UK Acorn Finance (Mortgages)

Cathy Jamieson Excerpts

Tuesday 11th November 2014 Westminster Hall

[Mr Llwyd]

The hon. Gentleman is absolutely correct. That is certainly the conclusion to which I have come, as have several other Members of Parliament with constituents who have been badly affected by these scams—I can think of a worse word than scam, but not a polite one. As my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) said, the farming community is more vulnerable than the average person, or has been.

Burges Salmon, the solicitors, had a charge on my constituents’ property for their fees, and endowment policies were assigned. There was also, interestingly, an agreement with the lender for Burges Salmon, the solicitors, to step aside should the lender wish to repossess. As director of the UK Group—they are all the same creature under these different names, hiding behind the corporate veil as some people choose to do—Mr Phillips had his name on the clients’ mortgage, making him a joint owner of the property if the clients were to die; he automatically became the sole owner by survivorship. I think that is hugely unusual.

There were broken promises of funding by Peter Williams and UK Group, upsetting key suppliers to clients, and particularly feed merchants. In effect, they were closing the farm and income stream down, making it impossible for Mr and Mrs Williams to pay the mortgage. That must be the most obvious breach of fiduciary duty there could possibly be, and I hope that the Government—I see that the Minister is listening intently—will be able to do something about this matter. Those are the main points on the way that those involved go about their business.

To my knowledge, there are 44 different complainants, all of whom had complained to Avon and Somerset police by June 2013. The victims are seriously concerned that the police allege that there is no evidence of wrongdoing by any of those involved. The victims have documentary evidence and other evidence that fraud has been committed, as I will now summarise. The police consistently refused to look at the evidence.

There have been fraudulent valuations. A number of valuations are available and in the possession of victims, with widely varying calculations for the same property over very short periods. E-mails and notes also indicate that inflated valuations were being sought by UK Acorn companies in order to lend at a supposedly 70% loan-to-value ratio—but in fact at a much higher LTV or even negative equity. Once money had been paid, minus the huge fees that were withdrawn, there was no chance of escape for the poor people who had entered into the mortgage agreements. Other brokers appear to have been involved; there are numerous companies—I will not go through them all, but they include Commercial First.

Karen Phillips of UK Group—the daughter of Mr Desmond Phillips—has admitted in a hearing in Exeter county court that she substituted execution pages of documents from one document to another. She claimed that she had done so with permission, but could not provide any proof. The above was common practice at UK Group and went alongside the planting and forgery of signatures—graphologists’ opinions have been sought and that has been proved in at least one or two cases—and deeds not being signed according to the Law of Property Act 1925. Signatures were obtained from victims and witnessed afterwards, in some cases, by people who had never met the signatory.

A number of tricks were regularly used to get loans through without proper advice and before the victim had a chance to understand properly what they were signing. That is disgraceful. There was a churning of mortgages, as I have explained, with numerous short-term mortgages. That churning was commonplace at UK Acorn Finance and the charges to be paid for those activities were not disclosed to victims before the commencement of the series of transactions.

In some documented cases, the changing of the mortgage did not provide the victim with any additional funds at all, merely adding further gross fees for the perpetrators. Surely that is fraud by misrepresentation. Evidence suggests that both the brokers and the lenders were involved in defrauding not only the borrowers, but the lenders to them and in the securitisation of the supposedly long-term documents.

Strong documentary evidence also suggests that most of the mortgages were set up to fail and that once executed, the lenders did their best to thwart the victims’ efforts to fund the repayments. The use of LPA receivers was suspect at the very least and it was the same character virtually each time. He certainly did not appear to have aimed to maximise the returns from repossessed properties, further disadvantaging victims. Des Phillips and others associated with him have purchased a considerable number of repossessed properties.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I am listening very carefully to the right hon. Gentleman, because I was not aware of these circumstances until he brought them to my attention. He has referred to police involvement, but I am wondering whether any of these firms or the people involved had contact either with the Financial Ombudsman Service or the Financial Conduct Authority, or its predecessors, in addition to the police. I am sure he will have more to say about the police, but did they also have contact with those organisations?

