As more details were unearthed last month of the scale of the Global EPP scam, it emerged that lessors bought no less than 579 pieces of equipment for the Leicester-based plastics manufacturer, and yet only 71 of these machines actually existed.
Further details of the nature of the alleged fraud have also appeared, including the involvement of the manufacturer of the equipment – comprised exclusively of extrusion line machines – in the scandal.
By the time EPP Global ceased trading, leasing companies had become exposed to total losses of £64 million ($96.3 million). The lessors involved include Lombard, HSBC, Bank of Scotland, Lloyds TSB, CIT, Co-operative Bank, Barclays, Clydesdale, Allied Irish Banks, Alliance & Leicester Commercial Services, Siemens Financial Services, Landesbanki, Bank of Ireland, Deutsche Leasing and Fortis Leasing.
Part of the alleged scam involved a company called HTL Limited, which manufactured the machines. It convinced lessors to buy the equipment by stating that Global EPP had made orders for them. It has emerged that HTL in fact had the same ownership as Global EPP, and has not traded since Global EPP collapsed late last year. Global EPP’s administrators, PricewaterhouseCoopers, have arranged a trade sale of the 71 machines in place to a German trade buyer.
Some recoveries are also expected from sales of EPP Global’s shareholdings in overseas subsidiaries in the Philippines, Mexico and Russia that continue to trade. However, it seems that the lessors and other creditors can expect only a fractional recovery of their losses.
The criminal fraud investigation is proceeding, though no charges have as yet been brought. A suspect arrested and bailed earlier was reinterviewed by Leicestershire Police in September this year, and has now been bailed to report to police again in February.
The deals appear to have been spread fairly evenly among the leasing companies.
“The 10 with the biggest exposures all lost £5 million to £6 million each,” said one adviser.
Serial numbers on the machines were erased so lessors could not match them with equivalent numbers on their lease documentation. As a consequence, there has been no scope for individual lessors to mitigate their losses through repossessions.