HomeCase studiesBanks & financial institutionsLitigation and dispute resolutionUsing a freezing order to minimise a major UK clearing bank’s losses in a multi-million pound fraud

Why the client needed our help

Our client, the sales finance arm of a major clearing bank in the UK, contacted us for advice on their options for dealing with a perceived multi-million pound fraud that had been perpetrated upon them.

The client had been funding a business involved in the wholesale and distribution of nuts. The director had somehow persuaded his father to sign a number of blank cheques at a point where he was planning to retire and the son then proceeded to operate the business to fund his expensive lifestyle, despite the trading position of the business not being sufficient to support the monthly dividends he was taking. He raised fictitious invoices to obtain cash from the financier and then used the blank cheques to recycle cash through the sales finance facility by repaying the company’s own (fictitious) debts with a portion of the advanced prepayments it was obtaining from our client. This had seen a sharp rise in the turnover (required for the director to conceal the fraud) and because the debt was turning, the underlying fraud was not picked up at audit. This resulted in the financier being exposed to the tune of £10million, against a true ledger of probably £3-4million.

How we helped

We were urgently instructed to send out demands to the company’s entire sales ledger and to work with a third party collection agent to ascertain how much of the ledger was real debt and how much was fictitious. We quickly analysed the responses received and managed to work out how the director had been using one of his own companies to repay the debt through the facility from an analysis of the cheques that had been received by the financier. This allowed us to put together the required supporting witness evidence to accompany an application for injunctive relief, preventing the company’s directors from dissipating any of their assets, including property and known bank accounts.

The outcome

We successfully obtained the required freezing order from the court against both the director and his father. While the client still suffered a loss, we were able to minimise those losses and the director was eventually arrested on the basis of the evidence that we had compiled and served time in prison for the fraud.

Key contacts

Mike Lockton

Mike Lockton

Partner

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