Roundgrant Ltd. (Hansard, 29 January 1996)

§ Mr. William Powell (Corby)

One of the features of social life of which one can feel most proud is the amount of money that is given by our fellow citizens to charity. There is an extraordinarily wide range of charities and large sums are raised by a variety of purposes. Nothing that I wish to say is designed to get round the fact that it is my belief that 99.9 per cent. of our charities are magnificent institutions and deserve the general support of our fellow countrymen. There are, however, a few that amount to nothing more and nothing less than a criminal scam.

Nearly all our charities are of credit and renown. Their work deserves our attention and support. Whether at home or abroad their activities are an essential part of civilised life. This evening, however, I shall raise the issue of bogus charities and a criminal scam that demean all outstanding charitable institutions and whose activities insult the public. Let the message go forth from the House that we must all be vigilant against fraudsters, tricksters and criminals who pretend that they are raising money for charity.

In September 1993, Roundgrant Ltd. of 285 Welland road, Peterborough, the directors being Mr. Ian Irwin of that address and Mr. Terence Wyre of 64 Lavender crescent, Dogsthorpe, Peterborough, was incorporated. At the same time the Roundgrant Society was established from the same address. Some promotional literature was prepared, in which it was claimed that the Roundgrant Society would cover East Anglia, the midlands, Lincolnshire, London, Bedfordshire, Berkshire, Essex, Surrey, Leicestershire, Cambridgeshire, Nottinghamshire and Derbyshire. It was then claimed that at the moment we are planning to expand down to the south coast. Roundgrant Ltd. also prepared a pamphlet, which was given to those who responded to the buckets that were held out for street collection, and £1 would provide the donor with a copy. On page three of the edition that I have—this is issue No. 5, and there have been a number of editions—it thanks the public for supporting Roundgrant Ltd., which, it says is a non profit making company. Formed within Government guidelines to raise funds for the Roundgrant Society. If I may pause for a moment, the Government guidelines referred to are a mystery to me, and I think that they would be a mystery to anybody reading this document, which continues: Our aim is to help as many people as we can regain the independence which is rightly theirs…Of course as every fund raising company Roundgrant Ltd. has its expenses, from time to time its directors will be paid remuneration which will be calculated on the basis of what in the directors opinion is reasonable, taking into account the time spent by the directors in managing Roundgrant's affairs, and the level of the funds Roundgrant is successful in raising. We are not like so many so called fund-raising companies who give as little as possible to their said cause. All the net profits of Roundgrant Ltd. will go to the Roundgrant Society to enable them to do as much as possible. The rest of the document contains a recipe for chicken and ham loaf and for raspberry and banana trifle; a number of advertisements, including advertisements for 752 medical supplies; a couple of crosswords; a page entitled "humour and laughter" and other matters. The really important part of what it had to say was that it was not like so many so-called fund-raising companies.

Roundgrant Ltd. was formed in 1993 as a limited company. Unfortunately, almost no documents have been lodged in Companies House about its activities, but there is in Companies House a set of accounts that were prepared for Roundgrant Ltd. up to 31 August 1994. They show that a gross income of some £43,748.38 was raised in a period up to that date. Roundgrant Ltd. continued long after 31 August 1994 and no subsequent accounts have been lodged. The breakdown shows that directors' fees and pensions amounted to some £10,620, and that commissions payable—I surmise mostly to the directors and their nearest and dearest and those whom they could control—amounted to some £14,859.48.

There are a number of other mysterious items in the breakdown, all of which suggest that the amount that was taken by the directors in one form or another by way of fees, pensions, commissions or whatever was an astonishing proportion of the total. Indeed, at the bottom of the accounts, Roundgrant Ltd. claims that the amount that was transferred to the Roundgrant Society, which, of course, would be using the money for the purposes of providing equipment for the disabled, was only some £2,000. About £43,000 was raised, but only £2,000 apparently was distributed. The essence of the fund raising was the holding out of a bucket so that people could put in £1 coins. There is absolutely no guarantee that those coins were not transferred into the pockets of those who were collecting or the pockets of the directors behind them, without appearing in the accounts at all.

