To recap, I was talking about the individuals connected to the mafia who had a company in the UK called Magnolia Fundaction UK Ltd. They filed information saying that the director’s name was “The Chicken Thief”, his occupation “fraudster” and the address “Street of the 40 Thieves in the town of Ali Baba, Italy. Companies House gratefully accepted this and filed it away—that was it. When the Secretary of State was asked on 14 September 2017 what she was going to do about it, the reply was:
“No action has been taken at this time against the promoters and officers of Magnolia Fundaction UK Ltd for filing inappropriate information in Italian at Companies House.”
Nothing has changed since; it is exactly the same.
I knew the names of some well-known convicted mafia criminals and, out of curiosity, I put one of their names into the Companies House website. The person turned out to be a director of an organisation called Business Bank Italy Ltd, registered in the UK. It had a website that was inviting people to invest. I reported that matter to the shadow Chancellor at the time, Anneliese Dodds, she raised it in the other place and eventually the website vanished.
Nobody in authority at the Insolvency Service or anywhere else even bothers to see whether criminals’ names appear in the Companies House database. It is that bad, and we think that that kind of institutional framework will help us deal with misdemeanours by directors; it is not going to do that. What the Government have done is prosecute someone who demonstrated how easy it is to form a company with a false name and then announced in a newspaper that he had done it. So they went and prosecuted him—effectively, he was a whistleblower.
The proposed regime under the Bill for dissolved companies will suffer from the same problem as the current regime for live companies: the requirement that an interested party, most likely a creditor, raises concerns about the conduct of a company’s directors with the Insolvency Service. But how will the creditors
know that a company is being dissolved? Directors are required to notify creditors of the proposed dissolution, and such creditors have an opportunity to object to the proposed dissolution before it takes effect, but not all such creditors may be notified. You can have pre-packs without any creditors meeting. People do not even need to be told. All kinds of things happen.
Once a company has been dissolved, there is no equivalent of a liquidator or an administrator of an insolvent company who has a duty to investigate the conduct of directors and report them to the Insolvency Service. This makes it more likely that only the particularly egregious examples of misconduct significant enough to come to the attention of the interested party will be investigated in respect of the directors of dissolved companies.
Companies can also be dissolved without any formal legal process. For example, Companies House can dissolve a company if it fails to file annual accounts. You do not need to go through any legal process; just do not file the accounts. Every year, thousands of companies do that, so many rogue directors can choose this method to dissolve companies. Such possibilities do not even appear in the Bill, as to who is going to find out and what they are going to do about it.
The Bill places considerable reliance upon insolvency practitioners but the insolvency industry has been engaged in corrupt practices for years. About 20 years ago I published a monograph—titled, appropriately, Insolvent Abuse—which documented many of the corrupt practices of the insolvency industry. Hardly anything has changed in the last 20 years. The industry is still running amok. This week the Financial Reporting Council confirmed its fine of £13 million on KPMG and £500,000 on its insolvency partner, together with costs of £2.8 million for investigation. The reason was that KPMG and its insolvency partner pushed Silentnight, which was a client of the accountancy firm, towards insolvency, so that the private equity group HIG, the client that it really wanted to cultivate, could buy the business out of administration by dumping the defined-benefit pension scheme for Silentnight’s 1,200 staff. KPMG’s partner lied to the Pensions Regulator and to the Pension Protection Fund.
KPMG has been central to numerous scandals, and its involvement in another will perhaps not surprise many in this House. However, it is still in business, and its lying partner is not facing any criminal investigation or charge. Perhaps the Minister can explain why there is one set of laws for ordinary mortals but another for accountancy firm partners, where they go in front of kangaroo courts and lie but still continue with their lives.
In case anyone thinks that was a hefty fine for the partner, usually the partnership agreement states that the firm will reimburse the partner, so his £500,000 fine will be reimbursed, while the £13 million fine for KPMG will go not to the members of the Silentnight pension scheme, who have lost some of their pension rights, but to the coffers of the Institute of Chartered Accountants in England and Wales, which authorised the cheating, lying partner. The institute will be quids in. It is akin to someone being fined for mugging and
then being told, “By the way, make the cheque payable to the Institute of Muggers.” That is what we have by way of self-regulation, and it is wrong on every count.
I urge the Minister to act to ensure that the money goes to the victims of KPMG, not the ICAEW, which does not deserve it. It has already recovered the costs of the investigation. These RPBs—recognised professional bodies—must not benefit from the misconduct of their members; in fact, they should be in the dock for authorising those members. What kind of supervision do they actually carry out?
The corrupt practices of the insolvency industry are also documented in last month’s publication by the All-Party Parliamentary Group on Banking, Resolving Insolvency: Restoring Confidence in the System. It notes that insolvency practitioners
“sell their independence, and their considerable powers, in return for an appointment to an insolvency case.”
Who usually appoints them? Banks. So they are basically colluding with banks. The report says that conflicts of interest are regularly being ignored. The interests of banks are prioritised and too many innocent people have lost their homes, businesses and savings as a result. Your Lordships can see the evidence; it is in the monograph that I launched.
Many victims claim that banks and insolvency practitioners have forged their signatures in order to repossess assets. Evidence of that has appeared in national newspapers and on the BBC, but the National Crime Agency has sat on the evidence for months or even years and has done absolutely nothing. I have been told by authoritative sources that there are hundreds of such cases, but nothing is getting done. The recognised professional bodies are essentially accountancy trade associations—I am sorry; I will finish. They have no independence from their members and have a long history of sweeping things under their dust-laden carpets.
About a year ago, replying to one of my Written Questions, the Minister said that 7,962 insolvency cases had still not been resolved, and that their age was between five and nine years, while 3,642 were more than 10 years old, and 14,328 were more than 15 years old. No regulator asks why insolvency practitioners are milking insolvencies. The longest one that I know of lasted 30 years, and that related to Israel-British Bank. PricewaterhouseCoopers made it last for 34 years, and it came to an end when there was not a penny left in the business. These are real-life sharks, and they really need to be dealt with.
There was a report by Sally Masterton, codenamed “Project Lord Turnbull”, which was written in 2013 and formally published in June 2018 by the All-Party Parliamentary Group on Fair Business Banking. It referred to fraud at HBOS. There was no action by any recognised professional body, although the report made it clear that the fraud could not have been carried out without the complicity of the partners. There has been no investigation into the RPBs either. In the last 10 years, some 8,000 complaints about insolvency practitioners have been lodged with the RPBs and—guess what—only five out of 8,000 have had their licences withdrawn. Over the last seven years, only three IPs had their licences revoked. Is the Minister really content with that?
I finish with two specific requests. Can the Minister arrange two things? One is an independent public inquiry into the insolvency industry. Secondly, could he arrange for a relevant Minister to meet me and a former police and crime commissioner to see and hear the evidence about how banks, lawyers and insolvency practitioners are colluding and perpetrating devious practices that have deprived people of their homes, businesses and savings? I am sure that he does not tolerate corrupt practices and will willingly agree to these two requests.
7.22 pm