[Mr Llwyd]

Yes, they did, and I want to say a brief word about that towards the conclusion of my remarks. At least 44 cases were reported to the Avon and Somerset police, who unfortunately, took very little interest in what was going on—the chief executive of Avon and Somerset police is an ex-partner of Burges Salmon, by the way, so that is another interesting piece of information. Peter Williams was at one time a partner in Burges Salmon, as was John Smith, the chief executive of Avon and Somerset police, who was appointed in 2009. Avon and Somerset police describe themselves on their website as long-standing clients of Burges Salmon. That article also appears on Burges Salmon’s website.

All known complaints to the police and those handling this matter remain unanswered, and I have to ask why. Interestingly enough, they said that they could not find any criminal behaviour, but a detective constable, Niki White, of Avon and Somerset police came up to attend the repossession hearing in the Williamses’ case. Why exactly I do not know. On the one hand she was pretending to give some succour or comfort to the Williamses that the police were doing something, but on the other hand a letter from the manager of the financial investigation and economic crime section of the police to the solicitors acting on behalf of the perpetrators says:

“In your letter dated 16^th August 2013, you have questioned DC White’s attendance at Court on the 7^th August 2013. Her attendance on that day was to ensure that the Court understood the extent of the Police involvement and were not misled into believing that a criminal investigation was already underway.”

That was despite the police at the same time telling the right hon. Member for North Somerset (Dr Fox) that an investigation was under way and that it was an in-depth investigation. But interestingly, a couple of months after that letter, they say that

“we have been in discussion with other regulatory agencies. The purpose of this was to look at whether there are…other opportunities to address the situation or to influence regulation of this kind of activity in the future.”

They say that unfortunately they have not been able to progress it further. So they have concerns both on the criminal side, it seems to me, and, as the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) says, on the regulatory side, which I am sure we all share.

However, Avon and Somerset police have consistently blamed the Serious Fraud Office for not opening an investigation. That is ironic, because the police themselves have refused to open an investigation, although they have said to at least one Member of Parliament that they have done so. They have also tried to block Dyfed Powys police in Wales from investigating. I believe that something is amiss in Avon and Somerset police. As I have said, John Smith, the chief executive, is now writing to complainants and making decisions, but not mentioning the fact that he used to be a partner in one of the firms that is, or should be, in the firing line.

Let me say a word about Mr Desmond Phillips. Again, this touches on the important point that the hon. Lady made about regulation. In 1975, at the age of 22, Mr Phillips was made bankrupt. In 1976, he was convicted of theft at Shepton Mallet magistrates court. In 1987, his timber and haulage business collapsed, leaving creditors with a loss of £300,000. In 1991, Phillips’s company brokering endowment policies collapsed. Many customers were farmers. Insurance companies claimed that they were owed £300,000 on commissions that had been paid out on policies that failed to materialise or were subsequently cancelled.

In 1992, Phillips underwent his second bankruptcy, owing £170,000. That was discharged in the late 1990s. In 1994, the BBC Radio 4 programme “Face the Facts” was the first programme on Phillips. In 2008, there was a judgment against Phillips at the High Court in Manchester for £250,000 and costs. That was subsequently paid, I believe. In 2010, there was an individual voluntary agreement in respect of all his debts. In 2011, Acorn subsidiary UK Country Capital collapsed, owing £17.3 million to Barclays bank. On 16 April 2014, “Face the Facts” described him as “The Country Rogue”.

Two bankruptcies, one IVA and 14 county court judgments have been recorded against Mr Phillips and, believe it or not, a couple of years ago his licence to lend was renewed by the regulatory authority. That is quite incredible. I have documentation with me to show that Clive Maxwell, chief executive of the Office of Fair Trading, said that he was a fit and proper person to be lending money. I find that utterly incredible and I am sure that the Minister, in due course, will want to consider that aspect. In fact, Phillips’s licence was renewed in May 2012, so that was after most of the bad things that had happened and certainly after what had happened in the case of the Williamses.