There are those who have considered the matter closely and have assisted me in the preparation of my evidence tonight who believe that the true sum that was raised by and on behalf of Roundgrant Ltd. over 18 months—a wider period than that covered by the accounts to which I have referred—was not less than £100,000, and I have heard it suggested by responsible people in Northamptonshire that the sum raised might be substantially in excess of £100,000. We know that the only claim that it makes for what was transferred to the Roundgrant Society, the body that had the power to make sums available for equipment for the disabled, was only about £2,000. It is well within the realms of everyone's imagination that the sums in the accounts could have been understated, but it would be impossible to imagine that the amount passed on to the Roundgrant Society has been overstated. If it had wanted to, it could have entered a much larger sum without anyone being able to check up.

We know that the Roundgrant Society and those acting on behalf of it operated in a number of counties: Nottinghamshire, Northamptonshire, Lincolnshire, Cambridgeshire and Norfolk. It is likely that they also operated in a number of other areas, and that that occurred over 18 months. It came to my attention last autumn that people acting on behalf of Roundgrant had made a number of visits to Oundle, near Peterborough—in my constituency—in July and August, and had held out collecting buckets. It is beyond doubt that all those who put money into the buckets thought that they were giving to charity. They received, if they wanted it, a copy of the pamphlet to which I have referred. Of course, almost none of the money went to charity.

753 A number of my constituents were approached during that period. I have copies of witness statements from them, prepared by and on behalf of Oundle town council and for the environmental health office of East Northampton district council, which suggest that constituents of mine—some of whom I know personally—were approached and gave money in the belief that it would go to charity, although it did not. That happened on a continuing basis, and we know that similar collections were made on a continuing basis in Kings Lynn, Breckland, south Holland, east Cambridgeshire, Peterborough, south Kesteven, Cambridge, Nottinghamshire, Boston and Hemel Hempstead. It is not surprising, therefore, that substantial sums were raised.

I contend that that was a criminal scam, and that the directors and those running Roundgrant knew exactly what they were doing. They realised that it was a good wheeze that would enable them to hoodwink the public and persuade people to give money, ostensibly to charity. My constituents were told that the money would be used to help the disabled, specifically those in Oundle, and that it would be allocated with the assistance of the social services department. Needless to say, the Northamptonshire social services department did not know about this; nor did local doctors, whose advice would allegedly be used by Roundgrant in the distribution of the money.

By early autumn last year, it was obvious that something serious was going on. As a result, on 3 November 1995, the Northamptonshire police, East Northampton district council and Oundle town council issued a news release, stating that they were investigating and warning the public about the operation of an organisation which has been selling brochures on the streets of Oundle at £1 a copy. The news release went on: The organisation is based outside the county and operates in a similar manner in other areas of Northamptonshire and a number of other counties. Sales of the brochure are promoted on the grounds that funds are being raised for the disabled and the brochure claims the organisation to be charitable. Members of the public making donations are misled by the cover of the brochure and by the sales pitch of the collectors into believing they are giving money to a charitable organisation for the disabled. However, this is not supported by the contents of the brochure or by the facts which are now becoming evident. Not only are the public being misled, but it is feared the operation of the organisation could well have a detrimental effect on the fund-raising activities of bona fide groups who are raising money for charity. Members of the public are advised to be on their guard against this type of deception and when making any donation should question what proportion of the money is going to the stated good cause. It is important to underline that money that the public thought they were giving to charity, but that was not going to charitable organisations, was being denied to other bona fide charities that deserved the public's support.

By September, it was clear that, in all probability, a number of breaches of the Companies Act 1989 had been committed because the necessary documentation required for a limited company had not been lodged at Companies House. One of the things that I ask of my hon. Friend the 754 Minister is that he draws those possible breaches of the law to the attention of my right hon. Friend the Secretary of State for Trade and Industry.

It is likely that the people who were raising money were in breach of social security law. In particular, employment records by Roundgrant are hard to find. I hope that my hon. Friend the Minister will draw to the attention of the Secretary of State for Social Security possible breaches of the law in relation to employment records and social security that may have occurred. Because of all that, a working group was formed from the various local authorities and from police from a number of counties. The Charity Commission was involved and a number of meetings of that group were held in Oundle, the most important of which was on 6 November. The minutes of that meeting state that Mr. Larkin of the Charity Commission advised the group that when operations such as Roundgrant were constituted they formed two distinct and autonomous organisations, in this case, Roundgrant Ltd. and Roundgrant Society. The purpose of Roundgrant Limited was to raise funds specifically for the Roundgrant Society, and under the Charities Acts of 1992 and 1993 it was necessary for a legal agreement to exist determining the financial arrangement between the limited company and the society. It was the view of the Charity Commissioners that the legislation which determined the terms of agreement was in the case of Roundgrant not being met. Legal advisers to the Charity Commission had therefore concluded that Roundgrant were trading illegally. Mr. Larkin advised that the Charity Commissioners would be issuing an order restricting the transactions and payments of the Roundgrant Society accounts on the 7 November 1995 which would effectively in law, stop Roundgrant trading … should Roundgrant continue to trade once the order had been issued the Charity Commission would have the power to treat this action as contempt of a High Court order. Those orders were issued to Mr. Irwin, one of the directors to whom I have referred, at 285 Welland road, to Mrs. O'Brien, also of that address, to Mr. Dennis Tomlin of Moorview, Bondleigh, North Tawton in Devon, and to Mr. Horace Gilson of 3 Aboyne avenue, Orton Waterville in Peterborough.

