Three people who ran a supposed financial investigation company, were this month handed combined jail terms of 10 years and disqualified from being company directors for a total of 39 years at a hearing at Nottingham Crown Court.
The sentences follow an investigation and prosecution for fraudulent trading by The Insolvency Service and the Department for Business, Innovation and Skills.
The court heard that, between 2006 and 2009, Bradley James Limited (BJL) netted almost £1 million pounds by running an elaborate swindle aimed at people in a vulnerable financial position.
John Cotton, Keith Harrison and Alasdair Macdonald targeted creditors who had already lost money through companies in liquidation by luring them into a scheme that they claimed would get their money back.
The reality was that this was a scam designed to encourage the creditors to part with even more of their money, which – rather than being used to investigate and recover the debts - went instead into the pockets of Mr Cotton, his immediate family (including being used to pay the private school fees of his daughter) and the other defendants.
The court heard Mr Cotton, 62, of Birmingham described as the front man of the operation despite, as a third-time bankrupt, being banned from acting as a director or running a company.
In signing up the hundreds of clients, Mr Cotton also misrepresented himself as an ex-police officer successfully convincing them that he was a man of honour and integrity. The truth was he had never been in the police force and, further, had a number of previous convictions for dishonesty.
Following last minute guilty pleas from all three defendants on 9 May, the morning that the seven week trial was due to commence, and an adjournment to allow for pre-sentence reports on all three, His Honour Judge Mithani, QC sentenced the defendants as follows:
- Mr Cotton: five years and one month’s imprisonment and disqualified from being a director for 15 years;
- Keith Harrison, 54, of Belper, Derbyshire, who was also bankrupt for a period during the company’s operations, was handed a prison sentence of three years and two months and disqualified from being a director for 13 years;
- Alasdair Macdonald, 41, of Derby was given a sentence of two years and one month in prison and disqualified from being a director for 11 years.
The case was initially investigated by Company Investigations, part of the Insolvency Service, which wound up the company, and the criminal investigation and prosecution was conducted by BIS.
Robert Burns, Head of Investigations and Enforcement Services at The Insolvency Service said:
“This company’s tactics were typical of those that set out to deceive and prey on the vulnerable. They used lies and exaggerated claims to get people’s trust and get them to part with their money.
"Companies that employ such tactics should know that the Insolvency Service, can and will investigate and, where appropriate, take action to put them out of business.”
The court heard that:
- In addition to misrepresenting himself as a former police officer, Mr Cotton also falsely claimed to be a certified bailiff;
- In signing up new clients, Cotton, Harrison and Macdonald would claim to have damaging professional and personal information about the directors of the companies in liquidation. They claimed they would confront the directors in person, prompting them to pay up old debts. The evidence accumulated over the three year investigation revealed no such instances of directors being confronted.
- The alleged 90% success rate (trumpeted in the glossy brochure and repeated in Cotton’s sale pitch) was also a fabrication – the real rate of ‘success’ was zero;
- BJL would request an upfront payment (of between £500 and £3,400) and claim that they would expect to get 19.6% of any monies recovered.
- BJL drew up a bogus ‘data protection disclosure’ clause preventing the creditors from discussing the matter with the debtor companies.
The court also heard Mr Macdonald - referred to in the company’s literature as ‘Operations Controller’ - would follow up initial contacts made by Mr Cotton and Mr Harrison.
He wrote letters detailing the company strategy for recouping the debt. He referred to ‘collating key documents’, using undercover telephone calls and locating lost or hidden assets. All these claims were untrue.
All that happened was the sending of identical letters to the ex directors and liquidators of the insolvent companies, asking if there was any inappropriate behaviour – a far cry from the fire and brimstone promised by Cotton in the sales pitch.
The identical ‘cut-and-paste’ letters to liquidators were worded in such a weak way that they were often ignored or gave rise to replies merely seeking clarification.
Sometimes, these would be doctored before being shown to the clients to falsely suggest real progress in recouping the debts. Harrison would bolster this impression by inputting false updates about case progress on the client web pages.
This level of sophistication succeeded in deceiving the vast majority of creditors that BJL was a genuine company - when a letter telling the disappointed client that the company had been unable to retrieve any monies was sent, many creditors did not make a fuss.
John Bennett, an Investigator with the Department for Business, Innovation and Skills said:
“The sentences handed to these directors demonstrates the penalties for directors who deliberately set up companies with the sole aim of defrauding the public.
"The Insolvency Service and the Department for Business comes down hard on perpetrators of this type of activit
