One of the areas where I have been involved over recent years is investigating fraud arising out of insolvent estates and organisations.  This is where a bankrupt person or director of an insolvent company has, in preparationn for, or in contemplation of the impending crash hidden or removed assets.  This is theft of course from the creditors of any bankrupt estate and there are provisions within the Insolvency Act 1986 for returning these assets.

This means that whenever I have investigated such a fraud it has been on behalf of an Insolvency Practitioner who has a licence to hold office as for example a trustee in bankruptcy, a receiver or a liquidator.  Acting as a fraud investigator or asset tracer means that I can excercise powers that he is granted under the Act and allow me to recover documents and question directors, employees and suppliers etc in order to determine where the assets have gone and how much could potentially be recovered.

An example of the powers granted by the Act is whereby under S236 the Insolvency Practitioner (or somebody acting on his behalf… i.e. me) has the right to demand information from say a director about a particular payment he authorised just before his company went under.  It may be that the payment was not at arms length to a bone fide supplier, but a preferential payment to a friend.  Under these circumstances this payment can be recovered for the benefit if the disadvantaged creditors of the insolvent company.

Recovering the preferential payment may need a court order, in which case it may be necessary to question the director before a judge (in the High Court) in order to get an order made for repayment.  A tennacious Insolvency Practitioner or his representitive may undertake this questioning in court as this would be cheaper and more efficient that employing a barister!  I have undertaken this task on a couple of occasions and I can assure you that asking the questions before the judge is a whole lot better that being on the receiving end which I usually am as an expert accounting witness specialising in fraud matters!

These investigations have been a little quiet over the past 24 months but I can see the opportunities as a fraud investigator approaching as a result of the current economic downturn.  There are a lot more frauds to surface as a result of the way companies have been run over the past year or two in an attempt avoid collapse as the credit crunch bites.