The incredible but true story of the
leasing industry, a Harrods safety deposit box and a missing
fortune.
How to Serious Crime Squad Protects Lessors
During Christmas 2006, financial
investigators from the UK’s Serious Organised Crime Agency (SOCA)
carried out a series of raids across Britain on a number of
properties and businesses.
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SOCA’s mission was to seize large amounts of
stolen money which had allegedly been laundered through scores of
safety deposit boxes.
One
business raided was London’s most famous department store, Harrods.
Stashed away in a basement safety deposit box, officers discovered
hundreds of thousands of pounds of allegedly laundered money.
The idea that Harrods, the retailer of choice
for the rich and famous, should be used by alleged fraudsters to
launder the proceeds of crime seems mind-boggling. Even stranger,
perhaps, was the discovery that the loot in its safety deposit box
had, in fact, been allegedly defrauded from at least 10 British
leasing companies.
However, it took until the end of 2009 – after
a legal battle that lasted almost four years – for a judge to
finally allow the money from the deposit box to be handed back to
the leasing companies.
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By GlobalDataThis only partly resolved the matter, however,
as the companies involved are still chasing large sums the alleged
perpetrators are believed to have stashed elsewhere.
The story of how the money ended up in the
safety deposit box in the first place, and what happened after the
raid by SOCA, can be revealed here for the first time.
Leasing Life can also shed light on how the
fraudsters conned the leasing companies into handing over huge sums
in cash – and the efforts lessors made to recover their money. It
also serves as a salutary lesson to all leasing companies on the
need for them to cooperate in order to recover their money.
Mastermind
The affair was masterminded by an
Irish-born businessman called Patrick Doherty.
Not to be confused with another businessman
with the same name – a multimillionaire who owns a Dublin-based
company called Harcourt – Doherty is currently under investigation
by Irish police for tax evasion. SOCA also last month said it has
been “cooperating” with the Criminal Assets Bureau of the Garda in
its investigation into Doherty.
Doherty also has links with numerous UK
companies, many of which are said to be in the property sector.
According to one source linked to the case, Doherty said during
interviews with SOCA he had a property empire worth £200 million
(€227 million).
Many of his companies have the name Magnus in
their title. A number of these, including one called Magnus
Properties UK Limited, currently in the hands of
PricewaterhouseCoopers administrators in Leeds, were at the centre
of the Harrods case.
Doherty’s alleged accomplice was a Scottish
businessman called Leslie Thompson who, according to public
records, is listed as a director of Amco Fire and Security, a CCTV
installation company. Based in West Lothian in Scotland, Amco was
liquidated in October last year following the issuing of a
winding-up petition against it.
The scam
The nature of their alleged scam was
simple enough, but the details only emerged at a hearing before the
City of Westminster Magistrates Court at the end of 2009.
Doherty first applied – through
Magnus Properties UK Limited and several other businesses linked to
him – to leasing companies for finance, claiming he needed the
money to cover the cost of installing CCTV equipment in some 30
properties which he owned across Britain, including student
accommodation and factories.
Once these lease deals had been signed, the
supplier of the CCTV equipment, Amco, received up-front payments
from the leasing companies – whose identities cannot be disclosed
for legal reasons – for the value of the equipment. Sources said
these payments totalled in excess of £1 million. Amco was then
supposed to deliver the cameras to companies linked to Doherty. In
many cases, however, this never happened.
At the hearing, SOCA successfully applied
under the Proceeds of Crime Act for the money to be forfeited from
the Harrods safety deposit box to be returned to the lessors.
Presiding over the hearing, District Judge
Snow said “it is more likely than not that the leasing arrangements
were fraudulent”, and that in many cases the equipment did not even
exist and was never supplied to Doherty by Thompson. In many cases,
however, Amco received upfront payments without question from the
lessors.
The judge also said Amco sometimes billed the
lessors twice for a single camera – a trick the supplier got away
with by simply using different serial numbers on the same
equipment.
Doherty, meanwhile, as well as being the
lessee, contributed to the alleged scam by personally signing a
number of false delivery notes stating the equipment had been
installed. A template of an Amco invoice was found on Doherty’s
home computer.
