Investigators unravel complex fraud network

A former tax consultant faces additional jail time for leading a conspiracy that used a string of UK and offshore company bank accounts to steal £6.9 million in taxes paid by clients, which were deducted from workers’ wages through fraudulent payroll schemes.

David (Mike) Hughes was sentenced to nine-and-a-half years in August 2019 for conspiracy to cheat the public revenue, false accounting and money laundering and was recently ordered to pay £1.7 million back within three months or face extra time in prison.

Hughes posed as a payroll service provider but instead of directing the funds to the taxman, he used a network of bank accounts from UK and offshore companies to steal the money from clients.

He and his accomplices then split the money between themselves instead of paying it to HM Revenue & Customs (HMRC). Three of his co-conspirators were jailed for a total of 19 years in October 2016.

However, to evade capture, Hughes spent seven years in Chile, Dubai and Northern Cyprus, which do not have extradition treaties with the UK. However, he was finally arrested in January 2018 after arriving on a flight from Istanbul to the UK.

A spokeswoman for HMRC said that Hughes had abused a system that is supposed to ensure workers are paid correctly and that taxes go to the Revenue. Instead he and his accomplices pocketed millions.

She added that an investigation does not stop once someone is convicted. HMRC will always try to reclaim the stolen money. £3.5 million has already been recovered from two accomplices.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “A confiscation order is often one of the best ways to reclaim money from convicted criminals and if they contest the amounts claimed from them, they have to prove that they did not profit from their crimes.

“Unlike the burden of proof for the original crime, which has to be proved beyond all reasonable doubt, the onus falls on convicted fraudsters to prove that they did not profit from the proceeds of their crimes.

“What’s more, the prosecuting authorities often allege that money has been hidden by those convicted and, if the court agrees, an order can be made to pay over undisclosed funds for which there may be relatively little evidence. If they are not surrendered, custodial sentences can be extended and sometimes the extension can be longer than the original sentence.

“It is for this reason that robust forensic accountancy evidence can be of great significance.”

Posted in The Forensic Blog.