Our Directors are:-
David Cook JP FCA MAE who is a Justice of the Peace, a Chartered Accountant, accredited by the Institute as a Forensic Accountant, A Member of the Academy of Experts, accredited by them as an Expert Witness, and is a member of the Professional Negligence Lawyers Association and the Society of Expert Witnesses.
Chris Gahagan LLB FCA, who is a Chartered Accountant, an Associate Member of the Academy of Experts and a member of the Society of Expert Witnesses with experience in commerce as well as professional practice.
We have considerable experience in Forensic Accounting, with David in particular having given evidence in Court, both Criminal and Civil, on numerous occasions. We offer a complete range of service, where we pride ourselves on our analytical and interpretive skills, personal involvement, ability to meet the requirements of the case and deadlines and our cost effective approach.
The main areas of work that we cover are:-
- Money Laundering
- Confiscation Orders
- Loss of Profit or Earnings
- Professional Negligence
- Commercial Disputes
- Business valuations, in dispute situations
- Matrimonial disputes
- Expert Determination
Forensic Accountants deal with a range of legal disputes involving money, which can be criminal or civil. In the vast majority of cases they are instructed by Lawyers, sometimes by Accountants, Insolvency Practitioners or Financial Advisors (even litigants in person, although that is fraught with difficulties), to investigate a situation, produce an Independent Expert’s Report and if necessary give evidence in Court.
A Forensic Accountant needs a comprehensive knowledge of accounts, financial and business transactions combined with analytical and interpretive skills, direct involvement, ability to meet the requirements of the case and deadlines, a cost effective approach, the ability to produce a clear relevant independent report complying with the relevant CPR and to give evidence in Court and cope with the rigours of cross examination.
They can be acting as:-
- A party expert for the Claimant/Prosecution or the Defence, which is still probably the position in the majority of cases, particularly in criminal cases.
- A Single Joint Expert, where, either the parties agree on this or the Court specifies it. This will often be the case in Matrimonial disputes, where, for example the main asset and source of income is a private company and the value, ability to extract income and capital and tax position need to be assessed.
- An Independent Expert to determine a financial dispute. This often arises under the terms of a contract, where it is specified that if the parties cannot agree on a financial matter it will be determined by an Independent Accountant appointed by agreement between them or, failing that, by the President of the Institute of Chartered Accountants.
- A Shadow Expert, which can arise with either a Single Joint or Independent Expert, where either party feel they would benefit from Forensic support/advice in dealing with their position.
We have acted in all these capacities many times.
Some examples of the type of cases that our firm have acted on are:-
An MBO by a one third director shareholder of the other two one third director shareholders. Completion was agreed by fax late on Friday afternoon when it was too late to transfer funds. The partner had already left for the bank holiday weekend so an assistant accepted completion subject to agreeing payment of interest up to Tuesday. On Saturday the purchaser director received information that a major customer had been lost and pulled out of the deal.
The vendors sued their solicitors on the basis that completion had taken place and that they had suffered loss due to the greatly reduced value of the company. The case went to trial in the High Court in London with the main issues being whether or not completion had taken place and if so the amount of loss suffered. Acting for the Defence, apart from evidence on the practical position, we had to value the company following the change in circumstances both with and without a minority interest, assess the value of security and value loan notes on a discounted basis. The case was decided in favour of the Defence, both on quantum where the Judge gave his assessment first and on causation. An unusual aspect was that at a further without prejudice experts’ meeting at Court, the Claimant's expert admitted that, as was pointed out to him, the treatment of cash in his valuation was incorrect but that he would not lose face by admitting that in Court and that he was very worried for his clients as they had been persuaded to go to trial by over aggressive lawyers and were likely to lose over it.
The client company was supplied with defective goods which it used in its manufacturing process, resulting in faulty goods (custom built display stands) being supplied to customers as the faults did not become apparent until later when the goods were in use. Acting for the Claimant, we had to assess, quantify and report on the losses suffered by the company which in our view were in respect of:-
- The time and costs involved in identifying and solving the problem.
