Court of Appeal judgment reduces criminal’s jail term by six
months
Andy Thompson
Go deeper with GlobalData
Lombard, the UK leasing subsidiary
of Royal Bank of Scotland, was severely ripped off in a case that
sets a legal precedent in English law for the sentencing of
fraudsters.
Two fraudsters involved in the scam, which
included the sourcing of finance from Lombard for assets that had
already been financed by a third party, were jailed several months
ago.
In May, the Court of Appeal reduced the jail
term for one of the criminals by six months because of a legal
technicality.
Web of deception
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By GlobalDataIn the scam, fraudsters Gary Hibberd
and Timothy Allen, who ran Vodka Bar Management Ltd (VBM) and
associated companies, which operated upmarket bar venues under the
name of Babushka, obtained a £1.3 million (€1.5 million) loan
facility from RBS.
A forged letter, purportedly from an
accountancy firm, was used to back personal guarantees for the loan
by VBM’s directors. This asserted that they had combined assets of
£3.9 million, including several freehold properties that did not,
in fact, exist.
A separate asset finance fraud against Lombard
followed a joint venture entered into by VBM with a major pub
company chain, Laurel Pub Company (LPC).
This “pubco” wanted VBM to take over
management of some of its sites and for it to
be re-branded as Babushka bars. LPC retained freehold ownership and
funded refurbishments.
The VBM directors, however, obtained HP
finance from Lombard for decorations, furniture, IT machinery and
bar equipment in these JV premises.
They falsely presented invoices as being
payable by Lombard on VBM’s account, when, in fact, LPC funded the
bar fixtures and retained title. Lombard’s lien on the assets was,
therefore, worthless.
Related deceptions included the forging of
documents purportedly from LPC, stating knowledge of the Lombard
deal and guaranteeing the repayments.
Scam begins to
unravel
VBM started defaulting during 2003.
In January 2004 LPC repossessed the JV sites, and VBM collapsed
soon afterwards.
The financiers’ losses totalled £1.6 million
for RBS and a further £450,000 for Lombard.
The personal proceeds of the fraud were mainly
within the salaries drawn by the fraudsters from VBM. During the
fraudulent trading period, Hibberd, as managing director, took an
annual salary of £250,000.
He also had the personal use of a Bentley
Azure car, valued at £136,000, on finance from Lombard.
RBS made a report to the police in August
2004. Charges of conspiracy to defraud were eventually brought in
2007.
Admitting to fraud
The fraudsters had denied the
allegations while under investigation. However, they finally
pleaded guilty on the day of the trial at Southwark Crown Court in
September 2008. Hibberd was jailed for six years and Allen for
three-and-a-half years.
Each sentence included two consecutive
elements for the respective frauds against RBS and Lombard.
In the recent Court of Appeal hearing, the
defence argued that this consecutive sentencing was wrong, given
the close relationship between the two financiers. The appeal
judges held that, in such connected circumstances, the statutory
maximum sentence of 10 years could not have been increased through
consecutive sentencing.
Yet this did not affect their view of the
actual sentences.
The fact of the two compounded frauds was
still held to be an aggravating feature and grounds for consecutive
sentences within the unexpanded maximum.
In Hibberd’s case, it was held that the trial
judge had been wrong in citing certain aggravating features. These
included a finding that he had “corrupted” his junior partner,
Allen.
Having therefore agreed to review Hibberd’s
sentence, the appeal judges cut it from six to five-and-a-half
years.
After examining some precedents, they held
that his “starting point” should have been six years, with six
months deducted for the late guilty plea. Allen’s sentence was
upheld.
Before the frauds, the defendants had been
involved in a series of similar ventures under the same trading
name of Babushka. These, too, had become insolvent, causing loss to
creditors.
The trial judge treated this as an aggravating
feature. Significantly, the appeal judges
rejected a defence submission that this had been wrong.
“Particularly for Hibberd, the fact that he
had run companies which had collapsed and risen ‘Phoenix-like’ from
the ashes on more than one occasion, put him in a different
category from a person with no such history,” said Lord Justice
Hooper.
Commenting on the outcome, a Lombard
representative said “We welcome the Appeal Court’s decision. It
demonstrates that effective prosecutions will follow fraudulent
activity.”
