Monday, December 14, 2009

HM Customs And Courts Under Fire As Air Freight Firm Boss Is Jailed

Doubts Cast on Guilt in Extraordinary VAT Prosecution
Shipping News Feature

OXFORD – UK – Mr Philip Bowles, boss of Airfreight Express, was jailed last week for cheating the tax authorities of £1.2 million. Circumstances surrounding the case are likely to cause controversy for months, if not years, to come given the severity of the sentence and the way the prosecution and judgement were handled. Mr Bowles had not apparently enriched himself by his deception, nor was he accused of doing so, but he supported his ailing businesses using the unpaid VAT from a large property deal.

What little we can glean from sources about Airfreight Express indicates that the company (or companies) went through several metamorphoses over the past few years. They seem to have started up around 1999 as an aircraft owning freight carrier with charter and scheduled services. They obviously had a troubled existence, familiar to many who venture into that risky field, passing from Airfreight Express apparently to AFX747 and then to AFX Capital Ltd all registered at the same West Drayton address. There appears to be a history of problems with payment of landing fees, administrators being called in and difficult negotiations with bankers.

This then is the tangled web of accounts which the Crown Court was informed could be “considered by counsel with calculators”, a claim that any senior freight executive would find surprising to say the least. Mr Bowles had found all his assets frozen as soon as HMRC had decided to prosecute under the controversial Proceeds of Crime Act. All tax records were seized and access to them denied.

Like the prevention of Terrorism Act, which it is freely acknowledged, even by the Police, is routinely misused daily as a “stop and search” instrument, the Proceeds of Crime Act has now, in this case, effectively been used to prevent a defendant funding his own defence. David Blunkett introduced the Act in 2003 saying it would enable the seizure of assets like luxury yachts and house from major crime lords. No form of financial allowance was made to Mr Bowles, either by the Court, HMRC or the Legal Services Commission, funding required, not merely to employ a technically competent legal team rather than the legal aid he had to utilise, but to pay for a forensic accountancy report to explore and explain the complexities of the case.

Eventually, after the verdict of the jury, a firm of accountants volunteered their services “pro bono” and, having gained access to the records, prepared such a report. In it they explained that, although it seems Mr Bowles had not handed over the sum owed, he was in fact due a similar amount for the transactions undertaken by his other businesses. The draft of this report was handed to the Judge in October and the final report made its appearance a week ago.

The accountants’ findings can be summed up quite simply, in the opinion of their investigators there was no evidence that any outstanding VAT had been fraudulently evaded or concealed and, in fact, Bowles companies were owed money rather than the other way round, in which case, they pointed out to the Court, no crime had actually been committed. The defendant’s lawyers furthermore illustrated that the jury had been misdirected, having being told by the prosecution that it was not permissible to spread tax liabilities and assets, including VAT, across different companies in the same group.

Despite this new evidence and a plea from the defendants lawyers that the case be referred directly to the Appeal Court, judgement already having been pronounced, Mr Bowles was sentenced on the one charge he had been previously found guilty of (two other not guilty verdicts had also already been made). The judge expressed concern about the possibility of imprisoning an innocent man and said he had a dilemma as he did not want to delay justice further. The prosecution insisted to free pending appeal would set a legal precedent and that the judge must sentence. With that sentence was duly passed, and Philip Bowles began his three and a half years behind bars and now has a bill for £130,000 prosecution costs and a confiscation hearing to face.

Many in the freight (and indeed wider) community will look at this case in horror, in the course of our enquiries we heard many say that it is simply easier to pay up when faced with accusations from the tax authorities than employ a forensic accountant to verify where every penny has gone. VAT is particularly despised as companies feel they not only have to pay it but to work at calculating and collecting it, with a fine, or as Mr Bowles would no doubt say, imprisonment, as the only rewards if they are perceived to have made an error.

The law which saw Mr Bowles lose all control of his assets is apparently about to be extended. The Government thinks there may be a quarter of a billion pounds sloshing around in British companies somewhere and they have tasked those in the civil service to collect it. Many will feel that a situation where it is up to the accused to prove innocence, rather than the prosecutor needing evidence of guilt, and a judge expressing doubts about the sentence he is about to pass, means that something is very sorely amiss.