Victim of corporate fraud? Don't expect the police to fall over themselves to help you. William Hall investigates...something the authorities rarely bother doing.

When The Accident Group (TAG), the UK’s biggest personal injury claims firm, collapsed in 2003 owing £100 million, it made the headlines with the callous way its high-living boss Mark Langford dismissed his staff via text messages to their mobile phones. Many felt that if ever there was a firm that deserved to be the subject of a fraud investigation, this was one.

But while the Inland Revenue and TAG’s liquidators have been seeking financial redress through the courts, the one glaring omission from the legal jigsaw has been a Serious Fraud Office (SFO) investigation into  what happened at TAG, whose collapse left 2,500 people unemployed.

Whatever the reason, the relatively few high-profile SFO prosecutions in the North West add to the perception that, when it comes to fraud, the region is wide open country where fraudsters can roam virtually unchallenged apart from when they run into the occasional posse of Her Majesty’s Revenue and Customs (HMRC) investigators hunting down VAT fraud gangs.

If you commit a fraud, the chances of being detected are low; the chances of being investigated lower; the chances of being prosecuted even lower; the chances of being tried for all you have done lower yet – and consequently the chances of being sentenced for fraud, and of being deprived of the benefit of the crime, lower still.

“The gap between the number of frauds investigated and prosecutions in criminal courts is widening”, says Simon Bevan, national head of accountancy firm BDO Stoy Hayward’s Fraud Services team. “The average sentence of 2.8 years for committing a fraud allows fraudsters to laugh all the way to their offshore bank.”

Admittedly, the North West saw a record £199.6 million of fraud cases coming to court in 2007 – three times higher than the previous record set in 2002 according to accountancy firm KPMG Forensic’s Fraud barometer. The total included six Manchester men jailed after an £85 million carousel fraud involving the sale of mobile phones, and two Fylde men involved in a £50 million VAT fraud which also revolved around the sale of mobile phones.

The sophistication of organised fraud in the North West is extremely concerning, says Richard Powell, head of KPMG’s forensic and fraud investigation unit in the North, who believes that the fraud cases coming to court are “just the tip of the iceberg”. “There has been a marked reduction in the willingness of the police and prosecutors to take on fraud cases”, says Mike Kenyon, managing partner of Manchester solicitors Cooper Kenyon Burrows, a leading commercial fraud firm.

“Local police forces in the region have fraud squads because they have to be seen to, not because it is one of their top priorities”, he continues. “Every sign over the last few years is that prosecutions in fraud cases have been getting less and less. They are very expensive to prosecute and the police would rather concentrate their funds on something more visible, such as a new headquarters”, says Kenyon.

The City of London Police, in the heart of the UK’s financial centre, is the only force where tackling fraud is a top priority. Increasing public concern about terrorism, drugs, and organised and gun crime means that investigating complex fraud cases is an increasingly low priority for the rest of the UK’s police forces.

“The police seem to be more focused on statistics whereby if a complex fraud is not investigated it is not recorded as a crime and, therefore, the problem does not exist”, says Anthony Barnfather, who heads the fraud squad at law firm Pannone.

“Walk into any police station and ask for the desk clerk, and you will soon see that they are likely to be dealing with 101 other things that they perceive to me more important than a corporate crime, from rape to street robbery,” says Isaac Mirza, a partner dealing with business crime at Manchester’s JMW Solicitors.

Pannone’s Barnfather notes that the defence workload of specialist white-collar crime firms shows that there has been a move away from defending fraud cases prosecuted by the Crown Prosecution Service to prosecutions by the former Customs and Excise and Inland Revenue, which now come under the aegis of HMRC.

There has been an 80 per cent reduction in police fraud investigative officers in the Manchester region, says Barnfather, but a 500 per cent increase in the number of officers engaged in financial investigation units which deal with the preparation of confiscation orders and tracing assets subject of confiscation.

Changing police priorities are not the only reason for the falling number of official fraud investigations. Some companies are also reluctant to get involved because they do not want to attract the adverse publicity of a public trial, which could damage their business: especially since the police are not responsible for recovering any fraud losses.

Indeed, the sheer length of time of a police-led investigation, and subsequent trial, is a major reason why many companies prefer to sort the matter out in private, bypassing the police and bringing in specialist lawyers and accountants.

Richard Smyth, senior member of DLA Piper’s corporate crime and investigations team, is involved in a fraud case involving a SFO investigation of a computer company where events date back to the summer of 2000, and it has only now – eight years later – gone before the Manchester Crown. “In terms of fraud cases this is not regarded as desperately long,” he says.

Belatedly, the Government seems to be waking up to the rising amount of business fraud, which is reckoned to be running at close to £20bn a year. Last October it announced that it was investing £28 million in various initiatives including a new National Fraud Reporting Centre and a National Strategic Fraud Authority.

Nevertheless, professionals like CKB’s Kenyon remain sceptical, dismissing such announcements as headline-grabbing initiatives aimed at proving that something is being done. “What the government is not doing is spending money on increasing the number of frontline officers fighting fraud”, says Kenyon.

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