In history, there are many famous cases of powerful owners who have misappropriated funds or robbed pension funds of millions. One only has to think of Robert Maxwell. But for every Bob Maxwell there are a hundred or so smaller directors/business owners who are either stealing from their own businesses, mistreating their customers or otherwise avoiding their moral and fiduciary responsibilities to the financial disadvantage of us all. What is distressing is that many are getting away with it; many, but not all.

Personal injury calls

Take for example, the recent case of a telemarketing company pursuing personal injury claims. From 2017 the Telephone Preference Service (TPS) and the Information Commissioner's Office (ICO) received nearly 500 complaints from members of the public who had received unsolicited marketing calls from the company. The director had tried similar campaigns through other businesses and was well-known in the industry. He was considered to be highly experienced in telemarketing sales and having full knowledge of the rules and regulations.

Previous investigations into his companies by the ICO had resulted in the director closing these companies down and successfully striking them off, prior to the regulators finalising their investigations. In January 2019 however, an £80,000 fine for contraventions of The Privacy and Electronic Communications (PEC R) Reg 21 was successfully issued against the company. The director appealed. His appeal was dismissed and the fine revised upwards to £90,000. The company failed to pay and was wound up. Following our appointment as liquidators, no company assets could be identified.

As is often the case in matters of this nature, information was limited, and books or records were few and far between. The director stated that all records had been previously destroyed. The only records that were available to us were the bank statements, which created a confusing picture of the company's affairs.

We worked closely with the ICO and the TPS to obtain as detailed a picture as possible on the company's activities. This allowed us to identify that the original calls (the source of the complaints) had been made from lines retained by one of the directors' previously owned companies. He had continued to use these lines under the pretence of a new company that was now in liquidation.

Further investigations enabled us to identify that the Director had been involved in not only the line leasing of the numbers traced, but also a further 17 lines that were at this time unknown to us. The leased lines were still in existence and had continued to be used by the company. 

This subsequent information allowed us not only to identify that the source of the calls was indeed the Company itself, but also enabled us to secure additional banking information. We were also able to secure notifications and alerts addressed from the TPS to the company regarding the complaints it had received from its unsolicited business activities.

Formal interview

On the back of this information, we were able to carry out a formal interview with the director. He confirmed that the company had indeed made the calls, and that the lines had been maintained by the company. He said he was also aware of the letters and emails that had been sent to him by the TPS.

The director attempted to blame all of these ‘errors' on a new employee, whose name and company position he could ‘no longer remember'. He did remember, however, that he had sacked the said employee having discovered their inappropriate actions! In addition, the director did admit that he had received the TPS notifications and that he was responsible for the offending calls being made. He insisted however that this had only occurred on one day (despite being presented with overwhelming evidence to the contrary) and that the former employee was actually to blame for the remainder of the calls. Upon discovering his employee's misdemeanours, he thought the best thing to do in these circumstances was precisely nothing.

To be strictly accurate, he did do something: he decided the best thing to do (following the commencement of the ICO investigation) was to resort to his previous tactics and begin to voluntarily dissolve the company, taking its debts with it. The ICO discovered this in time and lodged an objection.

A claim was subsequently issued against the director for the loss to the company of incurring the imposed fine.

Whilst initial negotiations were slow and a date for a trial was set, the director did in fact settle the amount in full, together with a personal undertaking that he would never be involved in telemarketing again. The settlement allowed for a distribution to unsecured creditors.

The dishonesty in this case is of course not on the same scale as a Robert Maxwell, but such seemingly ‘minor' dishonesties and frauds are happening frequently and are invariably to the disadvantage of the consumer, many of whom - as in this example - are some of the most vulnerable in society. Calling out such malpractice therefore not only helps protect the vulnerable from future scams, but also ensures the directors are held to account and pay for their misdemeanours.

For further information visit: PKF Littlejohn Advisory Limited