- The cost of rectifying faulty items.
- The cost of the faulty materials.
- Compensation paid to customers.
- Loss of business and goodwill which was the most difficult area to assess.
The conduct of the case by the Defence was a little unusual as they appeared to accept liability then changed their stance and cancelled an early mediation. They then appointed Forensic Accountants, who were said to be producing a report, but instead acted rather as Shadow Experts, producing points for the Defence Lawyers to challenge aspects of our position and it looked as though the case was going to Trial. Unexpectedly they agreed to a mediation, where the Defence points were robustly refuted and the matter was settled, with the Claimants receiving fair compensation.
Our usual involvement in matrimonial eases is where a private company is one of the major assets and income source and the company has to be valued and the ability to extract income or capital assessed, sometimes looking for disappearing income or funds.
We had an unusual case acting for the widow and second wife of a wealthy businessman who had died. She was left with relatively little, partly by the terms of his will and partly by actions of his children in relation to the family business, pension rights and trusts. Action was taken under the Inheritance Provision Act.
Acting for the Claimant, we had to value the company, investigate the dealings on the pension scheme and on the trusts, arrive at the effective total value of his assets for the purposes of the Act, advise on the tax situation and how matters could most efficiently be dealt with, so that a fair share for the widow could be assessed. We were able to show that this was £16m and were told by our instructing Lawyers that our report was a bombshell to the Defendants and their Lawyers. The matter was settled at Mediation with the widow receiving a fair settlement.
This was a Crown Court fraud trial relating to a director of a construction company, accused of fraud against a major supplier and customer, in conjunction with a director of that company. The other director had already been convicted of fraud against his international company.
The basis of the Defence, for whom we were acting, was that the Defendant and his company colleagues knew nothing of the fraud, entered into transactions with someone that they were used to dealing with, supplied cash for subcontractors, as they had in other cases, had made their usual profit margin on the jobs and had dealt with the transactions correctly. We had to examine the transactions in detail and report on whether they were correctly recorded in the company's records and accounts, correctly dealt with for VAT and Corporation Tax and that the director had derived no personal direct benefit from the transactions, all of which we were able to do. We also had to look at and comment on how the transactions were dealt with in the other company's records and their very poor internal control procedures for verifying and authorising transactions
After a fairly grueling cross examination our evidence was upheld and the Defendant cleared.
This was a fraud against an Insurance/Investment company by an individual who discovered by accident, that he could "fix" the time on fax instructions so that he could buy or sell units after he knew how they were performing and make guaranteed profits.
He pleaded guilty so that the case was all about the level of compensation to the insurance company and the Confiscation Order under the Proceeds of Crime Act (POCA). The prosecution claimed that the Defendant should pay both £4.5m compensation and £5.5 confiscation, with the bonds being worth some £4.5m and using his other assets, property and investments to pay the balance.
Our first task was to correct the figures being claimed for compensation to £3.5m and for confiscation £4.5m and to point out that cashing the bonds, as was being proposed, would attract tax of £lm, which should either be taken into account in the compensation figure or that this should be dealt with by the insurance company taking back the illegal profit direct from the bonds so that tax was not a consideration.
The next task was to argue and show that the Defendant’s other assets were not derived from crime and that the compensation should be paid first with confiscation only being paid to the extent that there was a balance of value left in the bonds, some £lm. This would leave the other assets for the Defendant’s now divorced wife and family.
At a hearing before a High Court Judge in London, he found in the Defendant's favour.
Expert Independent Determination
We were appointed by the ICAEW under the terms of a contract to act as Independent Accountant to Determine a large financial dispute between a District Council and a Contractor. In this case, as is usual, operating to our timetable, both parties made their submissions and then their responses. In this case, due to the complexities, they were both given the opportunity to make a further response and then asked to respond to our points/questions. After a detailed review of the figures, the basis of both parties’ position and considering the relevant factors, the Determination was made.
