AGENDA WEST: The Bounce Back Loan fraudsters who have been caught out by the Insolvency Service with one spending his loan on his girlfriend and the bookies

Picture: CNN

Thousands of businesses have survived the bleak months of the covid lockdowns by taking out bounce back loans and furloughing staff.

With the furlough system now gone and the loans backed by the Government due for repayment the Insolvency Service have revealed some of the shocking cases of business owners who abused the system. Up until the cut off date for new applications the chancellor Rishi Sunak had allowed £47bn in bounce back loans to be taken out by hundreds of thousands of businesses in the UK.

Ian Carrotte of ICSM said the figures were shocking as The House of Commons public accounts committee estimated that between £16 billion and £27 billion would never be repaid due to fraud.

He said: “That’s a potential default rate of between 35% and 60% – which is eye-wateringly high. And since all these loans were state-backed, any failures to pay will be paid by the taxpayer.”

The Insolvency Service said that three directors have been banned following investigations this month included cleaning company N&S Solutions Limited who had gone bust before the Bounce Back Loan scheme came in owing £150,000. But that didn’t stop director Rafael Henrique Scher, 38, from pocketing £30,000 on 15 May 2020. Scher signed a disqualification undertaking which prevents him from acting as a director for 9 years.

In another case the Insolvency Service explained how Mujeebullah Khan, 34, and Muhammed Omair Javaid, 33, ran Chunky Chicken, a local Nottingham takeaway until December 2019, when they sold the business. Despite this they improperly applied for a government-backed Bounce Back Loan of £50,000 in the business name after the sale of the company. They said: “The money was used to repay a business creditor and who was also a relative of Muhammed Omair Javaid. Both Mujeebullah Khan and Muhammed Omair Javaid made themselves bankrupt on 24 May 2021, citing debts of over £200,000 that included the Bounce Back Loan. Both Mujeebullah Khan and Muhammed Omair Javaid signed bankruptcy undertakings that extend their restrictions for 8 years. This means they are limited to what credit they can access, as well as not being able to act as a company director without the permission of the court.”

Publican Malcolm Wilks, 57, ran the Royal Oak pub in Nuneaton since 2014.

The Insolvency Service reported: “At the start of the pandemic in March 2020, the pub closed for lockdown and Wilks entered into an Individual Voluntary Arrangement (IVA) and began to claim Universal Credit. The pub later reopened and traded for a few hours a week until it finally closed in November 2020 due to the reintroduction of COVID-19 restrictions.

“On 11 November 2020 Malcolm Wilks received a Bounce Back Loan of £19,000. A day later, the supervisor of his IVA terminated the agreement, and confirmed to the Insolvency Service that Wilks had only made 2 repayments.

“As a result of the Insolvency Service investigation, it was established that Wilks transferred nearly £17,000 of the Bounce Back Loan into his personal bank accounts. From there, he paid over £4,100 to his ex-girlfriend and spent £1,120 on online gambling. Nearly £3,500 was withdrawn in cash and cannot be accounted for. Only £6,500 was allocated as wages for himself to cover the period when he wasn’t working.

“Separately, Wilks also received £1,100 in business rates refunds in December 2020, just weeks prior to declaring himself bankrupt. He received a further £10,500 in subsequent weeks but failed to disclose this to the Official Receiver. On 27 September 2021, Malcolm Wilks signed a bankruptcy restriction undertaking that extends the duration of his bankruptcy for 8 years, starting on 18 December 2021.

Alan Draycott, the Deputy Official Receiver, said: “The Government loan schemes have provided a lifeline to millions of businesses across the UK – helping them to continue trading during the pandemic and protecting millions of jobs. As these three cases show, the Insolvency Service will not hesitate to investigate and use our powers against those who abused the COVID-19 support schemes.”

About ICSM Credit

ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel – while at the moment there’s a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach – ask for details from Paul.

For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.

To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com

For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk