Fraud - what to do?

[Merrsh1]

Afternoon

Fellow director has been caught by me colluding with a customer to create fake invoices, total of approximately £16k. It looks like the client has applied for the grant in order to pay us for work we've already agreed to and my fellow director has created a fake invoice trail to support their narrative.

I'm aware of my options but what is the likely outcome if / when I report?

My concern is now I know its happened, legally I have to do something and he's bang to rights there is absolutely no error / pretending it didn't happen as I have the full email trail and fake invoices.

A few people have told me it'll be brushed under the carpet / money will be repaid and the client blacklisted but I'm not so sure....

Any advice appreciated.

Thanks

[BlackTails]

If I were in your shoes:

- I’d inform the co-director and the client what I had discovered, with a paper trail, via a solicitor’s letter.

- I’d inform the entity that provided the client with the grant what I had uncovered, with supporting docs, via a solicitor’s letter. And emphasise your own innocence, the concealment from you; and offer to assist that entity with any further investigations.

- Look into how to get rid of your co-director via professional, insured advice from a litigation solicitor who knows about companies, directors, wrongdoing and shareholder rights. If you no longer want to work with him (and there is NFW I would) you need to get him out. Chances are you’ll have to offer to buy out his shareholding and it may not be that easy to get him off the board against his will if you’re 50/50 shareholders.

[Merrsh1]

BlackTails said:

If I were in your shoes...

Thanks for that, we have a bad leaver clause in our SA so if he's barred from being a director, he's out the business and his shares are sold at nominal value.

I've spoken to a few people and they all tell me I'm making a mountain out of a mole hill but I don't think I am. Apparently because of the value they believe it'll be smacked legs for client and director, client pays back the money and then all forgotten about. However, its a large government agency that's in the mix with a robust fraud department with an apparent zero policy to fraud.

This is serious isn't it?

[mickythefish]

Police.

The issue is has he got history and now how can you ever trust him.

[Muzzer79]

Merrsh1 said:

I've spoken to a few people and they all tell me I'm making a mountain out of a mole hill but I don't think I am. Apparently because of the value they believe it'll be smacked legs for client and director, client pays back the money and then all forgotten about.

It's £16k, not some loose change. Think about what else he might have done that you haven't discovered (yet) and the strong possibility that if left unchecked, he'll continue or do it again.

Merrsh1 said:

This is serious isn't it?

100% yes! It's fraud.


Your 100% focus should be on emphasising how you had nothing to do with this and distancing both yourself and the business from this individual.

[BlackTails]

Merrsh1 said:

BlackTails said:

If I were in your shoes...

Thanks for that, we have a bad leaver clause in our SA so if he's barred from being a director, he's out the business and his shares are sold at nominal value.

I've spoken to a few people and they all tell me I'm making a mountain out of a mole hill but I don't think I am. Apparently because of the value they believe it'll be smacked legs for client and director, client pays back the money and then all forgotten about. However, its a large government agency that's in the mix with a robust fraud department with an apparent zero policy to fraud.

This is serious isn't it?

Yes, this is serious. It’s fraud. Moreover, it is a fraud that he has caused the company to be involved in. So although he is on the hook for it and you personally can say you knew nothing about it, the company will be liable for the consequences of his fraud, and you may encounter scepticism that you knew nothing/were innocent. Hence: dob him in hard and fast without any hesitation.

It will be a while before he is barred from holding a directorship and that may never happen (it normally requires a prior insolvency event for the company, or his bankruptcy or a criminal prosecution). I’d be looking urgently into ways to exclude him from the business pretty much immediately. Your position should be that is a dishonest contagion and the company and its business needs to be insulated from him.

I would ignore the “advice” of the friends you’ve spoken to. It sits somewhere between dangerously naive and stupid. Lawyer up.

Edited by BlackTails on Wednesday 26th February 15:21

[Vsix and Vtec]

Absolutely this is serious. If you don't report this (and I don't mean tell them they've been rumbled) and someone else does, and it comes out that you knew, then YOU are now thier accomplice even if you didn't benefit. Talk to your lawyer, and talk to the police. Not doing so now you're aware puts you in a no win situation.

[Blib]

mickythefish said:

Police.

This. Now.

[Mr Pointy]

No-one seems to have asked what sort of company the OP works for: it might be a two-man band or it could be a large multinational. If it's the former then you need lawyers & police; if it's the latter then boot it up to the Board & HR.

[Merrsh1]

Mr Pointy said:

No-one seems to have asked what sort of company the OP works for....

We're a small business, 6 staff and 2 directors, myself and the director in question. We have full articles of association, shareholders agreement and a bad leaver clause that if either of us ceases to be a director then we have to sell our shares at a nominal amount.

My concern is that the government body or the police don't take it seriously and I'm left to deal with him - but I've got to do it regardless.

He has a history of stupid mistakes and poor behavior, this is just the pits though... I caught him years ago attempting something similar, warned him and he's never tried it again until now.

I'm currently in the position of leaving the business (against my better interest) as I've had enough of him and couldn't see a way to get rid, maybe the universe has provided!

Cheers

[AndyTR]

Solicitor for advice immediately and do not inform the individual he's been rumbled. As this is a financial crime you need to be aware of the laws around tipping off, hence the need for legal advice asap.

Edited to add https://www.sentencingcouncil.org.uk/droppable/ite...

Edited by AndyTR on Wednesday 26th February 16:27

[Merrsh1]

I'm going to contact Action Fraud (the police) and the funding body's fraud department tomorrow. Is this a sensible approach?

Thanks all.

[Mr Pointy]

Merrsh1 said:

I'm going to contact Action Fraud (the police) and the funding body's fraud department tomorrow. Is this a sensible approach?

Thanks all.

I'd suggest speaking to your own lawyer first just to make sure you are doing everything to protect yourself. Once you contact the police you won't have control over what happens & you will need representation in any interviews.

[Merrsh1]

Mr Pointy said:

I'd suggest speaking to your own lawyer first just to make sure you are doing everything to protect yourself. Once you contact the police you won't have control over what happens & you will need representation in any interviews.

Ok, I'll do that and see what they say.

[GiantEnemyCrab]

Is this a 'process' problem (eg grant after the work has been agreed), or is the aim to get paid twice for the same work, with him and the client splitting it or all of it?

[MaxFromage]

You have to engage a solicitor, remove the director and then go from there on the advice of the solicitor. To protect the company and yourself. I've seen it a couple of times before. Make sure you have your ducks lined up (bank access, emails etc) before you remove them.

[Merrsh1]

GiantEnemyCrab said:

Is this a 'process' problem (eg grant after the work has been agreed), or is the aim to get paid twice for the same work, with him and the client splitting it or all of it?

Process problem

[Googie]

Much bigger numbers involved but a similar principle years ago in a previous job where some guys did similar- they ended up in prison for fraud

[BlackTails]

Merrsh1 said:

I'm going to contact Action Fraud (the police) and the funding body's fraud department tomorrow. Is this a sensible approach?

Thanks all.

It is a sensible step but not a sensible first step. Speak to your solicitor first. Then prioritise these steps, under your solicitor’s guidance.

[Mr Overheads]

Merrsh1 said:

GiantEnemyCrab said:

Is this a 'process' problem (eg grant after the work has been agreed), or is the aim to get paid twice for the same work, with him and the client splitting it or all of it?

Process problem

So Company has done some work already
Client now has found a grant that could pay for it, rather than pay in normal way
So Company is altering old invoice values/wording so that client qualifies to pay using the grant, or some other alteration to ensure work is covered by grant?