DELAYS AND COSTS

The lines between professional and personal blurred in an ICAEW disciplinary tribunal case where an accountant admitted acting inappropriately in accepting gifts from his client worth £89,000.

Accountant Algernon Trout received a severe reprimand and was ordered to pay costs of £19,314 and a fine of £4,000 after an ICAEW tribunal found that his judgment was “clouded” due to the friendship he developed with a client.

Trout originally assisted the client with the preparation of his tax returns and later with the organisation of his general financial affairs. But the two soon struck up a friendship that extended beyond the normal accountant-client relationship and saw the client lavish Trout with gifts totalling £89,000 from July 2004 to November 2009.

And then, shortly before the client passed away in June 2010, the disciplinary tribunal heard how Trout advised his client to transfer the ownership of his £600,000 commercial property into the name of an LLP – of which Trout was a member.

Although the client was described “as sharp as a tack” until his death, Trout accepted that he had not advised the client to take independent legal advice about the transaction. The client instructed Trout and his solicitor before his death not to register the transfer, but the solicitor did it anyway. However, there was no loss to the estate.

At the disciplinary tribunal, Trout accepted that he should have dealt with the situation in a “more appropriate and transparent manner”.

The tribunal considered mitigating factors such as the accountant’s 20-year ICAEW membership and his belated remorse, which satisfied the tribunal that his conduct swayed more towards “serious” rather than “very serious”.

“In acting in the way in which he had, the defendant had breached the position of trust that he found himself in and his independence and objectivity had fallen well below the standard expected of someone in his position,” the tribunal concluded about Trout’s conduct in respect of both the gifts and the transaction.

But Trout’s late admission also went some way in reducing the fine from £5,000 to £4,000, but he was still left to pay costs in the sum of £19,314.

My comments on the above case summary are as follows:-

The only point which troubles me is in respect of the costs of £19,314. The case was concluded in a day. The investigation ought not to have been particularly time-consuming. Mr Trout appears to have accepted that he had acted inappropriately at an early stage. Furthermore, he did not contest the proceedings. How, therefore, has the ICAEW incurred costs in excess of £19,000, especially regarding a case which dates back some 10-15 years.

Mr Trout was legally represented. The record states that no submissions were made on behalf of Mr Trout concerning the figure of £19,314. Well, why not? A lawyer has a duty to his client to make representations on costs sought by the regulator, particularly where the figure is high. Of course, there is no guarantee that the tribunal having heard submissions will reduce the amount of costs sought. Nevertheless, the defence lawyer must at least try to get these reduced.

There is often duplication with more than one employee being involved in the case investigation. Sometimes, the time spent is clearly excessive, particularly with regard to preparation time and perusing of documents. I find that, generally, following detailed representations, the tribunal will make a reduced costs order.

 

 

An experienced top firm audit manager who improperly claimed over £2,000 in expenses on meals, snacks and alcohol over a four-month period has been excluded from the ICAEW and ordered to repay costs of £13,000.

Through over-claiming expenses of £2,564.82 Reginald Tuna also lost his job. Before the ICAEW disciplinary tribunal, he fully accepted that he had acted dishonestly, but as part of his defence, he also laid blame on the culture of expense claims within the firm.

Tuna’s high level of expenses caught the attention of the firm during a comparison exercise, when the description of the expenses Tuna provided did not match the receipts he produced. Other expenses outside the firm’s travel and expenses policy were ‘bundled’ with other receipts.

Suspicion surrounding Tuna’s high level of expenses sparked an internal investigation, which led to a disciplinary meeting in November 2015. During this meeting Tuna was found to have over-claimed expenses. The amount he owed was deducted from his final salary.

Broken down, the June to October 2015 expenses included £796.51 for meals, £141.43 on snacks and £858.38 on alcoholic drinks.

Tuna claimed he ‘bundled’ his expenses together with other receipts as a consequence of time pressures. However, the Investigation Committee argued that the sheer number of expenses suggested that the bundling “goes further than carelessness or mistakes”.

Rather, the committee found the mis-description of items and incorrect allocation to be dishonest, given that Tuna understood the travel and expenses process.

The tribunal considering the code of ethics obligation for members to be straightforward and honest, found “Tuna has not been straightforward, open or transparent in his handling of his expense claims and would have known the importance of doing so for the purpose of claiming money back from his employer. Indeed, it was his duty to be so.”

Combined with Tuna’s admissions, the tribunal unhesitatingly concluded that the 64 separate claims were carried out dishonestly and decided that the proportionate sanction was exclusion.

The tribunal also ordered Tuna to pay the Investigation Committee’s costs of £13,000 in 11 monthly instalments.

My comments on the above are as follows:-

The internal disciplinary hearing took place in November 2015. Mr Tuna was sacked. The ICAEW disciplinary hearing was not convened until June 2019, some three and a half years later. No explanation for this delay is given. I assume that the firm would have reported Mr Tuna immediately following the hearing in November 2015.

This is yet another case which has taken an inordinate amount of time to reach the Disciplinary Committee. Committees need to be much more critical of delays on the part of the regulator. If the regulator fails to provide a reasonable explanation for the delay, the costs sought against the defendant should be slashed. The tribunal is now chaired by a Queen’s Counsel. There are three who take it in turns to chair disciplinary hearings. May I very respectfully suggest that they each take a critical look at delays on the part of the regulator, together with the massive costs which are now being incurred on a regular basis. However, in all fairness, the Disciplinary Committee in Mr Tuna’s case did seek representations from both parties on the subject of costs and decided that £13,000 was a reasonable figure. Unfortunately, the report does not tell us how much was originally sought.

 

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