I have said that I cannot understand why Avon and Somerset police have not researched this matter properly. I have myself dealt with the Serious Fraud Office and the Attorney-General and have met His Honour Judge Geoffrey Rivlin, the senior adviser to the fraud office. I was told by the fraud office that it deals only with very large frauds. In my instance, it is for £1.5 million, but if we multiply that by anything between 30 and 50 constituents or Members of Parliament, it is a massive fraud. No one can deny that.

I have said that there is a dossier of 44 cases that alleges similar conduct in them all. An especially incriminating document was prepared by Mr Levy, a barrister who specialises in this area. It is entitled “Appointments under flawed security”. He questions why Acorn has persistently used the LPA receiver Mr Burd. The only possible explanation is that Lloyds bank was comfortable with the methods used, because it was lending on to Acorn, as we know, and it was turning a blind eye to all that was happening, in breach of any fiduciary understanding that I have ever come across anyway.

In case anyone thinks that I am just a conspiracy theorist, the following Members of Parliament, to my certain knowledge—I am sure that there plenty of others—are also involved in trying to deal with the matter: my hon. Friend the Member for Carmarthen East and Dinefwr, the hon. Members for Vale of Clwyd (Chris Ruane), for Brecon and Radnorshire, for North Cornwall (Dan Rogerson), for Brigg and Goole (Andrew Percy), for North East Somerset (Jacob Rees-Mogg), for Pendle (Andrew Stephenson), for Penrith and The Border (Rory Stewart) and for Thirsk and Malton (Miss McIntosh), the right hon. Members for South East Cambridgeshire (Sir James Paice) and for Preseli Pembrokeshire (Stephen Crabb), the hon. Members for Caerphilly (Wayne David), for Wantage (Mr Vaizey), for Folkestone and Hythe (Damian Collins), for North Devon (Sir Nick Harvey) and for Selby and Ainsty (Nigel Adams), the right hon. Member for Bexhill and Battle (Gregory Barker) and the hon. Member for Somerton and Frome (Mr Heath). There is also a Member of the other place who is actively involved in trying to assist people whom he knows.

As I said, I have been in contact with Avon and Somerset police, North Wales police, the Attorney-General, the Serious Fraud Office, the regulators and His Honour Judge Geoffrey Rivlin, the chief adviser to the SFO. So far, very little has been achieved, and it is to my huge regret that that should be so.

The conclusion that I draw from this terribly unhappy affair is that even if the modus operandi of UK Acorn and the allied companies is not fraudulent—I believe that it is—they of course have been in flagrant breach of their fiduciary duties to the borrowers. What that means may be obvious, but I will explain it. There is a fiduciary duty on a lender to ensure that the borrower can sustain the payments under the mortgage; otherwise, it is a straightforward taking of his property. That is an obvious point, but in this case there have been instances in which there has been overvaluation of properties in order to make an advance that would not be sustainable on the business case. That is clear in virtually every case that I am aware of. I think there are elements that are criminal, and I hope that we will be able to shine a light on this behaviour, but even if I am wrong, there have been serious, repeated and consistent breaches of fiduciary duty.

I put to the Government the following points. I know that the Minister is in the Treasury, not the Home Office, but will she please pass some of this information on to her colleagues in the Home Office? I am sure that she will. I ask the Avon and Somerset police to come clean as to why they are not properly investigating or, alternatively, to say that they will now investigate thoroughly these very, very serious complaints. They are complaints that have ruined the lives of, to my knowledge, 44 or 45 families. I am sure that Members of Parliament will know of many other people who were affected, and there will be others who have not complained. There is even a woman who has completely lost her mind and is in prison as a direct result of the situation. I could name her, but I do not want to embarrass her. She is contact with me, and she is still in prison.

