulent investment memorandum by Connaught Asset Management which was approved by Capita. All of these matters deserve investigation but are less easy to prove. The losses to investors in this case may amount to £80 million and yet insufficient resources are devoted to serious white- collar crime.

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