UPDATE 3-In split from SocGen, TCW's fortunes seen set to rise
By Greg Roumeliotis and Jessica Toonkel and Jennifer Ablan
(Updates with firearms details)
By Michael Szabo
LONDON, June 19 (Reuters Point Carbon) - Three British men have been jailed for a combined 35 years after being found guilty of a 38-million pound ($59.5 million) tax fraud relating to the EU carbon market, the UK’s revenue and customs agency said on Tuesday.
Sandeep Singh Dosanjh, director of London-based KO Brokers Ltd, was jailed for 15 years, Navdeep Singh Gill, director of Infiniti UK Ltd, was jailed for 11 years and Ranjot Singh Chahal, director of Wembley-based Allianz Group Ltd, received a nine-year sentence, the UK tax authority said in a release.
The three, who made the money in just 10 months between 2008 and 2009, face the prospect that their cars and properties, once used to portray an air of success, will be confiscated as the treasury tries to recoup the lost revenue.
“This was a deliberate attempt to steal as much money as possible from the public purse by a criminal gang interested only in lining their own pockets,” said Chris Martin of Her Majesty’s Revenue and Customs (HMRC) Criminal Investigations unit.
“(We) will not stand by and let crooks rip off honest taxpayers.”
The three were arrested during police raids across the UK between 2009 and 2010 that HMRC said uncovered huge piles of cash and firearms.
The convictions are the latest in a European-wide crackdown on value-added tax (VAT) fraud related to CO2 trade that European police estimate has cost EU treasuries 5 billion euros
HMRC said Dosanjh, Gill and Chahal, aged between 30 and 35, set up bogus companies to buy tax-free EU carbon permits from European sellers through the spot emissions market.
They then sold the credits on to other “buffer” companies they owned, adding value-added-tax (VAT) to the price, then dissolved the importing firms without ever paying the tax to the UK Treasury.
The men eventually sold the allowances on to larger, reputable companies in order to paint the string of transactions as legitimate, HMRC added.
“The trades were made in a matter of minutes via a computer system, and the stolen VAT was transferred to offshore bank accounts in the United Arab Emirates to ‘clean’ the stolen cash which the gang spent on luxury cars and an expensive London home,” the tax authority said in the release.
Several sources told Reuters Point Carbon that KO Brokers had approached them about setting up trading accounts, but were quickly rebuffed after failing to pass client background checks.
Nevertheless, the credits found their way through complex transaction chains on to the books of banks and energy companies, including BNP Paribas, Citigroup, Deutsche Bank, Shell Trading, RBS and Gazprom, according to the prosecution.
The scandal led to widespread changes across the 27-nation bloc in the way that tax is applied to trading carbon instruments.
“STRONG ON ETHICS”
Dosanjh, who was just 26 at the time that the offences were committed, was labelled by prosecutors as the mastermind behind the operation.
He was convicted on Friday, his 30th birthday.
Dosanjh set up KO Brokers out of an office in a non-descript grey building on the fringes of London’s ultra-rich Mayfair district.
The firm listed a second office in the north of the city, but sources at both addresses said KO moved out years ago.
The firm’s website says KO trades carbon units as well as lubricants, steel and raw materials including coal, oil, iron ore and scrap metal.
“We care about the environment ... Our traders/consultants are strong on ethics and believe doing business ethically leads to successful long term relationships,” it reads.
Several market sources that met the men said they flaunted expensive cars, while records showed that Dosanjh owned a flat in an affluent area of west London.
One emissions broker who preferred not to be named said Dosanjh and a colleague raised eyebrows when they arrived for an initial introductory business meeting in a Rolls Royce.
The HMRC has now started confiscation proceedings to ensure “the criminals do not profit from their crimes”.
The three sentences were handed down late last week, but media has been barred from reporting on the case after the presiding judge imposed a gag order on May 23 to ensure those charged received a fair trial.
Four others – two men and two women – were acquitted of the single charge of conspiring to cheat the public revenue following the 15-week trial at London’s Southwark Crown Court, an HMRC spokeswoman told Reuters Point Carbon.
Last week’s sentences were the first handed down in the UK for defrauding the treasury using the carbon market, and mark the most severe dispensed in Europe to date for such crimes.
A total 11 people were found guilty for similar offences in the past six months.
A German court in December sentenced six men to between three and eight years in jail, while a French court a month later found five people guilty.
They were sent to prison for between one and five years and ordered to pay fines of between 100,000 and 1 million euros.
The HMRC spokeswoman said she was unaware if any separate charges had been laid in relation to the discovered firearms or if any similar investigations were ongoing.
(Reporting by Michael Szabo; Editing by Andrew Allan)
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By Greg Roumeliotis and Jessica Toonkel and Jennifer Ablan
* Defendant's federal conviction was overturned in February