The Comptroller and Auditor General, Sir John Bourn, today reported to Parliament that he has qualified his opinion on the financial statements of the Government Property Lawyers Agency for the year ended 31 March 1998 due to a fraud which resulted in a £542,000 loss to public funds.
Until September 1999, the Government Property Lawyers, an Executive Agency of the Treasury Solicitor’s Department, provided conveyancing and land advisory services to government departments and other publicly funded bodies in England and Wales. These services included purchases and sales of land and buildings, sales of surplus land and the negotiation of commercial leases for office occupation. During 1997-98, the Agency handled transactions in excess of £300 million for clients.
In May 1998, the Agency discovered that one of its solicitors, who was responsible for the conveyancing of property for a major client, had misappropriated the client’s funds in nine cases between July 1989 and May 1998.
The fraud took three main forms:
- in 1989, the offender took advantage of the client’s error in issuing a duplicate cheque for £70,000 in favour of the solicitor acting for the vendor of a property, opened a building society account in the name of that solicitor, but under his control, deposited that cheque and then stole the funds;
- over a nine-year period, by abusing an arrangement whereby clients made out cheques in the name of solicitors acting for the vendors of property, the offender opened a building society account in the name of the payee, and obtained interest on the amount deposited; and<
- by exploiting a control weakness in the Agency that allowed him to authorise payments to solicitors with no countersignature, the offender was able to gain unlawful access to funds provided by the client for the purchase of property.
Under the latter two arrangements, the offender diverted and invested over £1.2 million of the client’s money into the building society accounts which he controlled. When the fraud was discovered in May 1998, there was a shortfall in the client’s funds of £277,000 which, with the earlier theft of £70,000, has been disclosed in the financial statements as a fraudulent use of £347,000. In addition, the theft and fraudulent investment of funds has cost the Consolidated Fund about £195,000 in lost interest, making a total loss of some £542,000. The discovery of the fraud was reported to the police and, following criminal proceedings, the offender was sentenced to two 30-month prison sentences, to run concurrently.
The Agency and the Treasury Solicitor’s Department have taken a number of steps in response to the fraud, including:
- examining the cases handled by the offender over the period 1989 to 1998, to ensure that all possible cases from which he could have stolen money have been identified;
- reviewing a large sample of cases chosen at random, to ensure that other members of staff had not perpetrated a similar fraud;
- taking immediate steps to require two signatories for all payment authorisations and stopping the acceptance of ‘in favour of’ cheques; and
- obtaining written bank account details from the solicitors of property vendors to ensure that any moneys are paid into that account and not any other account.
The Department has taken out a court injunction for £250,000 on the offender’s assets and is pursuing the offender for recovery of the stolen money. A court judgement for damages has been obtained and the Department has investigated the offender’s financial affairs. This has identified that the fraudster had paid further receipts of £137,000 into his false building society accounts over the period of the fraud. Although there is no immediate evidence to prove that these sums were part of the fraud, this possibility cannot be ruled out.
Unconnected with the fraud, the Agency has also been subject to a quinquennial review of its activities. In the light of this review, the Attorney-General decided in November 1998 that there was no longer a requirement to maintain a central conveyancing and lands advisory service to government departments and agencies and other publicly funded bodies in England and Wales. Accordingly the Agency was closed down in September 1999.