ACCA/ICAEW disciplinary cases

ACCA disciplinary case

An accountant who provided “woefully inadequate” responses to an ACCA investigation and withheld documents from a client has been excluded from the ACCA and ordered to pay £27,000 in costs.

The main thrust of the complaints, which consisted of eight allegations in total, was Adrian Thompson’s refusal to hand over his former client’s files, or co-operate with his new accountants or even handle the ACCA’s investigation in an “open and straightforward manner”.

The ACCA found that Mr Thompson did not have the right to retain the documents and should have returned them promptly, and that he was under a duty to provide the new accountant with the requested information.

The committee found that Mr Thompson knew he was being misleading in his assertion that “all records were sent to [the client]” after the ACCA reviewed his booking out sheets – accordingly, the committee found he had acted dishonestly.

Complaint: Not returning clients documents

The relationship between Mr Thompson, who practiced under Adrian Thompson & Co, and his then client broke down in late 2015 after a dispute over outstanding fees. Over the next two and a half months, the client sent Mr Thompson 13 emails to resolve the outstanding invoices, and also sent emails addressing the issue of dividends from his limited company. Mr Thompson failed to assist.

Later, Mr Thompson produced a letter dated 8 August printed on the firm’s note paper as proof that he responded, but the ACCA investigation questioned the veracity of the letter’s date.

Despite the content not reflecting any other correspondence during that time or Mr Thompson not referring to this letter in any subsequent correspondence, this allegation was not proven.

On 20 October 2016, the client and his brother alerted Mr Thompson that they were instructing a new accountant and that he should return all the files in his possession. Thompson refused to provide reasonable transfer information and said: “once cleared funds have been received your papers will be available for collection”.

ACCA picked up the case after the client complained on 13 January 2017. Mr Thompson reiterated that all records had been returned and that he had responded to all correspondence up until the contested 8 August letter.

ACCA requested additional information, but Mr Thompson responded saying that “we have difficulty in understanding each other’s letters” and offered to meet face-to-face.

Complaint: Failure to cooperate fully with ACCA investigation

Mr Thompson faced another complaint concerning his failure to cooperate. He failed to cooperate fully with five pieces of ACCA correspondence from 9 February to 28 April 2016.

Speaking to the investigating officer on 12 February 2016, Mr Thompson reasoned that there were few questions he could answer and doing so would open him up to “other action”.

The ACCA’s case presenter Emily Healy-Howell recognised that Mr Thompson had made partial responses to the ACCA’s enquiries, but those responses was “woefully inadequate” and acted to “frustrate the investigation”.

Thompson was “controlling and measured” in his responses and could have “provided much fuller explanations”, concluded Healy-Howell.  He replied to only 7 of the 42 questions asked in the first letter, for example.

Sanctions and conclusions

But this was not the first time Mr Thompson had been subject to disciplinary proceedings. He previously received a severe reprimand (January 2015) for committing assault by beating, failing to disclose his conviction for assault and failing to return CPD and practising certificate renewal forms.

Because Mr Thompson’s “wide-ranging” misconduct was so significant the committee concluded that exclusion was the only appropriate action.

“Mr Thompson had demonstrated no insight or remorse,” the committee said. “He had failed to deal with his regulator in an open and straightforward manner. On two occasions he breached his duty to co-operate with his regulator. His failure to comply with his professional duties to his clients could have resulted in them suffering financial loss.”

This was a fairly complex case. The reasons for decision of the Disciplinary Committee run to no less than 153 paragraphs. One can therefore only pick out certain relevant points. Firstly, this was a two-day hearing which was concluded in June 2018. There had previously been two adjournments, although it is not clear from the papers whether those adjournments were sought by Mr Thompson or the ACCA.

Mr Thompson did not attend the hearing. He had previously tried to resign his membership of the ACCA, but this was refused as he was subject to complaint/investigation.

It would appear that, approaching the hearing, Mr Thompson refused to accept any communications from the ACCA. Of course, a member does not have to attend a disciplinary hearing. He would be entitled to make a written submission. However, Mr Thompson’s case was sufficiently complex that it was very much in his best interests that he should attend and perhaps have been legally represented. Nevertheless, it seems clear that Mr Thompson no longer wished to remain a member of the ACCA and had concluded that there was no point attending the proceedings.