There are others who have lost absolutely everything. They have the shirt on their back, and that is about it. In the meantime, Desmond Phillips is still lending money recklessly and making huge amounts of money against the assets of innocent people whom he has duped. I would ask also that the Avon and Somerset police fully assist the Serious Fraud Office to undertake its work. I believe that we are talking about a massive fraud, in which the SFO, if it has any purpose at all, should be involved. I have been trying to persuade Sir David Green to get involved, and I do not know whether the problem is one of resource, or what it is. To my way of thinking, if we send the SFO one file that shows underhand behaviour, the SFO should consider it. We have sent 36 files to the SFO, all of which show similar, if not identical, MOs, which suggests to me that something is really amiss.

--- Later in debate ---

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I congratulate the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) on securing the debate. He referred at the outset to his profession as a lawyer, and he has more than done justice to the case on behalf of his constituents. He said that he felt frustrated and aggrieved that a solution had not yet been achieved. It is clear from his presentation and the vigour with which he has prosecuted the case that the lack of a resolution of the situation does not reflect a lack of effort on his behalf.

I was not aware of the issue before the right hon. Gentleman brought it to my attention, and I am grateful to him for supplying background information. As the representative of a rural constituency, it occurred to me that many more people may have fallen prey to similar situations but, for various reasons, may not yet have approached a Member of Parliament or felt able to go into the public domain. We can only try to understand what it must have been like for the right hon. Gentleman’s constituents to have lost not only their family home and heritage, but their livelihood. Other Members, no doubt, have constituents who have been in similar circumstances.

It was interesting to hear the right hon. Gentleman’s description of the process. The Minister may want to say more about this, but it seemed to me that some of the issues that go back some time might now be caught by changes in the regulatory environment. I hope that is so, and I seek an assurance on that. Sadly, the situation the right hon. Gentleman described mirrors complaints we have heard about the financial services sector and the small business environment. In some cases, there have been suggestions of predatory—I use that word advisedly—activities, in which people came together to try to buy up small businesses that were in difficulty. A collection of people with connections would benefit from that, and they would not have the best interests of the clients at heart.

The right hon. Gentleman put across the point about fiduciary duty extremely well. On a day when we have heard that the Financial Conduct Authority has, at long last, taken steps to deal with some of the worst excesses in the payday lending industry, it is timely to reflect on what other areas need to be tightened up to ensure that practices such as the right hon. Gentleman described cannot happen. There are parallels between failing to carry out due diligence as to whether people can afford a product and whether it is the correct product for them; and instead of getting people out of a spiral of difficulty, setting them off on a downward spiral into further debt and increased interest charges, with the subsequent loss of their home and livelihood.

Some of the problems may be picked up by changes in the regulatory regime. However, I am concerned that, as the right hon. Gentleman has indicated, notwithstanding all the concerns about the individual whom he mentioned, that person is still deemed to be a fit and proper person. I am sure the Minister will want to reflect on that and tell us whether anything can be done to bring the matter to the attention of the regulatory authorities. In addition, perhaps the Home Office can be asked to look into the problems with the police. I cannot speak for the police and I do not know what the Home Office or the Serious Fraud Office would do, but a significant amount of evidence has been presented. Even if that evidence had been thoroughly investigated and nothing was found to be wrong, the process should be transparent and should not leave a scintilla of doubt about whether there were conflicts of interest or inappropriate behaviour. At the moment, no one can have confidence that the matter has been fully investigated.

I echo the points that have been made by the right hon. Gentleman and other Members on behalf of their constituents, and I look forward with interest to what the Minister has to say. She may have difficulty commenting on some of the specifics of the case, but I hope she will take up the point about passing information to the Home Office. I also ask her to consider whether anything further can be done to make sure that the Financial Conduct Authority is aware of the concerns raised in the debate. It is important that we assess which of the practices involved in the case would be caught by the changes in regulation, and whether there are any potential loopholes. I have taken a particular interest in having a fiduciary duty in financial services more broadly, and I continue, through Finance Bills and other measures, to try to have it written into legislation that anyone in any circumstances providing financial information and advice should be a bound by such a duty, as the right hon. Gentleman suggested.

