Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill (Second sitting)

Debate between Peter Grant and Navendu Mishra

Committee stage
Tuesday 6th July 2021 Public Bill Committees

[Peter Grant]

Q One final question, if I may, that ties together two of your previous answers. You said that you had certain knowledge of the type of scams that you just described, perpetrated by company directors who were doing the same thing many years ago. It is up to you if you want to name names in answer to this question, but are you aware of people conducting these scams now who could be disqualified from office as directors if the Insolvency Service went back and looked at the conduct of directors of companies that were dissolved earlier than the time limit of three years set out in this Bill? Does the three-year rule actually prevent the Insolvency Service from investigating directors currently conducting scams who, without that time limit, could be held to account and disqualified from holding office?

Andrew Agathangelou: Yes, that is absolutely the case. I will elaborate on my answer, if I may. Last year, the Work and Pensions Committee led by Stephen Timms MP opened an inquiry on pension scams. Many of our members are victims of pension scams, so as a consequence it is a topic we know rather a lot about. I will share a document with the Committee produced by the Transparency Task Force as part of our response to that inquiry, and that document will evidence without any doubt why it is absolutely necessary that the three-year limit is extended to five, six, seven, 10 years, however far back you can go.

I say this because I am working on the basis that if the regulators, the enforcement agencies and the Insolvency Service can prosecute criminals and have them pay fines or be locked up, or whatever it might be, they would want to do that. Why would they not want to prosecute the baddies? To my mind it is simple, and I absolutely assure you that in the document I will provide to the Committee, as well as other supporting documents and evidence, you will see named individuals who have been dancing around prosecution over many, many years—I think one is 11 years. This Bill, if extended to a proper duration of time, would become a problem for them.

I would take great satisfaction if this Bill helped to finally lock up individuals who are currently in very expensive villas in Florida, with properties all over the world, with all kinds of fancy cars and fancy homes, all paid for by the life savings of British pension savers and investors. That would be very rewarding to know.

[Navendu Mishra]

Q I believe that all 650 MPs will have constituents who have been victims of the practice of phoenixing. I believe you made reference to law enforcement agencies, Action Fraud and the National Crime Agency. Could you tell us a bit more about how big the problem of phoenixing is—directors using legislation to dissolve companies to avoid liabilities and further investigation?

Andrew Agathangelou: I cannot answer your question directly, forgive me—I do not have that data and have not done that research. Let us think of it like this: roughly four or five years ago, a man called Roberto Saviano, an investigative journalist, became quite famous for a period because he did some investigative journalism on the mafia, and as a consequence of that investigative journalism, he now lives, I believe, under police guard 24 hours a day because he lifted the lid on a whole load of really bad, really heavy stuff.

I am mentioning Roberto Saviano because about five years ago, at something called the Hay Festival, he made the point that London is the heart of global financial corruption. That is a pretty powerful thing for somebody to say, especially if they have been investigating the mafia for years and years. You can google it and find it yourself. This is a very serious heavy-duty investigative journalist.

I mention that because it is reasonable to assume that a lot of that corruption involves entities and companies set up for special purposes. If the UK is the worst country in the world when it comes to global financial corruption—or if it is not the worst, let us say it is in the top quarter of really bad countries when it comes to financial and economic crime and corruption—it is reasonable to assume that the artful dodge of phoenixing is part of the modus operandi of the “community” that does this kind of stuff. I cannot give you any facts or figures, but a little deduction suggests that it is a massive problem.

I will make one further point, if I may. One of the reasons why it is a problem is Companies House. It is still shocking to me that, despite about nine years of Parliament having an interest in Companies House, finally getting its act together and asking even really basic questions about the people behind a new company that is being set up, Companies House has been allowed to carry on behaving in the nonchalant way that it does, with its casual, risky and dangerous way of granting companies the chance to come into existence when no proper due diligence has been done.

Similarly, in the pensions world, there was a period of about three years when Her Majesty’s Revenue and Customs was happy to authorise the setting up of new pension schemes with the lightest-touch due diligence you can imagine. Basically, people were allowed to go online, fill in a form and create a new pension scheme, which would then be the perfect vehicle for scammers to use. That has happened so much.

While I am on this little rant, allow me to stay there with one more point. When the pension freedoms legislation was being introduced, many people said, “Woah, woah, woah, woah, woah! Before you go allowing people to transfer their entire pension savings in a lump sum, why don’t we stop and think what the risks of this are? Why don’t we have a conversation about whether this might lead to some kind of fraudster’s paradise?” But no, pension freedoms legislation was rushed through, and now, many years later, even the regulators, such as the Financial Conduct Authority, are making the point that not enough thought was given to the risks associated with that kind of casual, fast policy-making.

So there we go. Companies House is effectively advertising to criminals, “Come and set up a company in the UK. Don’t worry, we’ll turn a blind eye to pretty much anything that happens because, frankly, we won’t know what you’re doing or what you’re about because we won’t bother asking you.” That is one example of these sorts of issues. The second example I have given you is in relation to HMRC, and it goes on.

I honestly think that if anybody was to do some kind of independent, objective, evidence-based evaluation or analysis of the work of City of London police, the Insolvency Service, Companies House and the financial regulators—that very long list that I mentioned—around how effective they are at preventing crime from happening in the UK, I am pretty sure that report would be rather scathing.