Mobile Phone VAT 'Carousel' Gang Is Gaoled

by Robert Lee, for LawAndTax-News.com, London

10 January 2007

UK's Worcester Crown Court has slapped a 15-year gaol sentence on the leader of a 'missing trader' VAT fraud which stole GBP54m from HM Revenue & Customs, using shipments of mobile phones which circulated in and out of the UK in a 'carousel' operation.

Emmanuel Hening, a trader with dual Belgian/French nationality, was found guilty on three counts of 'missing trader' fraud, following his extradition from France in December 2005. He was described by Judge McCreath as 'the guiding hand' behind the multi-million pound 'missing trader' (MTIC) VAT fraud, which has seen an eight-strong crime gang given sentences totalling 38.5 years.

Chris Harrison, Deputy Director, Investigation for HMRC said: "This was not some kind of victimless crime, but organised fraud on a massive scale perpetrated by criminals all bent on making fast and easy profits at the expense of the British taxpayer. This was theft of revenue needed to fund our country's public services. Missing trader fraud is not merely a paper fraud but often features links to other forms of criminal activity. This case is a further example of our determination and success in bringing to justice the criminals behind this type of fraud. The sentence should send out a clear message to others who may contemplate such criminal activity."

Judge McCreath said: "This case involves fraud against the Revenue on a massive scale amounting in total to a Revenue loss in excess of £50m described accurately... as an orchestrated attack on the United Kingdom VAT system."

Hening was sentenced alongside two accomplices, one from the West Midlands and one from Wales, in December. A further two members of the gang from the West Midlands and two from Lancashire were sentenced at an earlier trial. An eighth defendant, a woman from Birmingham, pleaded guilty and is awaiting sentencing.

The court heard the multi-million pound fraud centred on the mobile phone industry. Investigations by HMRC began in 2000 and involved breaking the audit trail of businesses based in the UK, Luxembourg and France through a company called Handycom SA operated by Hening. Hening claimed on invoices to be importing large numbers of European
specification mobile phones, with two-pin plugs, into the UK. The numbers he claimed to be importing far exceeded any legitimate commercial demand.

The phones were purportedly imported into the UK VAT-free by various companies set up by Hening. He then sold the phones on paper charging VAT that was never paid over to HMRC. These companies then went 'missing'. The phones were then 'sold' down the line to various 'buffer' traders before they were exported back to Hening. Each company made an agreed profit margin on the phones. The companies were based in the West Midlands, Lancashire and the Isle of Man.

In sentencing Hening, the Judge commented: "You are responsible, in my judgment, for the genesis of the fraud, through your control over the foreign importers and your control over the UK missing traders, and because of the reality that the evaded VAT was paid to you, into your bank accounts."

As in all successful prosecutions, confiscation proceedings are being pursued in order to strip the guilty of their assets, illegally derived from the proceeds of these frauds.

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