‘Pressure on managers’ to
lend before the recession helped fraudster in £25m
swindle
Go deeper with GlobalData
Bank of Scotland and Barclays are
among several banks swindled in a £25 million (€29 million) leasing
fraud that lasted almost five years.
Investec was also among those defrauded in the
scam that was orchestrated by Paul Cope, the owner and director of
a string of companies – including lease brokerages – operated out
of offices in Stafford.
One of these, Kingdom Finance, a lease
brokerage specialising in the supply of furniture to the nursing
home industry, was the main sponsors of football club Stafford
Rangers until last year. At one point Cope had as many as 700 staff
working for him.
Cope, along with another Staffordshire
businessman, Brian Challiner, has pleaded guilty to conspiracy to
defraud before judges at Staffordshire Crown Court. He carried out
the scam by offering fake invoices to lessors for the financing of
equipment which in many cases did not exist.
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By GlobalDataA prosecution case summary stated: “Mr Cope
confirmed the supplier invoice would be false, that he would be
sent it and he would then send all of the documentation off.
“Mr Cope said there was usually some sort of
furniture at [a] care home that corresponded to the invoice
produced. However, he did accept the quantity and value of such
property would be wrong and consequently false.”
Cope also received ‘double commission’ from
both the lessors and his customers.
The leasing industry has been plagued by this
type of scam, known as fresh air financing. The Finance and Leasing
Association has responded to the crisis by setting up an asset
register.
The prosecution also raised questions marks
over the leasing arms of banks during the recession.
Oliver Gardner, defence advocate for Cope,
said: “Paul Cope was just the person who the client went to for the
money. The lenders turned a blind eye to it, because it suited
them, and because they were getting the lending figures.”
He added: “You name a lender, they were
involved. It was rife throughout the industry. The reality is there
was a lot of pressure on the managers of these banks to lend as
much money as possible in those days, and they were quite happy to
do so.”
Also, according to a case summary transcript,
the lessors involved were “unlikely to check on the property,
especially if it had come through a broker, as even if the property
had existed, its value would be quickly diminished”.
The assets being leased in this case – beds
for the elderly – have minimal residual value.
Lessors entered deals believing they were
secure as Cope “factored in an insurance payment” so “the finance
company would always be paid”.
Through various companies he owned, including
Kingdom Capital, Kingdom Vehicle Finance and Kingdom Healthcare,
Cope also issued invoices for equipment – including nursing home
beds and computers – which were “frequently inflated” in value,
prosecution documents make clear.
Cope also ran “multiple leasing agreements on
pre-existing property”, the prosecution case summary stated.
Through his far-reaching swindling of banks
during the period January 2004 to July 2008, Cope managed to have
an “extremely extravagant lifestyle”, it was heard in court.
He personally benefited from the scam by at
least £2.5 million, and he owned two Rolex watches worth at least
£35,000, several top-of-the-range cars, including a Ferrari and a
Lamborghini, and a £1.7 million home in Spain, prosecutor Nicholas
Corsellis wrote in his case summary for the hearing.
Besides his lease brokerages, Cope also owned
a music venue, a beauty parlour, and a shoe company.
Despite owning leasing brokerages himself,
Cope used several well-known lease brokerages to source business
from banks.
These included Bell Finance, a business
finance and asset-based finance broker based in Warwickshire;
Synergy Professions, a Chester-based broker offering asset base
leasing, sale and leaseback agreements and unsecured practice
loans; and Manta, a commercial finance broker in Brighton.
Steven Haskew, a broker at Manta, was used by
Cope to “get the deal through” to Barclays, as Cope believed
Barclays was keeping “a wide berth” from him and would find Haskew
more “palatable”, the prosecution papers stated.
Cope and Haskew “split the commission”
payments they received for this brokered business, a prosecution
case summary stated.
Haskew could not be reached at time of going
to press.
But Barclays first noticed irregularities in
March 2007, the Staffordshire court heard. Cope, Challiner and a
third accused businessman, Andrew Oxlade, were arrested in July
last year after police had launched an investigation.
One broker which worked with Kingdom Finance
ended its relationship with Cope after one year following the
fraudster’s failure to provide proof customers were receiving goods
it was allegedly brokering the finance for.
“There were things going on that we did not
want to be associated with, details we were not being given access
to, so we just terminated the relationship and did not do another
deal from that point on,” the broker said.
Despite his guilty plea, Cope is adamant
lenders were aware of the conditions of the agreement.
Oxlade has pleaded not guilty. The case
against him will continue in March 2010.
Cope could not be reached for comment at time
of going to press.
Barclays, Investec and Bank of Scotland were
unavailable for comment at time of going to press.
