The Charity Commission, the independent regulator of charities in England and Wales, says its inquiry into the charity Astonbrook Housing Association Ltd (1093877) addressed a multi-million pound fraud against the charity, which later resulted in several convictions. The regulator has today published a report of its inquiry into the charity, which provided housing and support to around 3,500 refugees and asylum seekers in the West Midlands, Wales and the South West of England and went into liquidation in 2009.
The investigation began in 2007, after other agencies alerted the Commission to concerns about the charity and its management. These included concerns that substantial sums were reported to have been paid to staff without properly supported receipts, inappropriate delegation to the charity’s CEO and substantial funds being transferred to bodies connected with trustees or employees of the charity. The Commission opened an inquiry, froze the charity’s bank accounts and quickly appointed an Interim Manager (John Ariel and Geoff Carton-Kelly of Baker Tilly Restructuring and Recovery LLP) who took complete control of the management of the charity.
Allegations of potential serious fraud were reported to the police, whose subsequent investigation was conducted alongside the Commission’s inquiry. The criminal proceedings ultimately concluded in September 2012, when six people, including the CEO, were convicted of fraud and money laundering offences. The Commission worked closely with the police and other agencies including by providing witnesses and witness statements for the trial.
The Commission’s inquiry examined, among other things:
The most important initial priorities for the inquiry were to protect the charity’s assets and its beneficiaries (the refugees and asylum seekers). The inquiry therefore acted quickly and in coordination with the police by appointing an interim manager on the same day that the police arrested those suspected of committing criminal activities.
The Interim Manager found evidence of serious financial abuse within the charity. For example, it found evidence of the use of cheques, raised in payment of fictitious invoices, made out to trustees and staff members at the charity, as well as their extended family. The total cost of this fraud is estimated at more than £1.8 m.
There was also evidence that the trustees had created ghost employees, some of whom were members of the CEO’s family, having been listed on the charity’s payroll, even though they had never worked for the charity. It was estimated the charity lost around £700,000 to £1m as a result. There was also evidence that the trustees and senior staff had used charity funds to buy residential properties which were subsequently used as personal housing or rented back to the charity.
The substantial fraud at the charity, involving some of the charity’s staff and trustees, was proven in the subsequent criminal trials. The inquiry found serious and systematic mismanagement and misconduct by the trustees. The trustees repeatedly failed to put in place and monitor proper management systems and financial controls, manage substantial and detrimental conflicts of interest, or to properly manage the charity’s services.
As the contracts on which the charity relied were terminated and the charity was unable to honour its contractual obligations, it was forced into liquidation. During their appointment the Interim Manager managed to secure the continuation of contracts to the sum of over £19,546,000, and to date, £252,000 has been recovered.
The charity’s existing beneficiaries were rehoused safely.
Michelle Russell, Head of Investigations and Enforcement at the Charity Commission, says:
“This case involved the appalling abuse of a charity that provided vital services to many vulnerable people. Abuses of this kind against charity are always unacceptable – when they put people at risk and are as systematic and extensive as those uncovered here, they are frankly unforgivable. This case involved 1,800 fraudulent payments, fictitious invoices, ghost employees and charity money being paid to individuals at the charity, their family members or companies connected to them.
“This case also shows that people intent on enriching themselves at the expense of charity will not get away with it. Here, the Commission acted quickly, taking robust action to stop abuse and protect the charity’s assets and beneficiaries.
“By working together, with the police and other agencies, we can help ensure those who have committed crimes against charity are brought to justice”.
John Ariel, of Baker Tilly Restructuring and Recovery LLP who worked with colleague Geoff Carton-Kelly to oversee the case, says:
“We were very pleased to assist the Charity Commission and to work with the other agencies to safeguard the refugees and asylum seekers on this very complex and challenging assignment.
The fraudulent activity within the Charity was pervasive and it took much diligent application to present what was a very complex case to the criminal investigators.
We would also like to thank the Commission for their productive collaboration on this case, and to the late DC Mark Simmons of West Midlands Police who gave his total commitment to bringing the perpetrators of the fraud to justice.” Ends
For further information on this story please contact the Press office. Notes to Editors
1. The Charity Commission is the independent regulator of charities in England and Wales. See www.charitycommission.gov.uk for further information.
2. Our mission is to be the independent registrar and regulator of charities in England and Wales, acting in the public’s interest, to ensure that:
3. The charity was placed into liquidation under a court order on 9 March 2009, and the liquidation is still in place. John Ariel and Geoffrey Carton-Kelly, of Baker Tilly, were appointed by the Secretary of State in the role of Liquidator. Any queries regarding the liquidation process and the Liquidator’s role should be referred to Corinne Gladstone at Baker Tilly on firstname.lastname@example.org
4. Full details of this review process can be found at www.charitycommission.gov.uk
Freedom of information
How we regulate charities
Reporting our regulatory work
How we register charities
Approving changes to charities
How to comment on a scheme
Registering a charity
Charitable purposes & public benefit
Trustees, staff and volunteers
Managing your charity
Money and accounts
Protecting your charity