Three UK businessmen were today sentenced to imprisonment for between two and a half to three years for cartel offences.

All three were also disqualified from acting as company directors for periods of between five and seven years.

These are the first ever convictions for a cartel offence since criminal prosecution powers were given to the OFT under the Enterprise Act.

Peter Whittle, David Brammar and Bryan Allison pleaded guilty at Southwark Crown Court to dishonestly participating in a cartel to allocate markets and customers, restrict supplies, fix prices and rig bids for the supply of marine hose and ancillary equipment in the UK. Marine hose is used by the oil and defence industries for transporting oil between tankers and storage facilities.

Allison and Brammar were respectively the Managing Director and Sales Director of Dunlop Oil and Marine Limited, a manufacturer of marine hose based in Grimsby. Whittle traded as an independent consultant but in practice was employed full-time by the parties to the cartel to co-ordinate their activities around the world.

Officers of the OFT executed search warrants at Dunlop’s offices and Whittle’s home in May 2007 and seized extensive and compelling evidence of the cartel arrangements. At the same time, in an operation coordinated between the OFT and the US Department of Justice, the defendants were arrested in Houston, Texas, where a cartel meeting had taken place the previous day and was covertly recorded by the US authorities. A number of other suspects were also arrested by US authorities.

Whittle, Brammar and Allison were allowed to return to the UK and face charges as part of a plea agreement with the US DoJ. They returned to the UK in December 2007 and were arrested at Heathrow Airport by the Metropolitan Police.

The charges relate to the period between 20 June 2003, when the cartel offence came into force under the Enterprise Act, and 2 May 2007 when the men were arrested in the United States and the cartel arrangements brought to an end. The cartel was global in its scope and involved all the major manufacturers of marine hose worldwide.

John Fingleton, OFT Chief Executive said :

‘This was a highly sophisticated and well-organised cartel, involving all the major manufacturers of marine hose worldwide over many years, where the cartel members secretly employed a full-time coordinator to allocate contracts and fix prices.

‘This first criminal prosecution sends a clear message to individuals and companies about the seriousness with which UK law views cartel behaviour. The OFT will continue to investigate and prosecute cartels vigorously, with the aim of ensuring strong competition within the UK economy.’

NOTES

1. The defendants were each convicted of an offence under the Enterprise Act 2002. Under section 188 of the Act it is an offence for individuals dishonestly to agree that businesses will engage in certain types of cartel activity, namely price-fixing, limiting supply or production, market-sharing and bid-rigging. The businesses involved were Dunlop Oil and Marine Ltd, Bridgestone Corporation, Yokohama Rubber Company Limited, Parker ITR S.r.l., Manuli Rubber Industries SPA and Trelleborg Industrie S.A.

2. This cartel behaviour almost certainly resulted in higher prices for customers in the UK. These included the Ministry of Defence.

3. The sentences imposed on each defendant were:

Peter Whittle – three years imprisonment and seven years director disqualification,

David Brammar – two and a half years imprisonment and five years director disqualification, and

Brian Allison – three years imprisonment, seven years imprisonment and £25,000 costs.

Confiscation proceedings and costs for David Brammar and Peter Whittle will be heard on 1 July 2008.

4. The search warrants were granted by the High Court under s.194 of the Enterprise Act 2002 and were executed on 2 May 2007 (see press release 70/07). The subsequent investigation involved the gathering of evidence from a large number of sources and interviews of the defendants both in the US and in the UK.

5. The defendants were arrested by officers of the Metropolitan Police at Heathrow on 18th December 2007 and were charged later that day (see press release 177/07).

6. Under the terms of the US plea agreement, the defendants have pleaded guilty to violations of US antitrust law. The US plea agreement applies only to the proceedings in the US and does not affect the rights of the defendants under UK law.

7. A separate investigation is being carried out by the European Commission under Article 81 of the EC Treaty, which is directed at the companies concerned. The European Commission announced on 5 May 2008 that it had issued a Statement of Objections to a number of companies.

8. Anyone who has information about cartels is asked to call the cartels hotline on 0800 085 1664 or email cartelshotline@oft.gsi.gov.uk. The OFT has a policy under which it will pay financial incentives of up to £100,000 in return for information which helps it to identify and take action against illegal cartels. Rewards will be paid only where information is accurate, verifiable and proves to be useful in the OFT’s anti-cartel enforcement work, and will be calculated according to a set formula and not subject to negotiation. For further information please see: http://www.oft.gov.uk/advice_and_resources/ resource_base/cartels/rewards

9. The OFT also operates a leniency programme for companies and other individuals who wish to confess to cartel conduct. For further information please see: http://www.oft.gov.uk/advice_and_resources/ resource_base/cartels/confess

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05-06-2008

Citizens Advice, the charity which helps people resolve their legal, money and other problems by providing free information and advice, is working with National Debtline and Advice UK on a major project looking at people’s experience of dealing with their own debt problems.