I note the interest of Mr. Tomlin in Devon. I contend—and I know that my hon. Friend the Minister is aware of this important point—that, in relation to charitable collections, breaches of the Theft Act 1968 by organised criminals are taking place across the country, and that they are not confined purely to Roundgrant Ltd. and to activities in the eastern counties. I merely use Roundgrant, whose activities I now believe have ceased as a result of the interest that I and others have shown in its activities, as an example. I believe them to be illustrative of what is taking place much more widely throughout the country. It may be that in Devon, as well as in the eastern counties, serious breaches have been taking place.

The statutory notices forbidding any further activity by Roundgrant Ltd. and the Roundgrant Society were issued, and the meeting on 6 November was advised that any breach of them would be a breach of a High Court order. I have evidence that further breaches occurred in November in south Lincolnshire and Ely. The Charity Commission was advised by the relevant local authorities that Roundgrant had made further collections in breach of the statutory notices.

In view of what happened, the Charity Commission should have acted at once to take this matter to the High Court. It did not, and continued to investigate the matter. I deplore the fact that it did not take instant action, and I hope that in future, as soon as evidence from reputable 755 sources becomes available—and the evidence in this case was from East Cambridgeshire district council and the South Holland district council—action will be taken. In this instance action should have been taken in the High Court against those who were in breach of the statutory notices.

As soon as I became aware of these events in different counties, 1 approached the Director of Public Prosecutions and suggested that some kind of co-ordinating activity should take place involving the police, because it was apparent to me that whatever the breaches of legislation in relation to street collections, there was in all likelihood a serious breach of the Theft Act 1968, section 15 of which provides that obtaining a pecuniary advantage by deception is a serious criminal offence. In this case the pecuniary advantage consists of the £1 coins being dropped into the buckets, and the deception is that those who dropped them in were led to believe that they were giving money to charity when they were not. Not only would there be breaches of section 15 of the 1968 Act but there would be possible charges of conspiracy.

Alas, the Director of Public Prosecutions, as is her wont—and I have found this on other occasions—was not at all helpful, unlike her predecessor who would certainly have ordered a police inquiry and a report to him of what happened. I drew the correspondence to the attention of the various chief constables. The chief constables of Lincolnshire and Northamptonshire responded, but it is a matter of some regret to me that the chief constables of Cambridgeshire and Nottinghamshire did not. I hope that the Minister will draw these matters to their attention.

In this case there is ample evidence of serious breaches of the criminal law, and it is likely that the people behind those breaches are serious professional criminals who deserve a long time in the stammer. Certainly, most of my constituents hope that they go there as soon as possible in view of what is abundantly plain. I hope that the Minister will draw not only my remarks but the whole background of the case to the attention of the various Government Departments and chief constables to ensure that wherever this kind of danger exists in future action is taken to prevent substantial sums being raised for purposes quite different from those that the donors intended.

§ The Parliamentary Under-Secretary of State for the Home Department (Mr. Tom Sackville)

I congratulate my hon. Friend the Member for Corby (Mr. Powell) on raising this matter. I certainly confirm that I take it extremely seriously, and that his words will be drawn to the attention of the various agencies he mentioned.

As my hon. Friend said, charities have a very special place in our national life. They probably raise some £14 billion a year, and that shows a great deal of generosity. Overall, the voluntary sector thrives, and it depends on trust and good will, and on action that is motivated by generosity to others. When things go wrong, and particularly when it appears that the public's generosity is being exploited, it is a matter for considerable concern.