I look forward to hearing what the Minister has to say. The issue’s being considered here today will not undo the wrongs and damage that have been done to the right hon. Gentleman’s constituents and others, but I hope it will be of some comfort to them to know that people are interested in it and wish to pursue it, in order to ensure that these things do not happen to anyone else in the future.

--- Later in debate ---

[Priti Patel]

I fully understand the impact on the individuals. We should be clear that people have lost their livelihood; this is about losing not just bricks and mortar and a roof, but an entire livelihood.

[Cathy Jamieson]

When the Minister makes her representations and passes information to the FCA, might she not want to highlight this issue? It appears that the intention has been to use a loophole—redefining a domestic premises as a business premises—potentially to get round some of the regulations.

[Priti Patel]

The point is well made. This is clearly about the impact on individuals and their livelihoods. We need to ensure that loopholes are closed and that individual protections are put in place. The Government are clear about being committed to introducing FCA regulation, where there is a clear case for doing so, in the right and proper way. However, there is a balance: we do not want to impose greater burdens, additional red tape and costs on financial firms, but we want to ensure at the same time that consumers are protected.

Businesses are expected to be better placed than consumers to judge whether contracts they make with other businesses are in their interests, so they do not necessarily need the protection of FCA regulation in the same way. However, the point that has been raised really is valid, because we are talking about the impact on smaller businesses. Of course, such businesses have a different right of recourse—to the Financial Ombudsman Service. This is always about the right kind of protections and information, and making sure that consumers are protected and loopholes closed. At the same time, however, there is, from a regulatory point of view, a fine balance.

I reiterate that this is a serious and significant case, and there are avenues I can look into—speaking to the Home Office, in particular, and asking Treasury officials to look into the issue.

For micro-businesses—businesses with a turnover of less than £2 million and fewer than 10 employees—the Financial Ombudsman Service is an independent, non-Government body established under statute to provide proportionate representation and independent resolution of complaints against financial services firms. That is predominantly for bank customers. Those decisions are binding, which is to be welcomed.

The right hon. Gentleman has made representations on behalf of his constituents, but there seems not to have been the positive engagement he is looking for, so we will address the issue on that basis.

I want to touch on the subject of fraud. If it is believed that a business is a victim of fraud, there is an additional avenue to explore. From April 2013, all reports of fraud are now made to Action Fraud rather than the police. The right hon. Gentleman spoke in some detail about Avon and Somerset Constabulary. Obviously he has engaged with it on behalf of his constituents; but Action Fraud is a Government-supported specialist fraud reporting and advice service. It is not a law enforcement body and therefore does not investigate crimes, but it provides a portal for the collection of crime reports and information so that they can be analysed. Going by the files and information that the right hon. Gentleman has sent me, there is a lot of information that could be analysed through law enforcement mechanisms. Where viable that would be sent out to the local force. I should be happy to discuss with the right hon. Gentleman how matters could be followed up using that avenue.

Although business lending is not regulated, the major lenders already take steps, as we have heard, to prevent repossessions and insolvencies. I understand the highly specific nature of the case that the right hon. Gentleman has brought to the House today, but there are processes through which businesses affected by repossession and insolvency can work properly with third parties on repayment plans and so on.

[Cathy Jamieson]

Given that the case we have heard about today concerned not only a business but a home, will the Minister commit at least to seeing whether anything else should be done about insolvency practice and guidelines in such circumstances?

[Priti Patel]

I am sure that the Government can look into that, because small businesses in particular suffer in such circumstances. Small businesses that are closely intertwined with family business become subject to different conditions from those affecting larger ones, and the implications are different for them if they reach the devastating time when they go into insolvency and get an individual voluntary arrangement. The process is traumatising, which takes us back to the point made by the right hon. Gentleman: it is a question of an individual’s livelihood, as well as a business.