A significant number of people in debt decide to manage negotiations with creditors themselves. They will sometimes have sought initial guidance from an advice agency, but will take everything else forward on their own.

The credit industry largely advises people in difficulty to call them and discuss their problems, but evidence from Citizens Advice Bureaux (CAB) shows that they are not always treated sympathetically or positively.

Alex MacDermott, creditor liaison policy officer at Citizens Advice says:

“Last year nearly one million people in England and Wales sought free advice on debt related problems*. A major part of this work involves giving clients the information and support they need to take control of their debt problems. Unfortunately, we are seeing more and more clients coming back and telling us that their offers won’t be looked at unless they are endorsed by a third party such as their local CAB.”

Citizens Advice are keen to hear from anyone who has tried to deal with their own debt problems, whether the experience was good or bad, in preparation for a report due to be launched in  November this year.

To take part in a short survey on this subject please visit: www.adviceguide.org.uk and click on the ‘dealing with your debts’ logo. Respondents will be asked why they decided to act on their own behalf, what happened when they did and what changes they would like to see to improve the system.

The report is a major collaboration between three of the biggest providers of debt advice in England and Wales. It aims to make recommendations for changes in current practice, so that everyone can more easily access good quality advice and information, become debt free and get back on track with their finances.

Anyone facing debt related problems and seeking further advice can visit: www.adviceguide.org.uk or call into their local bureau for further support. The advice guide website contains a number of fact-sheets for dealing with different types of debt, including mortgage arrears, utilities arrears and how to deal with bailiffs.

* Total number of debt enquiries made to Citizens Advice, National Debtline and Advice UK in 2007.

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In relation to the same one count of conspiracy to defraud received sentences as follow:

Virendra Rastogi [Chairman - d.o.b. 02.02.1968] Nine years and six months’ imprisonment. Disqualified from acting as a company director for fifteen years

Anand Jain [Director - d.o.b. 08.05.65] Eight years and six months’ imprisonment. Disqualified as company director for ten years

Gautam Majumdar [Chief Executive Officer and Director - d.o.b. 17.10.51] Seven years and six months’ imprisonment. Disqualified as company director for ten years

This was a fraud that involved literally billions of dollars, and of the defendants HHJ Wadsworth in passing sentence said today “they created a very impressive front that fooled banks, the metal exchanges in both countries, (UK and USA), and well respected accountancy firms.” The judge also said, “they were involved in years of calculated dishonesty,” and that during the trial “they had shown no shadow of regret or remorse or repentance.”

Background Information

The Allied Deals/RBG Resources fraud was a truly global fraud that cost banks $700 million dollars worldwide but that was ultimately brought down by the pressing of a wrong button on a fax machine.

Between 1996 and 2002, Virendra Rastogi, Anand Jain and Gautam Majumdar, (together with Virendra’s brothers, Narendra who was based in the USA, Ravindra who was based in the UAE and Subhash who was based in Singapore) ran a web of in excess of 300 fake “customers” who were supposedly based in the USA, Hong Kong, Singapore, Dubai, India, France and Italy. The defendants used the supposedly independent customers to create “trades” that were then used as the collateral for cash advances from banks. Whilst the banks thought they were financing a very successful metal trading firm (one so lucrative that Virendra Rastogi appeared in the Sunday Times Rich List and had Jack Cunningham MP, Lord Holme, Lord Woolmer and Lord Gray as advisers) they were actually advancing money to a company that was propped up by dishonesty. The “customers” were actually Rastogi’s paid henchman based in addresses around the world who would falsify documentation and purport to banks and auditors to be independent traders. The truth was however far more audacious. The address of one of the customers was actually a cow shed in India. One SFO witness at trial indicated that another customer in the USA was actually just a laundrette in New Jersey and an investigator who went to locate one of the “customers” found a residential New Jersey housing estate with the house in question owned by an elderly lady who sold scrapbooks. A number of supposedly independent customers actually had the same address and when investigators phoned some of the companies the phones were actually answered by children.

Ultimately it was the complicated nature of the fraud, together with the controlling tendencies of Virendra Rastogi that led to the uncovering of the fraud. Mr Rastogi would require copies of the false customer documentation to be sent to the UK for checking by himself. One of his henchmen in Hong Kong, intending to fax a number of false letters from various “customers” to Rastogi for review, inadvertently pressed the wrong button on the fax machine and sent all the material to PricewaterhouseCoopers, who were RBG’s auditors in the UK. Although Rastogi tried to recover the documentation alleging that they were documents that had been sent in error, PwC refused to return them and resigned as RBG’s auditors. This resignation prompted concern amongst the banks. Realising that the banks investigation would reveal the extent of their dishonesty, the defendants and their accomplices went into a panicked attempt to cover up the fraud. Offices were rented, letter headed paper and business cards produced and individuals recruited to sit at desks and pretend to be employees. Investigators found hundreds of customer stamps amongst the fraudster’s papers at their Hong Kong business location, from which a ready inference could be drawn. Why would they own so many of their customer’s stamps unless they controlled them?