Valuations of Businesses in Dispute Situations. This can be Professional Negligence, Shareholder Disputes, Partnership Disputes, Matrimonial Disputes, Probate, HMRC, Company Commercial Disputes and once, a Murder Trial. Normally the valuation of a trading company involves examining the accounts for three to five years, dealing with any discrepancies/anomalies, adjusting things such as management charges, rent, directors’ remuneration etc. to a fair commercial charge for that company, to arrive at maintainable profits post tax. We would then arrive at a relevant Price Earnings Ratio, by using the FT, BVB and the ICAEW library etc. to arrive at a value for the company, also considering the net asset position. Shareholdings would be valued based on their rights, size and influence with account being taken of relevant provisions in the M & A and any Shareholders Agreement.
An example of a recent valuation that we carried out was in respect of a very profitable and rapidly expanding UK company selling top up Health Insurance in France to French Citizens. The two 50% shareholders wanted to go in different directions, could not agree on value and needed an independent valuation. This had all the normal aspects of a valuation with the increased difficulty of arriving at maintainable profits where these had increased so quickly and substantially, with the added factor of how this would be affected by increases in insurance taxes and a large unknown, the effect of BREXIT!
As mentioned above we are involved in dispute valuations with HMRC and we do have dealings with them in another area. In our experience it is quite usual following a criminal trial, where there are relevant aspects, for the Prosecution to pass information to other agencies such as HMRC or DWP. We find that this particularly and often applies to HMRC where there seems to be an increasing tendency for the Prosecution to do this particularly where it seems at all likely that something further can flow from it and they are unhappy with the result of the case.
A slightly unusual example of this is was in respect of a business providing attachments that would enable equipment such as DVD players and games consoles play none compatible items and pirate versions. He was charged with offences by Trading Standards and then the case was taken over by the SFO who took it to trial, where the Defendant was acquitted, a verdict with which the SFO were not very happy. He had not declared his profits for the four years that he had been trading, so the SFO contacted HMRC and took over handling the tax position.
The SFO then issued assessments based on the gross turnover, which produced a very large amount of tax payable. We duly appealed against the assessments on the basis that they were excessive, should be based on net profit and that the matter should be dealt with by HMRC not the SFO. We then received a phone call from a solicitor at the SFO, who was quite patronising, telling us that we obviously were not aware of the provisions of the Proceeds Of Crime Act, under which they were entitled to use gross proceeds, not net profit, and with HMRC’s agreement were fully entitled to deal with the tax position. We should therefore immediately withdraw our appeals as there were no grounds for them.
We replied that he was mistaken, we were very well aware of the POCA position and our clear understanding was that it only applied post-conviction. The client had been acquitted, so that normal tax rules applied and the assessments should be based on net profits. Further in that situation the SFO could only take over dealing with the tax position from HMRC with the taxpayer’s agreement and that was not being given.
The caller was taken aback, said that cannot be right, he would consult on the position and come back to us. In due course he did so, apologising profusely and begging to be allowed to deal with the position and undertaking that, if we did so, the case would be dealt with by an Inspector of Taxes on secondment to the SFO, who would come to our offices and reach reasonable agreement with us. Which is what happened.
In another case, following the criminal trial of the director of a construction company mentioned above, the Prosecution had alleged during the trial that, as part of the operation the company had been issuing fake orders to suppliers in return for acceptance and payment of invoices with no goods being received, with a cash hand back from the suppliers to enable the construction company to fund the alleged fraudulent transactions. This we were able to totally refute at trial (in fact showing that this was completely absurd), but, following the director being acquitted, the Prosecution have passed the papers to HMRC who have raised very substantial VAT and Corporation Tax assessments and have told us that different rules apply to the trial where the Prosecution have to prove their case beyond reasonable doubt, whereas with HMRC it is on the balance of probability and they issue assessments which the company have to prove are wrong.
We are currently assisting the company’s tax advisors and have produced an Expert’s Report completely refuting in detail HMRC’s position, which has been submitted. We await the response and whether this goes to the Tax Tribunal.