The complaint was made in July 2015. It is surprising, therefore, that it took three years to get to the Disciplinary Committee. It is a little troubling that it was not until January 2016 (six months after the complaint was received) before the ACCA wrote to Mr Thompson requesting his representations. This seems to be an inordinate length of time. Of course, before writing to the member, the regulator must engage with the complainant and obtain information and perhaps answers to questions. In my view, the ACCA should have written to Mr Thompson at a much earlier date.

At one point, Mr Thompson wrote to the ACCA telling the case manager that he did not understand the ACCA’s letters and wanted a meeting. The ACCA declined. Of course, one has to accept that a regulator cannot be expected to meet every member under investigation. Nevertheless, this may have been one of those cases where a meeting, at an early date, might have avoided much of the subsequent acrimony and non-cooperation on the part of Mr Thompson. All regulators should be prepared to meet some of their members who are under investigation, as opposed to conducting an inquiry simply through correspondence.

Mr Thompson refused to provide information to the ACCA on the basis of client confidentiality, a threat of legal proceedings from the client and his money laundering obligations. The case presenter when appearing before the Disciplinary Committee said that none of this “stood up to scrutiny”. It is difficult to understand the basis of Mr Thompson’s contention, but if he genuinely believed that he should not be providing information to the ACCA, he would have been well advised to have instructed lawyers to represent his interests.

In the event, the Committee concluded that Mr Thompson was guilty of wilful non-cooperation.

Although he claimed a lien on papers with regard to outstanding fees, the Committee concluded that he did not have the right to retain possession of client papers. Again, appearing before the tribunal, Mr Thompson would have had an opportunity to justify his position. In principle, an accountant can retain papers, when there are outstanding fees.

There was one feature that the Committee thought was particularly deplorable, namely Mr Thompson’s threat to the client that he would write to the Revenue if his fees were not paid.

One of the factors that influenced the Committee in deciding to exclude was that there was no evidence that any corrective steps had been taken by Mr Thompson.

Finally, there is the matter of costs. The costs sought by the ACCA amounted to nearly £30,000, an astonishing sum. This was reduced to £27,000 principally due to one of the complaints being found not proved.

It is a sorry state of affairs that an individual who had been a member of the ACCA for 21 years, decided to give up on his qualification and not to engage with the disciplinary process. This was certainly one of those cases where the member would have been well advised to attend the hearing and in view of the complexity of the matters for consideration and the number of complaints, Mr Thompson would have been well advised to be legally represented.

The ACCA is now claiming costs of a far greater magnitude than would have been the case four or five years ago. It is now not unusual to read of cases where the costs ordered against the member exceed £10,000. Is there anything that a member of the ACCA can do in order to avoid being hit with a massive costs order? The answer to that question is to ensure that the professional indemnity insurance policy covers the member in respect of disciplinary proceedings and that the policy should also cover the member in respect of the regulators’ costs. Insurers will never cover the member in respect of a fine.

If Mr Thompson had had such a policy in place, his insurers would not only have underwritten the legal fees that he would have incurred before the Disciplinary Committee, but they would also have paid the ACCA’s costs of £27,000.

The moral of the story is ensure that you have adequate insurance cover not only simply in respect of proceedings for negligence.

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ICAEW student disciplinary case

An ICAEW student has admitted forging a medical certificate in a desperate effort to save his career.

Prasath Sabanathan failed the professional examination in June 2016 and, again, the following month. In order to establish whether he be allowed to sit the examination for the third time, Mr Sabanathan’s employers required him to take a mock examination and attend a review meeting, before a deadline. He did not do either, explaining that the reason was due to ill health and that he had visited his GP about gastritis. This was untrue.

Then in September 2016, Mr Sabanathan falsified a medical certificate, allegedly from his GP, which he had created on his computer. This document was presented to his employer.

As a result, Mr Sabanathan faced two complaints before the Disciplinary Committee, alleging dishonesty.

The ICAEW tribunal imposed a severe reprimand on Mr Sabanathan. The tribunal took into account that Sabanathan had been desperate to save his career, that he had been unwell (but not for gastritis), that he had only been a student member for a few months, his relative youth, early admission and insight into his wrongdoing.

The tribunal concluded that, although serious, the facts did not warrant an order that Mr Sabanathan be declared unfit to become a member. Mr Sabanathan must also pay tribunal costs in the sum of £3,840 by 12 monthly instalments.

Mr Sabanathan, who attended the hearing without representation, was extraordinarily fortunate that he was not declared unfit to become a member, particularly as he faced two counts of dishonesty. Nevertheless, the issues were interrelated and were, no doubt, treated as a single incident.

 

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