The judge also found that, where genuine
leases had been signed, the value of the leases were often “vastly
inflated”. One source connected to the case said a finance company
allegedly “could be overpricing up to 700 percent”.
Furthermore, Doherty “consistently] default[ed]” in his lease payments, Judge Snow said.
Disaster avoided
Although the lessors are now
celebrating their victory, the case could have gone against
them.
Just hours before the start of the hearing,
Doherty’s legal adviser handed a letter to lawyers acting for SOCA
and the lessors. It stated Doherty was suffering from a mental
illness and had voluntarily booked himself in as a patient at a
psychiatric intensive care unit in Northern Ireland.
Although the judge made clear he believed the
“timing of Mr Doherty’s illness was fortuitous”, he still received
arguments from both sides as to whether he could continue the case
in Doherty’s absence.
However, as the case ultimately was about
forfeiture of the money in the deposit box, not against Doherty in
person, and as the businessman had been non-compliant with earlier
directions hearings, the judge ruled the case could continue in
Doherty’s absence. (It must be pointed out here that neither
Doherty nor Thompson have been found guilty of any fraud offences
linked to the case.)
Thompson, meanwhile, sought to dismiss the forfeiture
action by claiming payments made by him to Doherty were linked to
share purchases in one of the property owner’s companies, rather
than being any share of proceeds from the alleged scams.
Although District Judge Snow accepted that “it
is more likely than not” that Thompson did withdraw “cash from Amco
and used it to purchase shares in the company”, he said this did
not impact on the case as Thompson dropped out of the case before
trial and never filed evidence at the court.
The case may also have had a completely
different outcome if the leasing companies had not agreed to a
proposal by their legal advisers, Wragge & Co, back in December
2008 to band together into a single group.
Doing so meant they were far more willing to
hand over crucial evidence to SOCA, a factor which was crucial in
the anti-fraud unit’s success in court.
“The key to the successful conclusion of the
case was working collaboratively with SOCA and making sure the
finance companies worked with each other. Very early on we came up
with a solution whereby the finance companies agreed to share the
costs… this meant energy was pooled and channeled into fighting
the alleged fraudsters, not each other”
Furthermore, without a single action group,
the lessors might well have got involved among themselves in a
series of petty squabbles over title to the assets and right to the
money in the safety deposit box. For SOCA, which has a public duty
to ensure money it recovers is returned to the rightful owners,
this could have proved disastrous.
There were also other benefits for the leasing
companies to work together.
Greg Standing, a Wragge & Co partner who
acted for the leasing companies, said: “The key to the successful
conclusion of the case was working collaboratively with SOCA and
making sure the finance companies worked with each other.”
He added: “Very early on we came up with a
solution whereby the finance companies agreed to share the costs
and any recovery pro rata their exposure to the fraud. This meant
energy was pooled and channeled into fighting the alleged
fraudsters, not each other.”
The leasing companies, some of whom have
received six-figure sum payouts, have agreed to pay SOCA’s costs,
even though there is no legal requirement for them to do so.
Meanwhile, the hunt by the lessors continues
to recover the rest of the money taken from them by the dual
financing and fresh air financing scam.
Four of the eight lessors involved are
understood to have issued civil claims against Thompson and Doherty
for conspiracy to defraud, and have also obtained an order from the
High Court in London freezing some £2 million of assets linked to
the two men.
Harrods said it believed it acted in
accordance with the letter of the law throughout.
Its group director of corporate affairs,
Katharine Witty, told Leasing Life: “There was no suggestion of
impropriety on the part of Harrods in carrying out the necessary
safety checks on this customer.
“We always comply with stringent
money-laundering legislation, and in that respect Harrods is
regulated by the FSA and assists the authorities when required to
do so. You must remember that what a client puts in the box is
entirely up to them, and we have no knowledge of the contents.”
A SOCA spokesperson added: “Harrods has not
been accused of any wrongdoing. It did everything it had to
do.”
Brendan Malkin
