One of the most persistent business to business scams is support publishing. A telesales representative will contact a small business and offer them inclusion in a wall planner, directory or some publication for a school. They often claim to be associated with a good cause or that part of the money will go to charity.
In many cases the products are never published and little of the money raised goes to charity. The business will get a bill and will be threatened with legal action if they refuse to pay.
Companies Investigations, a part of The Insolvency Service, has been investigating a number of publishing scams in recent months and has taken action against the company directors to ban them from business. When The Insolvency Service has concluded their civil investigation the details may be passed on to another authority to take forward a criminal investigation.
Below are two case studies, one a civil case recently concluded and the other an investigation that was passed to Merseyside Police resulting in two directors being imprisoned for their misconduct.
Yellow Partnership Limited and associated companies
· Mr David Anthony Horan of Droylesden, Manchester. DOB 14/03/1964
Company Directors Disqualification Act 1986, eight year Disqualification Undertaking to commence from 23 September 2010.
· Mr Carlo Abbonizio of Yeadon, Leeds. DOB 16/08/1972
Company Directors Disqualification Act 1986, eight year Disqualification Undertaking to commence from 19 October 2010.
· Mr Paul Kristian Percival of Bideford, North Devon. DOB 03/09/1973
Company Directors Disqualification Act 1986, eight year Disqualification Undertaking to commence from 26 October 2010.
Yellow Partnership Limited – went into administration on 2 December 2008, with £0.00 assets and liabilities to creditors of £530,106
MPH direct Limited – went into administration on 2 December 2008, with £0.00 assets and liabilities to creditors of £356,593
Strawberry Educational Ltd – went into administration on 21 November 2008 with £0.00 assets and liabilities to creditors of £403,739
Yellow, MPH and Strawberry all subsequently went into liquidation on 18 February 2009 following petitions presented by the Secretary of State on public interest grounds
McEwan Kingston Bailey – went into liquidation on 18 February 2009 with £0.00 assets and liabilities to creditors of £274,277
With regards to Yellow Partnership Limited the investigation by The Insolvency Service found that:-
1) Yellow Partnership received at least £958,872 between 01 July 2007 – 31 August 2008 from customers as payment (between £300 - £500) for advertising in publications – a history workbook; a booklet including stories with the adverts stapled into the centre and a wall-planner. During this period Yellow Partnership paid £47,000 to registered charities and £57,159 to its directors;
Yellow obtained sales by cold-calling small businesses. Telesales staff provided details of Yellow’s business to advertisers in the course of an initial sales call and the terms of the contract we confirmed in a subsequent confirmation call;
Yellow failed to comply with the requirements of the Charities Act in that its telesales staff did not inform potential advertisers in the course of the initial sales call of the amount to be paid by Yellow to the charity concerned;
Yellow had no effective procedure in place to ensure its telesales staff properly informed potential customers of the nature of its business and its relationship with the charity concerned;
As a result some customers agreed to place advertisements in Yellows publications and made payments to Yellow in the belief that Yellow was a charity and/or for charitable purposes.
2) Between 2003 and November 2008 Yellow Partnership improperly retained details of customers’ credit cards, including the three digit security codes, thereby putting the customers at risk of fraudulent transactions.
With regards to MPH Direct Limited the investigation found that they obtained sales in the same way as they did Yellow Partnership Limited by cold calling small businesses and failing to comply with the Charities Act by not informing potential advertisers of the amount due to be paid to the charities. Evidence suggests and the directors did not dispute that:-
1) Between 01 July 2007 and 31 August 2008 MPH Direct received at least £444,253 from customers as payment for advertising in publications to be produced on behalf of registered charities. During this time MPH paid £18,750 to registered charities and £53,948 to its directors.
2 Between 2003 and November 2008 MPH also improperly retained details of customers’ credit cards and the three digit security code putting the customers at risk of losses by fraudulent transactions.
In investigation into the improper trading activities of Strawberry Educational Limited found that:-
1) Strawberry received at least £634,096 between 01 July 2007 and 31 August 2008 from customers as payment for advertising in publications to be distributed to schools but with no connection to a registered charity. During this period Strawberry paid £43,300 to its directors but made no payments to charity of directly for the benefit of any good cause;
Strawberry obtained sales by cold-calling small businesses. Telesales staff provided details of Strawberry’s business to advertisers in the course of an initial sales call and the terms of the contract were confirmed in a subsequent confirmation call;
Strawberry failed to comply with the requirements of the Charitable Institutions (Fund Raising) Regulations in that its telesales staff did not inform potential advertisers in the course of the initial sales call of the proportion of the payments received by Strawberry which were to be used for the benefit of schools;
Strawberry had no effective procedures in place to ensure that its telesales staff properly informed potential customers of the nature of its business and that it had not connection to a registered charity;
As a result some customers agreed to place advertisements in Strawberry’s publications and made payments to Strawberry in the belief that Strawberry was a charity and/or for charitable purposes;
2) Between 2003 and November 2008 Strawberry improperly retained details of customers’ credit cards, including the three digit security code, putting customers at risk of losses by fraudulent transactions.