RBG Resources also employed a number of genuine metal traders, who were based at RBG’s London offices at 105 Piccadilly. These traders entered into real metal transactions. These traders were not aware that the business conducted by Virendra Rastogi, Anand Jain and Gautam Majumdar was founded on fraud. They were the honest veneer of a business that in many regards was (as described by SFO counsel Richard Latham QC) “rotten to the core”.

Paige Rumble, the lead SFO investigator on the case, said “This was a truly audacious and ruthlessly efficient fraud that ranged from the poorest areas of India to the corporate tower blocks of Manhattan. The RBG Resources empire was a family business founded and driven by fraud. The successful prosecution of this case required a huge and technical analysis by the SFO team that unravelled the truth behind the facade and demonstrated to the jury the full extent of the defendants’ dishonesty”.

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After 18 monrths of campaigning by UKScams.co.uk and others, we are pleased to report that Ofcom, the communications watchdog, has at last published a code of conduct to stop internet service providers (ISPs) from advertising “misleading” broadband speeds.

Ofcom says 32 ISPs – covering 90% of broadband customers – have signed up to the code.

They include giants such as AOL Broadband, O2 home broadband, BT Total and Virgin Media. The regulator will now launch a broadband speeds survey to identify actual speeds compared to advertised headline speeds.

ISPs have frequently come under fire from the us and the Adverting Standards Authority for “misleading” consumers, including a case involving Virgin Media’s press ads last August that stated its own offering was faster than BSkyB‘s.

The terms of the new code include providing consumers with an accurate maximum speed at the point of sale, as well as giving customers the option to move to a lower speed package when estimates are inaccurate.

The regulator has also launched a programme of independent research to identify the actual speeds of broadband for consumers. The move follows research, which showed consumer satisfaction of ISPs has fallen over the last year.

Ofcom chief executive Ed Richards,told UKScams: “Broadband is a thriving market in the UK. We want to encourage real clarity for consumers about the actual broadband speeds they receive.”

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Citizens Advice Director of Policy Teresa Perchard said:

“We very much welcome today’s report published by the Competition Commission which confirms what we said in our ‘super-complaint’ that triggered the original investigation,* that PPI is over expensive and often unsuitable and that lenders are ripping off, rather than looking after their customers.

“While borrowers are trying to be responsible and seeking peace of mind by taking out PPI policies, many people are pushed into debt by the extra PPI costs.

“We therefore welcome the proposals in the report and call on the industry to address issues of cost and quality as a matter of urgency to ensure that PPI starts to protect people without further delay.”

In September 2005 Citizens Advice made a ‘super complaint’ to the Office of Fair Trading, calling on them to launch an investigation into the payment protection insurance (PPI) business, which at that time had an estimated 20 million policies in force and produced annual revenue in excess of £5 billion.

*Protection racket – CAB evidence on the cost and effectiveness of payment protection insurance the report on which the super complaint was based, is available on the Citizens Advice website: www.citizensadvice.org.uk/campaigns/protection_racket

Recent cases:

A couple took out a secured loan which included payment protection insurance. The CAB obtained a transcript of the phone call when the loan was taken out and at no point in the conversation did the person selling the loan mention that the loan was variable and the cost of the PPI was £21,000 on top of the loan. They were sent documents to sign stating that the loan was for £85,000 which they signed and sent back, and 4 days later the loan money was deposited into their account. They then received the loan agreement which stated that the insurance would be on top of the loan and this made the loan with this insurance £106,207.50 in total. When the client had to stop work because of ill-health and tried to claim on the PPI she was told that she could not claim for sickness, only her partner was covered. The loan company have refused to refund the PPI. The client has had to take a lower paid job because of illness, and now she and her partner may lose their home and still owe money when it is repossessed. The worry has added to the client’s health problems.

A married man of 47, a homeowner who is employed full-time, took out a secured consolidation loan for £60,000.00 with an additional loan for £15,000.00 for Payment Protection Insurance in case he lost his job, or suffered ill health. He didn’t realise that the PPI was only for 6 years, despite the term of the secured loan being 20 years. The CAB adviser comments that the PPI cover seems inappropriate, excessive and does not appear to meet cleint’s needs and some of the terms also appear to be unfair as he will not be covered for 14 years after his PPI expires, but he cannot arrange other cover or cancel the PPI as he would only receive 25% of the premium back if it is cancelled within 12 months of taking out the loan. The addition of the PPI premium has increased his indebtedness by £15,000 for little discernible benefit.

