Massive sentences for leasing fraudsters10/02/2017
Crime doesn’t pay, or does it? Six years after the Total Asset Finance fraud was discovered, the guilty parties finally collected 44 years in jail between them. We would comment that the process of law took far too long in this case. Two brokers collected a 10 and a 15 year term between them, and an employee of a funding bank who had accepted nearly £900,000 in bribes for continuing to approve the dodgy deals got 7 years. We asked industry veteran John Bennett of JB Associates, who has seen it all before, for his thoughts.
He said, “Another old style leasing fraud – but any new lessons? It was a simple fraud, based on inflated and fictitious rental contracts being sold to the funders. Genuine contracts were also funded, and the mechanics of the fraud involved nothing the asset finance industry hasn’t experienced with previous frauds. We’ve funded fake and altered customer contracts before, and no doubt we will be funding them again.
“There are, however, a couple of aspects to this case that are more unusual compared to other leasing frauds. Firstly, the £48 million missing cash that was unaccounted for is at the top end of the scale for UK equipment leasing fraud. Secondly , the individuals who were convicted were directors or senior management of the vendor, broker and funder, and this is the first leasing fraud conviction I am aware of involving employees of all three parties.
“The fraud was simple, and the key lesson is equally simple. Any funder who accepts broker introduced vendor deals, using a back-to-back structure that characterises the broker as a principal, and then allows the broker to collect millions of pounds of customer rental payments in respect of those deals, must ask themselves the question, ‘What could possibly go wrong?’ The answer to that question is never, “Nothing - fingers crossed.”
John Bennett analyses the fraudulent transactions in detail in the upcoming edition of Leasing World, and it makes for some fascinating reading, while we ask is 7 years too stiff a sentence for a lessor’s employee nodding through dubious transactions, and taking a backhander? On the one hand it should serve as a warning to all, but on the other hand, Jerome Kerviel got only 3 years for losing his bank €5 billion, and Nick Leeson only 6 years for bankrupting Barings Bank.