The last company investigated in this case was McEwan Kingston Bailey Limited, (MKB) investigators found that the directors used improper methods to collect debts on behalf of Yellow, Strawberry and MPH. The investigation established that MKB presented itself as an independent third party debt collection agency so that companies were not aware that it was controlled by the directors of Yellow, Strawberry and MPH. Also;
They used aggressive techniques, including threatening court action when no debt was properly due;
Collected and/or attempted to collect solicitor’s fee and court fees from clients when it had not incurred such costs, around £50.00; and
MKB collected and or attempted to collect late payment charges of between £40 and £70 when it was not entitled to make such charges.
Trinity House Publishing Limited and associated companies
Six companies were all wound up in the public interest on petitions issued by the then Secretary of state for Business Enterprise and Regulatory Reform (now Business Innovation and Skills).
Trinity House Publishing Limited, Regency Advertising (UK) Limited and KDM Publishing UK Limited, on 8th October 2007.
Fire & Safety (UK) Limited and Starlight Media (UK) Limited on 4th February 2008.
Adsearch (UK) Limited on 19 March 2008
In respect of Trinity House Publishing Limited
· Mr Gary Campbell of Page Moss, Liverpool. DOB 21 July 1965 Company Directors Disqualification Act 1986, 11 year disqualification order made on 16 June 2009, commenced on 7 July 2009.
In respect of Regency Advertising (UK) Limited, KDM Publishing UK Limited, Fire & Safety (UK) Limited, Starlight Media (UK) Limited and Adsearch (UK) Limited
· Mr John Francis Waring of Heswall, Merseyside. DOB 28 January 1969
Company Directors Disqualification Act 1986, 13 year disqualification order made on 24 March 2010, commenced on 14 April 2010.
Also in connection with this group of companies the Official Receiver obtained disqualifications against the following:
- Sarah Jayne Burnell (regarding Starlight) 5 year order commencing 14 April 2010
- Rhian Harris (regarding Fire & Safety) 5 year undertaking commencing 27 May 2009
- Edward Stephen Cave (regarding Adsearch) 7 year undertaking commencing 24 June 2009
Following on from an investigation by Companies Investigations, part of The Insolvency Service the Criminal Enterprise Team of the Merseyside Police took forward a successful prosecution of two company directors.
John Francis Waring and Gary Campbell both pleaded guilty to offences of Fraudulent Trading at a hearing at Liverpool Crown Court on the 21st of June 2010.
Mr Waring a 41 year old man, was sentenced to five years imprisonment for eleven offences of Fraudulent Trading by His Honour Judge Swift at Warrington Crown Court on Friday 27th August 2010. The offences were committed between 2005 and 2010 and were divided between 11 different companies or businesses, netting, according to the police investigation, £993,463 for Mr Waring.
Mr Campbell a 45 year old man, was sentenced to eight months imprisonment by His Honour Judge Swift at Liverpool Crown Court on Wednesday 6th October 2010 for similar offences committed in relation to a particular company, Trinity House Publishing Ltd, between 2006 and 2007.
The Insolvency Service investigation had found that five Wirral based companies, variously controlled by Mr Waring and Mr Campbell, all issued invoices and demands for payment in connection with advertisements that had never been ordered and which were to appear in publications, that were themed by reference to one or other of the emergency services, but were never produced.
The investigation also found that the companies’ Registered Offices were no more than mail drops, that the company officers had given false addresses to Companies House and that statutory filings were not being made. In further breaches of their statutory obligations, the company officers also failed to co-operate with the investigation by refusing to attend for interview, or to identify the companies’ trading addresses, or to allow access to trading records. Nevertheless, the investigators were able to establish that, in a period of less than 18 months the companies had collectively received and disbursed sums totalling almost £300,000, for which there was no explanation.
A copy of the report of the investigation was provided to Merseyside Police, who then launched their own investigation, drawing upon the work already done by CIB, in the form of witness statements submitted by the Investigator, supported by a quantity of evidential material.
In passing sentence, His Honour Judge Swift noted that whilst Mr Waring was on police bail, he continued his fraudulent activities by forming two further unincorporated businesses, Enterprise UK Media and Platinum Publishing and commented that this was fraudulent activity over many years using a variety of fraudulent methods and was therefore sophisticated, exploiting businesses and others.
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