Through its support and investigative division, the Charity Commission aims to identify those areas of concern and take action. In many cases, that means helping those concerned to rectify errors, but the commission also has powers to investigate abuse of 756 charity funds and to protect those funds when they appear to be at risk. I shall give a résumé of what is known to me about the case that my hon. Friend has raised.

I understand that there are two parties: Roundgrant Ltd., a commercial company, as my hon. Friend has described, which was selling magazines with a representation that some parts of the proceeds would benefit a charity, the second party, the Roundgrant Society. The Charity Commission has taken a very close interest in the matter, together with the relevant local authorities and the police.

Having written to the charity inquiring about the amount of money reaching it from the sale of magazines and having not received a satisfactory reply, the Charity Commission took action early in November. It served on the charity trustees an order prohibiting them from entering into transactions on behalf of the charity, from raising any funds for the charity, and from making payments in the administration of the charity. The order was copied to the charity's bank, effectively freezing the charity's fund.

As I understand it, only some £3,500 out of the declared £43,700 sales by the company reached the charity. While each case must be treated on its merits—such margins may be appropriate in cases where the public are buying an item that represents fair value—I understand that in this case a very insubstantial publication, which my hon. Friend has already described, was being sold, representing almost no value for the £1 purchase price.

In those circumstances, I certainly share my hon. Friend's view that the venture may indeed be nothing more than one for private gain falsely masquerading as a charitable venture. If that is indeed the case, I share my hon. Friend's view of what those involved have been up to, and I am horrified to hear that the fraud has been perpetrated on the public.

As well as writing to the charity, the Charity Commission wrote to Roundgrant Ltd. drawing its attention to the new requirements of the Charities Act 1992, pointing out that, before selling magazines with a representation that part of the purchase price will benefit a particular charity, it must have a written agreement satisfying conditions prescribed in the Charitable Institutions (Fund-Raising) Regulations. The commission pointed out that the company's existing agreement did not meet those requirements, and that the company would be unable to obtain a new agreement, because the Charity Commission's order prevented the trustees of the Roundgrant Society from entering into any agreement.

Since then, the commission has become aware that the company appears to be selling an amended version of the magazine, collecting for general charitable purposes. Given what went before, that new activity obviously raised further alarm. The commission therefore wrote to the company seeking details of the new arrangements. Not having received a reply, the Charity Commission invoked its powers under the Charities Act 1993 late last week, and issued a direction to Roundgrant Ltd. demanding details of its finances.

Further steps depend on what action the company takes and what information is forthcoming, but the commission has extensive powers. Should the company be unwise enough to ignore the direction that it has just received, the Charity Commission can issue a further order, and, if necessary, seek its enforcement through the High Court, 757 where possible sanctions include imprisonment. The commission is also maintaining its liaison with the police and local authorities.

We await developments with interest. My hon. Friend may, however, be interested to hear that the company's initial response has been to telephone the Charity Commission to inform the commissioners that it intends to close down its operation. Even if that is indeed so, the Charity Commission will have a continuing interest in the distribution of charitable funds that the company has raised.

I can reassure my hon. Friend that all concerned will be looking carefully at the case and the implications stemming from it. The new investigative powers of the commission and the new controls on professional and commercial involvement in charitable fund-raising have made an important contribution, and have enabled the commission to take a more proactive role.

I know from what my hon. Friend has said that he is critical of the degree of enforcement in this case, andperhaps—of the powers and safeguards available. As to the law relating to charities, however, I hope that he will appreciate the difficulty of framing legislation which gives the greatest possible obstruction to bogus fund-raising, but which helps bona fide charities to raise 758 the funds they need with the minimum of inconvenience and expense. We will, of course, keep this difficult balance under review.

Co-operation among the various agencies involved is essential, as such cases can involve several interests, and can require co-ordinated action to be taken. To strengthen such co-operation, it is our intention to issue a circular to the police, local authorities and others, summarising the new charities, legislation, drawing to the attention of all those agencies the role of the Charity Commission and encouraging practical co-operation where that can be of use. These steps also emphasise the importance of vigilance and continued choice by the public.

Clearly, the message that must go out is that people should be willing to give to genuine causes but be wary of propositions that seem doubtful. If one is in doubt, one should ask the collector or seller for more information or decline to give. If it is thought appropriate, one should refer the matter to the police, the Charity Commission or the local authority.

My hon. Friend will agree that the case that he has brought to the House's attention is in the minority, but it is important that we have and exercise powers to investigate, and that we act as quickly as possible.