A Panorama investigation, shown on the BBC in the UK, has revealed how criminals are taking advantage of flaws within the UK bankruptcy system to get away with fraud worth millions.
Bankruptcy is designed to be a last resort for those who are unable, rather than unwilling, to pay their debts. However, there are some individuals who are taking advantage of the whole process by using it to their own advantage and consequently making a mockery of the system. The programme highlighted how some individuals are willing to go to extreme lengths to avoid paying their debts, leaving their creditors empty-handed while they hold on to huge sums of money and valuable assets through a complicated concealment of their vast wealth.
Fraud cost the UK economy an estimated £193bn in 2016, more than the entire amount generated in income tax and equivalent to around £10,000 per household.
So, what part do insolvency practitioners have to play in combating this costly crime? One of the chief duties of an insolvency practitioner is to recover as much money as possible from the estate of the bankrupt and return this to the outstanding creditors. While the bankrupt individual is obliged to be honest in their discussions with the insolvency practitioner acting as the trustee of the estate regarding the level of the assets they hold, this is not always the case. Should concealment of assets be suspected, an investigation needs to be undertaken.
Begbies Traynor has substantial experience in the investigation of unexplained deficiency in bankrupt estates. Michael Locke, insolvency director, is a leading figure in this field having handled some of the most well reported insolvency cases where assets have been deliberately concealed.
Michael’s most famous case centres on the bankruptcy of Alan Geraint Simpson, a former Harley Street psychiatrist who claimed he was penniless. The investigation crossed oceans and thousands of miles, starting in the UK and ending at Simpson’s New Zealand home where over £1m of gold and silver bullion was discovered. This case was ground-breaking in the respect that it marked the first time that a UK bankruptcy order has led to special legislation permitting an overseas raid.
Michael was also involved in a case, along with Begbies Traynor's partners Paul Stanley and Paul Barber, which saw a bankrupt solicitor making pension contributions totalling more than half a million pounds. Following a trial, these contributions were deemed to be excessive and motivated by the desire to put this money out of the reach of his creditors. This case was the first of its kind and is now cited in UK case law, referred to as Stanley and Barber v Wilson and Others.