CASE STUDY

How to make money
Confiscation Order

In June 2009 BBC News and various Scottish papers reported that a businessman, his two sons, and an employee pled guilty to involvement in producing and distributing fake money. Counterfeit £20 notes totalling over £185,000 had been recovered. The businessman sourced specialised paper and inks and was able to produce some 15 to 25 counterfeit notes per hour. This unofficial attempt to help the government’s policy of quantitative easing ended on 5 February 2008, and the businessman received a custodial sentence. The Statement of Information calculated his benefit from crime over a six year period at just over £850,000, and his available amount was stated to be over £600,000. The respondent’s wife was a lecturer in accountancy and tried to assist him to understand and challenge the Crown’s calculation of alleged benefit. His financial affairs had been fairly chaotic, and personal funds were used for business expenditure and vice versa. He did not always file his company accounts and personal tax returns on time. During the confiscation proceedings he was negotiating a settlement with HMRC to cover tax on his under-declared income. He attributed much of the Crown calculation of alleged benefit to his disorganised financial affairs rather than actual crime. In the course of the proceedings the Crown figure for alleged benefit fell by large steps, first to around £300,000 and then to under £200,000. This was helped by some single and triple entry accounting by which the Crown understated alleged benefit by around £35,000, most of the errors being caused by the Crown’s failure to use double-entry in accounting for credit cards. A couple of black bags full of “productions” were found in a police station cupboard. They were examined by the Crown and NIFA accountants together. The respondent’s passport was found and, a few minutes later, a photocopy of another passport. This photocopy was simply the original passport photo with a bit more hair, a slightly changed date of birth and passport number, and a different name. A bank statement showed funds being paid to this alias, so presumably an account had been opened in the false name. This discovery did nothing for the respondent’s credibility. Defence counsel negotiated a figure for a proposed settlement, but the respondent insisted that he advocate a line of argument which defence counsel could not put forward. As a result, the proof was postponed and a new defence counsel appointed. As the proof date approached the new counsel continued to negotiate with the Crown advocate depute. The Crown figure was reduced for negotiation purposes and, after the respondent was told that neither the defence accountant nor the Crown accountant were likely to support some of his more extreme accounting arguments, he agreed to settle with the Crown at a figure of £96,000. There are several points to be taken from this. First, persistence appears to pay for respondents who refuse to settle when a proof is imminent. In the writer’s opinion the Crown would have recovered considerably more had the proof been run. Second, a little knowledge is a dangerous thing, and bad accountancy advice can cause a respondent to believe that his case is stronger than it actually is. Third, accountants should stick to basics and always use double entry bookkeeping. It is their best shield against error and Crown Office would benefit from using it. Finally, among the press announcements made by the Crown about the recovery of significant proceeds from crime, did nobody think to ask the most obvious question of all: how could someone who had made over £185,000 of counterfeit money only have benefit from crime of £96,000?

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