The Chancellor, Rachel Reeves, confirms the Government is appointing a Covid Corruption Commissioner to try and recoup the £billions of fraudulently obtained finance from public money during the Pandemic.
The Commissioner’s Likely Role
Upon appointment, the new Commissioner will work with organisations such as HMRC, the Insolvency Service (‘IS’), the Serious Fraud Office and the National Crime Agency to investigate an estimated £7.6 billion of Covid related fraud. Over £4 billion is thought to be irrecoverable. The areas to be investigated include:
- Public money wasted on useless PPE – a very hot topic
Only time will tell how successful the new Commissioner (once appointed) will be in recovering this public money, or whether this work will be adequately financially resourced. However, the Chancellor confirmed that the Commissioner will:
“….lead our work to uncover those companies that used a national emergency to line their own pockets. That money belongs in our public services, and taxpayers want that money back.”
Our Comments
This initiative is broadly based to recoup as much public money as possible that was lost in the above initiatives. Is this just a soundbite or is there a will to see this through?
From our perspective as Insolvency Lawyers, we are already seeing Criminal prosecutions and Director Disqualifications handed out to company Directors (often accompanied by financial compensation claims) who fraudulently or incorrectly applied for financial support and/or subsequently misused a Covid Loan, such as a BBL or a CBILS loan.
Question
If the Government is truly serious about hitting this topic hard, can we expect to see already disqualified Directors, many of whom will have made conduct admissions as part of the Director Disqualification process, now facing criminal investigation and prosecution?
Sounds fanciful? We are already advising in relation to such cases.
Director Disqualification
A company Director can be disqualified on the grounds of ‘engaging in Unfit Conduct’ that may include fraud, recklessness or even misjudgement. In a wider sense, the Company Directors Disqualification Act 1986 prohibits Directors from acting in an unfit manner, which includes, for example, fraudulent trading, misappropriating company assets, misuse of public funds and failing to keep adequate company records.
The IS can and does initiate disqualification proceedings. The length of the ban if imposed is between 2-15 years depending on the severity of the misconduct.
It is vital that the targeted Directors, whatever the Unfit Conduct alleged may be, respond quickly and appropriately to the IS. We are well placed to help.
Conclusions
So, now that the recruitment of the Commissioner has been confirmed, and depending upon the effectiveness of the Commissioner’s work, we can expect to see many more recovery cases in a civil law Director Disqualification sense and perhaps in a criminal law sense as well, and in terms of financial compensation being sought from Directors in both a Civil and Criminal law context.
Article by: Neil Davies, Solicitor and Managing Director of NDP and Contributory Editor to ‘Mithani: Directors’ Disqualification’ – the leading work on Director Disqualification law and practice.
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