Logistics boss banned after £1m worth of false claims uncovered

A director of a Birmingham logistics firm has been banned from running companies for nine years after falsely claiming £1m worth of work to secure advance payments from lenders.

In 2011, Contact Transport, based in Garrets Green, was acquired by another company, Keelek 369, before it entered into a Company Voluntary Arrangement (CVA) in the same year to help manage its debts, which completed in July 2015.

While the company returned to profit between 2012 and 2014, Contact Transport entered into a difficult trading period and fell behind in repaying its debts to their creditors.

As a result, a winding up petition was filed against Contact Transport in March 2017 before the company became insolvent, with administrators appointed in April 2017.

Further investigations found that Contact Transport had entered into an Invoice Discounting Agreement (IDA) with an external lender, allowing the company to get advances on cash they were owed from customers rather than waiting for them to pay.

But during an audit in April 2017 the lender became aware of discrepancies between what Contact Transport had claimed and what they were actually owed from their clients.

Investigators found that a director, Neil Hughes, caused Contact Transport to claim funds for work that were higher in value than the work completed.

This resulted in the company securing increased levels of funding and cash flow to the value of just over £1m.

Hughes resigned as a director of Contact Transport in June 2018 and is now banned for nine years from becoming involved in the promotion, formation or management of a company.

Martin Gitner, deputy head of insolvent investigations for the Insolvency Service, said: “Securing advanced payments is a legitimate method of sourcing working capital finance. However, Neil Hughes submitted false documents to wrongfully and deceptively claim more money than was actually owed to Contact Transport.

“Nine years is a significant ban and this should serve as a warning to other directors that the Insolvency Service has strong enforcement powers to remove dishonest or reckless directors from operating a business for a considerable amount of time.”