U.K. Financier’s Firm Aided by Covid Loans Is Ensnared in Probe
U.K. Financier’s Firm Aided by Covid Loans Is Ensnared in Probe
(Bloomberg) -- Two directors at a real estate firm that borrowed millions of pounds from the U.K.’s taxpayer-funded pandemic loan program are being probed for preparing misleading financial statements, according to documents seen by Bloomberg News.
Tempus Court Developments Ltd., backed by John Beckwith, one of Britain’s wealthiest financiers, refiled two years of financial statements weeks after a Bloomberg News investigation revealed in November that the company received a 3.7 million-pound ($5 million) Covid loan even though its accounts showed it hadn’t done any business for years.
The new unaudited accounts submitted to the business register in December show that Tempus Court wasn’t an inactive business with 60 pounds of assets as previously documented but had revenue of about 4.8 million pounds in the financial year to July 31, 2021.
Two Tempus Court directors -- John Beckwith’s son Piers and finance director Stuart Roberts -- are being investigated by the Institute of Chartered Accountants in England and Wales, or ICAEW, for allegedly preparing and approving misleading financial statements, the documents show.
“The company directors have a responsibility to approve the accounts,” said Frances Murray, senior associate at law firm Rosenblatt in London.
Beckwith and Roberts didn’t respond to requests for comment. In a letter to the editor on Dec. 10, Piers Beckwith told Bloomberg the loan was “legal, proper and justified,” the company has “already paid back the majority of the loan,” and the accounts filed at U.K. Companies House “were incorrect and have since been amended.”
The ICAEW started probing Beckwith and Roberts on Dec. 7 and is gathering information to determine whether disciplinary action is appropriate, according to documents seen by Bloomberg. The professional body may then escalate the case to an investigation committee and subsequently to its disciplinary committee.
While it’s unclear how advanced the probe into Beckwith and Stuart might be, it can take from six months for a straightforward case to more than a year for a case to be concluded, according to the ICAEW’s guidelines. Individuals can appeal ICAEW’s disciplinary actions.
A spokeswoman at ICAEW declined to comment on the probe.
‘Hugely Problematic’
“Restating accounts for a very significant economic activity is hugely problematic,” said Graham Barrow, a director at The Dark Money Files Ltd., a U.K.-based consulting firm. Tempus “is a wonderful example of the exposure we face in the U.K. to potentially irregular activity through a lack of verification of company incorporation details.”
Under U.K. law, directors have a legal duty not to file false information to Companies House. Directors who approve accounts that don’t comply with the requirements of the Companies Act 2006 may have committed an offense, according to a Companies House representative, who declined to comment on Tempus’s restatements.
Britain has historically gone easy on businesses incorporated in the U.K. that file incorrect financial statements. Despite a string of government pledges, there’s been little progress around bolstering checks on Companies House submissions and few prosecutions. The first-ever successful case for filing false company information was in 2018 when a company director was fined.
Russia’s invasion of Ukraine may see Companies House strengthened amid a broader concern that U.K. corporations have been used to funnel illicit funds. This week, the U.K. government said it plans to bolster the registrar, including giving it more power and resources to challenge information submissions and verify the identity of company owners. Some lawmakers said that doesn’t go far enough.
For its part, ICAEW can separately impose penalties including reprimands, fines, the removal of a member’s practicing certificate and exclusion from membership.
CBILS Investigation
The Bloomberg investigation analyzed records of more than 49,000 companies, about 45% of the businesses that borrowed from the U.K. government’s 26.4 billion-pound Coronavirus Business Interruption Loan Scheme, or CBILS. Lenders handed out more than 130 million pounds to companies that didn’t appear to meet the requirement that they were negatively affected by the pandemic, the investigation showed.
The British government has faced criticism over the checks it put in place around the loan programs. Parliament’s public accounts committee warned in February that the estimated loss due to fraud and error across all Covid response measures is “expected to be at least 15 billion pounds.”
A list of companies that may have applied fraudulently for emergency loans during the pandemic has been complied by the U.K. Cabinet Office and is circulating among lenders, people familiar with the matter have said.
To claim CBILS funds, companies had to show they had generated more than half of their income from the sale of goods or services before the pandemic lockdowns. Banks were responsible for conducting credit checks to protect taxpayers’ money, taking into account companies’ ability to repay the loan.
The British Business Bank, or BBB, which administered the program, in 2020 declined a freedom of information request by Bloomberg News for borrowers’ identities, citing the need to protect companies’ commercial interests. Bloomberg has asked the Information Commissioner’s Office to review its decision. Before leaving the European Union, Britain had to share loan details with the EU, which is publishing the data it has received. Not all the borrowers have been disclosed by the U.K.
Account Changes
John Beckwith’s business realm includes Pacific Investments Ltd., a company with interests in real estate and private equity, whose directors include his son Piers and Roberts. Among its holdings is Pacific Asset Management, which oversees more than $3.7 billion of client assets, according to its website.
Tempus Court’s new accounts have some significant differences from the previous filings. Crucially, the company is no longer dormant, a term to describe businesses that don’t have activity to report for accounting purposes. It now says it had a turnover of 190,000 pounds in 2020 which soared to 4.8 million pounds in 2021. The business had purchased apartments from its parent company, Mortar Tempus Court LLP.
The latter has also restated accounts, showing a profit instead of a loss in 2020 and details of property sales to Tempus Court which weren’t previously disclosed.
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