Tip of the Iceberg

‘Tough action’ taken against company directors for COVID-19 financial abuse

• 459 directors were disqualified in 2022-23 for abuse of the pandemic financial support schemes, with average disqualification length of seven years four months, up from five years ten months last year.

Over 450 directors have been disqualified by the Insolvency Service in 2022-23 for abusing the COVID-19 financial support scheme, as the agency continues to clamp down on pandemic fraudsters.

Figures published today by the Insolvency Service also show that directors guilty of COVID-19 related misconduct are being hit with longer disqualification periods. The average length of bans handed out to directors in the last year was seven years four months, up from five years ten months in 2021-22.

Of the total 932 director disqualifications obtained by the Insolvency Service in 2022-23 – 459 were cases involving COVID-19 financial support scheme abuse.

In addition to its civil enforcement action, the Insolvency Service also brought criminal prosecutions against six directors in 2022-23 for COVID-19 related misconduct. All of the prosecutions resulted in a conviction and resulted in immediate imprisonment in one case.

Dave Magrath, Director of Investigation and Enforcement at the Insolvency Service, said: “These fraudsters are just the latest to find out that we will not hesitate to take firm action where we uncover such abuse, and this can ultimately result in a jail sentence.

“The purpose of the Bounce Back Loan scheme was to support businesses during the pandemic, but it is clear a minority of company directors chose to maliciously abuse the scheme and defraud the taxpayer. Our team of experts continue to work round-the-clock to bring these criminals to justice.”

In three of the most recent cases, Bahar Dag was sentenced at St Albans Crown Court to two years six months in prison, with her husband Baris Dagistan sentenced to two years, having both pleaded guilty to offences involving a fraudulent application for a Bounce Back Loan.

Bahar Dag had claimed the full £50,000 Bounce Back Loan by stating the company’s turnover was £200,000. However, it was closer to £40,000. When Insolvency Service investigators made contact, and the couple realised they had been caught, they repaid the Bounce Back Loan in full.

Separately, Jubelur Rohman, sole director of Better Day Ltd which gave its business address the Indian Ocean restaurant in Wrexham until 2019, has been disqualified as a director for 11 years following an investigation into his company’s £50,000 Bounce Back Loan obtained in October 2020.

After his company went into liquidation in 2022 with debts over £150,000, Insolvency Service investigators found it had in fact ceased trading in October 2019, with the restaurant currently at the address being owned by a different company. But the rules of the Bounce Back Loan scheme were clear that businesses had to have been trading on 1 March 2020 to be eligible for any funding.

Rohman took out over £40,000 in cash from the company’s bank account between October 2020, when the loan money was received, and March 2021. Yet there was no evidence to show the funds had been spent for the economic benefit of the company.

In another case, Craig McCourt, the sole director of Craig McCourt Electrical Services Ltd, an electrical installation company in Ross-shire, has been disqualified as a director after he applied for Bounce Back Loan funding on two separate occasions, despite his company having already ceased trading and therefore not eligible for any financial assistance.

Although he later dissolved his company, he was caught thanks to new powers granted to the Insolvency Service which enable it to investigate directors of dissolved companies, particularly where bosses are suspected of using this as a tactic to avoid repaying taxpayer-backed Covid-19 support money.

At the point he dissolved the company in October 2020, nearly all its £20,000 Bounce Back Loan remained outstanding. The company was identified on government counter-fraud systems and under the new powers – which came into effect in December 2021 – the Insolvency Service launched an investigation.

Investigators discovered that not only had Craig McCourt Electrical Services Ltd not been trading since September 2019 – meaning he had breached the terms of the scheme when he applied for the loan – but he had immediately transferred the £15,000 loan to another bank account.

Investigators then discovered that he had applied for the extra £5,000 top-up loan for the company in November 2020 – a month after the business had finally been dissolved. He had also transferred this money to a separate bank account.

As a result, Craig McCourt has been disqualified for 11 years.

Rohman and McCourt’s bans prevent each of them from directly or indirectly becoming involved in the promotion, formation, or management of a company, without the permission of the court.