News breaking today that customers of TK Maxx, the fashion retail chain,
have had their credit and debit cards compromised should be kept in
context, according to fraud protection specialist, the 3rd Man.
Furthermore, consumers concerned about the future misuse of their credit
cards should keep checking their bank statements, but equally need not be
overly concerned.

Commenting, card crime specialist, Paul Simms, CEO of the 3rd Man, said:
“If it’s true that 45 million customers have had their cards compromised,
that’s obviously very serious but fraudsters often obtain card numbers from
a variety of sources. Provided security information has not been
compromised then there is no need for wholesale panic.”

According to reports, customers of TK Maxx have already had card details
used in fraudulent circumstances. Understandably many consumers, and not
just those who shop at TK Maxx, will be concerned about their cards being
compromised in the future.

“Card numbers on their own pose little threat,” explains Simms. “However,
card numbers together with names and addresses or security numbers would
represent a problem, but I would be highly surprised if this were the case.

“It shouldn’t come as a surprise to anyone that card crime continues to
flourish and criminals will do all they can to shift their interest from
one place to another. We saw it with Chip and PIN and the move to ‘card
not present’ crime, such as over the Internet and mail order. Since then
many retailers have put in place systems to prevent card not present fraud
from happening.”

A card number without a PIN is of little use in shops, and a card number
without the security number will be of little use on the Internet or over
the phone. “This story must not scare customers from shopping online,”
says Simms. “It is extremely unlikely that your details will be
compromised if you shop online. Furthermore most retailers use
sophisticated screening techniques to spot fraudsters if they try. Fraud
need not be a problem, it will remain something we all need to be aware of,
but it really should not cause anyone to lose sleep.”

The groundbreaking study into the prevalence of mass marketed scams in the UK provides the first ever detailed analysis of the financial impact and harm caused by such scams. The survey, involving over 11,200 interviews, found that nearly half of the UK adult population has been targeted by a scam and that every year one in 15 people (3.2 million adults) in the UK fall victim to a scam involving deceptive unsolicited mailings, phone calls, or emails.

The average amount lost per scam was £850.

The research suggests that consumers lose around £1.2 billion every year to bogus holiday clubs, £490 million to high risk investment scams, £420 million to pyramid and get-rich-quick schemes, and £260 million to fake foreign lotteries.

On average a victim has a 30 per cent chance of falling for another scam within 12 months of first being caught out, most likely because their personal details are added to a so-called ‘suckers list’, which are then sold on to other scammers.

Whilst older consumers were more likely to be targeted by a scam, the highest percentage of victims were aged between 35-44 years.

Of those who fell for the scams, 32 per cent said it was because of the legitimate and professional appearance of the marketing, 30 per cent said they were caught off guard, and 13 per cent because of the excitement at the prospect of getting a good deal or winning a prize.

In addition, the research showed that less than five per cent of those scammed reported their experience to the authorities, and more than half of victims have since changed their shopping behaviour, for example by becoming less likely to respond to any unsolicited offers or shop on the internet.

Mike Haley, Head of Scambusters at the OFT, told UK Scams:

‘This research shows for the first time the full extent of damage done to individuals and to the wider UK economy by manipulative and malicious scams. The £3.5 billion stolen from the public, which will line the pockets of scammers this Christmas, equates to about £70 per year for each adult living in the UK. This research explodes the myth that only the elderly are victims of scams. Young and old, and people from all backgrounds are taken in by increasingly sophisticated scams.’

Alun Hill MCIJ

Compulsory items purchased from designated retailers or schools were found to be on average 23 per cent more expensive than in uniform retailers generally, and 150 per cent more expensive than in supermarkets. Some schools claimed that these restrictive arrangements benefitted parents in terms of convenience and the quality of uniforms.

By comparing prices at exclusive outlets and retailers generally, the OFT estimates the total yearly detriment is £32m for parents buying secondary school uniforms, and £13m for primary school uniforms.

A third of schools operating exclusive contracts with retailers reported benefiting financially from them. Yet the detriment figure to parents is several times the amount schools say they make from these restrictive arrangements, which suggests that schools are not the chief beneficiary of higher prices paid by parents.

The findings of the study will be passed to the Department for Education and Skills, which is responsible for providing guidance to state schools in England on their uniform policies.

John Fingleton, Chief Executive of the OFT said:

‘This study has shown that parents have to pay higher prices for school uniforms where exclusive agreements exist. This restriction on competition acts as a ‘tax’ on parents, which mostly goes to the chosen retailers. We call on school governers to eliminate these exclusive agreements.’