| Directors jailed for accounting fraud |
|
|
| Tuesday, 13 November 2007 | |
|
Seven people were jailed for over 11 years in Liverpool on Monday for their part in a £5.3 million tax fraud involving a North West newsagents and garage chain.
Three directors along with six other senior managers and employees of Aleef Garages Limited, also trading as Aleef Newsagents, pleaded guilty to the multi-million pound fraud after a long and complex investigation by HM Revenue & Customs (HMRC) investigators. The charges centred on fraudulent accounting related to franchise outlets, suppression of stock purchases and under-declaration of takings at the newsagents' shops to the diversion of funds and payments of tax free undeclared wages. Money was distributed using bank accounts opened in the name of a charity but in reality the cash was used to fund private lifestyles and transferred to other personal accounts including some in the Channel Islands. Presiding Judge Swift said in court, "The directors were involved in a sophisticated venture involving careful thought and planning to cheat the tax authorities." Steve Armitt, who led the investigation for HMRC, said: "Criminality crept into every aspect of this business and the investigation was made all the more difficult because of the closed ranks of the employees involved some of whom are close family members. It was cheating on a grand scale, and it deprived the Revenue of a great deal of money. Those involved tried to make it as difficult as possible for the cheating to be discovered. Top up wages Aleef Garages is owned by members of a Bolton-based family called Patel. Three sons of the company founder pleaded guilty to cheating the Revenue and were banned as directors for ten years each. Confiscation orders were issued totalling £5.3 million plus a contribution to court costs of £500,000. Aleef Garages Ltd, founded over 25 years ago, is amongst the largest family owned retailers in the North West. The group has over 50 petrol forecourts and shops which cover all the major centres in Greater Manchester, Lancashire and Cheshire. The firm's website boasts of "an enviable reputation" that has helped it to continue to develop market share within a very competitive market sector. The site lists Aleef's key trading partners as BP, Shell, Texaco, P&H, Nisa Today’s, Imperial Tobacco, Gallaher and WH Smiths. During the period of indictment from 1998 to 2002 the company operated about 18 petrol stations and about 16 newsagents' shops. At the time the company's premises were raided it was estimated that around 250 people worked in the business, the majority of whom were in receipt of top up wages, or in fact not on the payroll at all. It was a big business with an annual turnover measured in tens of millions of pounds. The brothers along with the six other employees concealed their actions by keeping two sets of accounts. The 'unofficial' accounts, not intended to be seen by the company's accountants or by any person in authority, were kept in order to assist the directors to keep track of all the money. The 'official' accounts were prepared for the company's accountants and intended to form the basis on which the company paid tax. A significant part of the untaxed income had been diverted to the Patel family's own use or to the use of others. This income had not been declared to HMRC. Much of the untaxed profits siphoned away from Aleef Garages created a cash fund which was largely paid into the bank accounts of the directors' father and a Muslim charity run by the father and then back out for the benefit of the Patels, in some instances to accounts in the Channel Islands. Ideal location for a fraud The cash fund had been principally achieved by a number of newsagents operating two tills, but only declaring in the official records the money which was taken from one of them, and simply keeping quiet about the money that was taken in the second till. The majority of their newsagent shops are in the centre of Manchester and a city centre newsagent is an ideal location for a fraud of this nature as there is a rapid turnover of customers, most of whom are in a hurry, and all of whom are paying in cash. The conspirators deliberately suppressed the takings in one of the tills in their accounts and only declared the money in the other till to HMRC. The undeclared money was also used to pay top up wages to staff in both garages and newsagents. Numerous employees were able to make claims for working family/new tax credits, because of the fraudulent payroll operated by the company. These are state benefits intended to help families in low-paid employment, to which they were not entitled. The employees were not however low-paid. They were receiving not only the declared wages but also top up wages, funded by the cash which was being siphoned out of the business and hidden from HMRC. Balance of the takings Although a number of the newsagent shops were operated on a franchise basis, the franchise managers were all shown as employees of Aleef and paid tax under the PAYE system. The managers made weekly franchise payments to Aleef and in some cases also paid Aleef for a limited amount of stock, although they also purchased stock independently. Having paid the franchise fee, stock costs and wages, the managers were able to retain the balance of the takings for themselves. The shop managers in these cases failed to notify their taxable profits as self-employed persons to HMRC and at the same time Aleef failed to declare the franchise payments made to them by the outlet managers, as well as disguising the managers as employees of the company on low paid wages. Mustaq Hussain Patel was in overall charge of the finances of the business and was sentenced to three years custody. Six other employees were sentenced for their part in the fraud. Related articles
Related links |
Subscribe to our weekly newsletter for top jobs, news and more 
Digg it! 
del.icio.us 
Newsvine 
Reddit 
Stumble It! 
With financial market volatility in mind, the Director of Finance Online team present alternative options on which you stand to make a healthy return your investments.
