Charity Commission releases report after £2.5m charity fraudsters jailed

14 Mar 2011 News

Trustees of the People's Opportunity to Work Trust prisoner rehabilitation charity were in breach of their legal duties by failing to prevent £2.5m of funds acquired through donations and its trading subsidiaries being unlawfully distributed, the Charity Commission has concluded in its statutory inquiry report.

Trustees of the People's Opportunity to Work Trust (POW) prisoner rehabilitation charity were in breach of their legal duties by failing to prevent £2.5m of funds acquired through donations and its trading subsidiaries being unlawfully distributed, the Charity Commission has concluded in its statutory inquiry report.

The Commission employed a team of investigators, lawyers and accountants to investigate POW Trust after two of the charity's former trustees raised concerns of suspected fraudulent activity in October 2002.

Release of the report, which was completed in 2005, was delayed pending the criminal trial of the charity's general secretary, Peter Sainsbury and one of its trustees, Kirkvine Ellis, who were eventually jailed in May 2010 for conspiracy to defraud.

Publishing the report on Friday the Commission advised that there had been misconduct and mismanagement in the administration of the charity, which was registered in 1999, with the purpose to "relieve poverty" and assist rehabilitation among ex-offenders.

Charity funds laundered

After opening the statutory inquiry in November 2002 the charity failed to provide up-to-date accounts to the Commission for the years ending 2002, 2003 and 2004 and the trustees and Sainsbury did not co-operate with the Commission throughout its inquiry, the report advised.

The Commission obtained information from the charity's banks and found a number of transactions from POW's accounts to its trading subsidiaries which were subsequently re-distributed through a number of accounts held by the charity or by individuals connected with the charity. Neither the trustees nor Sainsbury could account for these payments. 

Sainsbury, described by the Metropolitan Police as the "mastermind of the scam" had taken on the unpaid role of general secretary as he was already a convicted fraudster, and therefore unable to be a trustee. But the Commission found he had been allowed to exercise full financial control of the charity issuing "a large number of cheques payable to himself". Some £239,737 had been paid out in cheques for cash by Sainsbury and a further £28,855 was paid to him in cheques signed by himself. These sums were "significantly higher than the total income and expenditure reported to the Commission".

Following the conclusion of criminal proceedings the Metropolitan Police advised that "between 2002 and 2004 £2.5m was stolen from unsuspecting victims" and that funds were put through business accounts, transferred to associates' accounts, withdrawn in cash or laundered abroad. Some 40 bank accounts had been opened in the name of the charity or its subsidiaries.

Little evidence of charitable activity

The Commission's inquiry found little evidence of charitable activity taking place despite claims on its website that its charitable purposes included a training scheme for ex-offenders, an employment agency, a dedicated fund to help ex-offenders rent a home, a law centre to help prisoners and victims of miscarriages of justice and a dedicated unit to administer prison visiting and letter-writing facilities for prisoners. 

The charity ceased to operate during criminal proceedings and so the Charity Commission removed it from the register on 7 December 2010. Following criminal proceedings the Metropolitan Police has undertaken to confiscate any criminal proceeds and assets from the charity but if any assets remain the Commission will use its regulatory powers to apply these for legitimate charitable purposes.

The Commission warned that the case highlights the need for charitys to provide an "adequate audit trail" and that trustees of a charity are collectively responsible for its proper management. 

 

 

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