Friday, October 06, 2006

VAT Fraud: Shoplifting easier to prove than most white-collar crime

Poor people are often sent to prison for shoplifting but it's a different kettle of fish when it comes to white-collar crime.

In April 2005, Irish businessman Dylan Creaven, then aged 31, wept after a jury unanimously acquitted him of a £14m (€20m) UK VAT fraud.

Creaven had been originally charged with fraud amounting to £162 million.The founder of computer components distributor Silicon Technologies Europe, which had a turnover of €416 million in 2001, had been accused of teaming up with a “ramshackle” array of off-the-shelf UK companies that “existed only to defraud” the tax man.

David Cocks QC, prosecuting, charged that Creaven upplied them with “vast consignments” of VAT-free computer chips that were then resold, this time with the tax added.However, instead of passing 17.5% to Customs and Excise, it was allegedly sent “on instructions” to Creaven.

The defendant, of Woodstock, Ennis, Co Clare, who pleaded not guilty to two counts of conspiracy to cheat the public revenue between December 29, 2000 and October 13 the following year, denied any wrongdoing.The former director of Silicon Technologies Limited told London’s Blackfriars Crown Court he had traded with the British companies in good faith.

He never once suspected anything amiss, and was “distraught” to now find himself in the dock.The seven woman, five man jury trying the month-long case took eight hours over two days to clear him of both charges. As the second verdict was returned, he buried his head in his hands and wept.

Earlier this week, The UK Assets Recovery Agency (ARA) announced that "Dylan Creaven, acquitted of missing trader VAT fraud last year, has agreed to pay £18.5m to the Assets Recovery Agency and the Criminal Assets Bureau (CAB) in the Republic of Ireland in respect of property which resulted from the VAT fraud."

The ARA said that the agreement was reached after a mediation process and means "that Mr Creaven will pay over to the two bodies a total sum of £18m, 176,000 euros, and will also transfer the ownership of a luxury villa in Marbella and four racehorses, one of which was the winner of the 2005 Galway Hurdle."

"Having been presented with the evidence compiled by ARA and CAB, Mr Creaven agreed to pay £18m, 176,000 euros, and to transfer the ownership of his Spanish luxury villa and his four racehorses," the ARA said.

Jane Earl, Director of the Assets Recovery Agency, said “This case is our largest result so far. It demonstrates the power of civil recovery legislation in taking away the fruits of unlawful activity. This case means that a proportion of the money stolen from the taxpayer through VAT fraud will be returned to the public purse, and it represents a significant achievement in the fight against VAT fraud which is not a victimless crime. Working with our colleagues in the Republic of Ireland, we have been able to ensure that there are no hiding places for assets at home or abroad. This is the first time that the Agency has used the mediation route and it has brought this case to a successful conclusion.”

VAT fraud - known in the official jargon as Missing Trader Intra Community (MTIC) Fraud - is the single biggest threat to the taxation system of the European Union.

It has already cost the UK government at least £8.5bn since 2001.

It typically involves the repeated import and export of small but valuable goods, such as mobile phones and computer chips, between EU countries, hence its other common name of carousel fraud.
From the late 1990s, UK revenue losses from what is termed Missing Trader VAT fraud was growing by up to three quarters of a billion pounds each year.
By 2001/2002, it was costing the UK taxpayer up to £2.75 billion and it has made some Irish people very rich. In the first half of 2002, the category "Electrical Machinery (apparatus, appliances and parts)" in Irish trade statistics was inflated by more than €8 billion in respect of both import and export trade with the UK.

UK Revenue & Excise detected carousel consignments of computer chips shipped to Ireland in the first half of 2002 large enough in aggregate to have supplied the entire market for that chip in Europe, Asia and Africa put together.

Creaven is unlikely to end up on the breadline.

A BBC report on the settlement began: A computer chip billionaire has agreed to pay £18m to the UK's Assets Recovery Agency and the Republic of Ireland's Criminal Assets Bureau.