Business

Judge questions customs’ raids on homes of accountants

Four arrested KPMG executives have not been charged with any wrongdoing

KPMG has stressed the investigation related solely to the executives’ personal affairs. Photograph: Niall Carson/PA

Wed Nov 30 2016 - 21:11

A process to obtain warrants to search the homes of four Belfast accountants under investigation for suspected tax evasion could be seen as just a "rubber-stamping operation", a senior judge has suggested.

Lord Justice Gillen pressed counsel for HM Revenue & Customs (HMRC) on the lack of available reasons for authorising the raids on the former KPMG partners' houses. His comments came as judgment was reserved in a legal action mounted by Eamonn Donaghy, Jon D'Arcy, Paul Hollway and Arthur O'Brien.

The four executives are challenging the legality of the searches carried out at their homes and offices. They were arrested last November, but have not been charged with any wrongdoing.

KPMG has stressed the investigation related solely to the executives’ personal affairs and was unrelated to the company’s business or its clients.

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Counsel for Mr Donaghy, Mr D’Arcy, Mr Hollway and Mr O’Brien said HMRC misled magistrates who granted the warrants at hearings where they were not represented.

On the second day of the hearing before three High Court judges in Belfast, Lord Justice Gillen questioned why reasons for the decisions were not available.

“The overwhelming likelihood appears to be that the judges, the decision makers, simply granted these: that smacks arguably of a rubber-stamping operation,” he said.

Paul McLaughlin, for HMRC, disputed the suggestion and said a statement of complaint prepared by the tax authority would have provided reasons.

Business partnership

Revenue concerns are about the four men involved in the formation of a separate business partnership and when it was registered. Loans being issued and written off as bad debt also featured in inquiries.

The court heard the accountants set up a finance partnership in 2009. It is said to have loaned sums of up to £800,000 and €2.2 million to another property investment company, JEAP, the four men had established in 2005. Within 24 months those loans had been written down to zero, according to Mr McLaughlin.

That was said to be a ground for concern that unlawful activity may have occurred and that the partnership could have been used as a vehicle to reclaim bad debt. But counsel for the accountants accused the tax authority of treating the case as an opportunity to seek to arrest and prosecute high-profile individuals.

Instead of putting direct questions to the accountants about issues of concern, HMRC was said to have taken the “nuclear option” of applying for search warrants. The move was intrusive and breached the human rights of the four men and their families.

Early-morning raids were carried out when children were at home and involved officers trawling through schoolbags, the court heard. In closing submissions today, Barry Macdonald QC, for the accountants, said: “To put it neutrally, HMRC haven’t played with a straight bat in this case, either in dealing with this investigation or in dealing with this application for judicial review.”

Following arguments Lord Justice Gillen pledged to deliver judgment as soon as possible.

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