Monday, 28 September 2015

Mortgage Fraud.

It's the September weekend and for once it isn't raining.

Better still, for once I've actually had the whole weekend off. I was meant to be doing a jury trial last week, tailgunner on a wee stabbing, but as it turned out the case ahead of it overran so I spent most of the week unable to make client appointments, in case my trial started,  but with time on my hands to clear my desk.

So really, really, the last thing I wanted to be having to do today was write a blog about mortgage fraud.

But needs must.

A week past on Sunday the Sunday Times carried an article about the business activities of Michelle Thomson, one time front woman for Business for Scotland and now the SNP Member of Parliament for Edinburgh West. It was unattractive stuff, highlighting how her property company had bought up houses and flats from distressed and desperate sellers at knock down prices. These were hardly the actions of a leading member of a supposedly social democratic Party. So the hypocrisy was enlightening but hardly unique in Nationalist ranks.

And, on the other hand, that is of course capitalism. Those with lots of money regularly can, and do, exploit that position at the expense of those who have little. That's certainly not something even the current Labour leadership is proposing be made illegal.

But there was something in that initial article that seemed to the informed eye a bit more sinister. That was the suggestion that, in some of the transactions involved, the price actually paid by Thomson was less than that declared to the Land Registry. "That looks very like mortgage fraud", I thought to myself but to be honest that was as far as I went. I was more focussed on preparing for my stabbing.

But then, yesterday, the Sunday Times suddenly put much more flesh on the bones.*

For they had found the anonymised findings of a case before the Scottish Solicitors Discipline Tribunal and had lifted the cloak of anonymity.

Now here I am going to have to get a bit (even more) boring and explain how various types of mortgage fraud work and who and how the perpetrator benefits.

The first relates to "false deposits".

As you will probably know, in the aftermath of the banking crash, the conditions attached to mortgages tightened considerably.

In particular, purchasers were required to fund considerably more of the price from their own resources, a sum commonly referred to as the "deposit". This caused considerable difficulty in the market. There were good numbers of people, particularly first time buyers, interested in buying property but without the ability to raise the deposit.

So, I might be able to afford an £80,000 mortgage, but that didn't mean I could afford an £80, 000 house. For the lender, typically, at he height of the crash, would be prepared to lend no more than 80% of the price. So to buy my £80,000 house I could borrow no more than £64,000. I would need to find another £16,000 from my own resources.

But of course I could afford an £80,000 mortgage. So, here is the thing. What if I didn't buy my £80,000 house for a declared price of £80,000? What instead if I bought it for £100,000. Then, of course, I could use my full £80,000 mortgage. But, I hear you ask, if you didn't have £16,000 for a deposit how did you suddenly get £20,000? And, anyway, why would you pay £100,000 for a house only worth £80,000?

The answer to these two questions are, respectively, I don't and I haven't. I propose, with the assistance of a third party, either the seller themselves, or an intermediary looking to make a profit in the process, to commit a mortgage fraud.

For one or other of these is going to "lend" me the deposit and once the money, combined with the mortgage funds has been tendered as the price, the seller is going to give them their deposit back.

To do this I must commit a fraud in two ways: Firstly, I have to fraudulently mislead the mortgage provider as to my possession of a £20,000 deposit and secondly I have to deceive them as to the true price I am paying, giving them in turn an inaccurate impression of the property's true worth. Meanwhile those providing the deposit, although not directly involved with the lender have almost certainly committed conspiracy to defraud, particularly if, as an estate agent or property developer, they were the instigators of it.

But of course this type of fraud has one major drawback, it requires the knowing participation of the seller.

So that is where "back to back" fraud comes in. It requires more than one principal participant but in this circumstance the seller is completely ignorant and innocent.

Again I will use the an £80,000 deal as an illustration although generally this operates with higher value properties. Mr innocent wishes to sell his property for £80,000. Fraudster one offers precisely that. But, with settlement on the same date, fraudster two then offers to purchase the same property  from fraudster one at a price of £100,000. Fraudster two then gets an 80% loan. Fraudster one never has £80,000. Indeed he or she never has any money. Fraudster two however hands over the full  £100,000 from which fraudster one pays Mr Innocent his £80,000 and proceeds to give Fraudster two the other £20,000 "back". Again fraudster two has committed the frauds outlined above but in this scenario fraudster one, although again never directly in touch with the mortgage lender, has also nonetheless participated in a conspiracy to defraud.

Now there are two essential elements to both these frauds. The first element can be innocent. You need a valuation of the property at the level of the nominal price paid. For a percentage loan is always provided as the lower of the declared price or valuation. At the height of the slump however that wasn't difficult as for a considerable time surveyors continued, sometimes wishfully on other overvalue property.

The second element however can't be innocent. You need a bent solicitor.

For mortgage lenders aren't idiots. Or at least since the crash they haven't been. Any solicitor handling mortgage funds must comply with the standard conditions imposed by the Council of Mortgage Lenders. Two of these are particularly germane here.

The first is that the solicitor must inform the lender and get their agreement to proceed if they know that the deposit is not being provided by the purchaser themselves. Obviously this can be entirely legitimate, where for example it comes from the purchaser's parents but where it is less easily explained, it is highly unlikely that the mortgage provider would release their funds. They intended to provide an 80%loan only. That's where we first came in.

The second is that the solicitor must inform the lender if the seller has owned the property less than six months. Again, there can be legitimate reasons for this, most commonly a catastrophic change in the sellers personal circumstance, but, again if the mortgage provider was informed that the seller had bought the property only that day and for a considerably lower price then again release of funds would be inconceivable.

But of course the lenders rely on the solicitor telling them. If at the behest of his client he fails to do so it is highly unlikely they would ever know.

Unless it is picked up by a routine Law Society inspection.

Which is what happened to Christopher William Hales, formerly a partner with Grigor Hales solicitors, Edinburgh.

As a result, it appears, of a Law Society inspection Mr Hales was found to have assisted in mortgage fraud in no less than thirteen transactions for which he ultimately appeared before the Scottish Solicitors Discipline Tribunal on 13th may 2014 and was then struck off as a solicitor.

It's all in the judgement which, despite its length I encourage you to read in full. Numerous examples of failing to inform lenders of undisclosed deposits, including examples of Mr Hales personally returning these to the purchasers, and several examples of back to backs, all equally undisclosed to the lenders.

But Mr Hales was not the principal actor here, he was simply the facilitator.

The principal actor, time and time again, was a woman referred to in the judgement as Mrs A. Sometimes she acts directly, on others she provides a third party deposit in exchange for a "fee".

And, thanks to the Sunday Times we now know that Mrs A is Michelle Thomson and from there, on reading the judgement, you can deduce that the others involved in the frauds include her business partner, their joint company and, occasionally, her husband.

Now, in May 2014, when the Tribunal decision was issued, Michelle Thomson was something approaching a national figure as one of the public faces of the SNP front organisation Business for Scotland. Indeed, at first appearance, one of the few genuine business people involved with that organisation, most of the others being little more than jumped up PR men. If her up to the neck involvement in mortgage fraud had come to light just three months before the referendum this would have been disastrous for Yes Scotland, for the SNP by association, but most of all for the economic credibility of the Independence cause.

I've got a bit of knowledge however of how solicitors get drawn into mortgage fraud. It usually starts with agreeing to "bend the rules", for a valued client, "just this once". The problem is that once done there is no way back. For, once done, any future reluctance can invariably be met with the response from the client "it would be a pity if the lender, or the Law Society, found out about that first matter". After all, the client could probably maintain they didn't realise they were doing anything wrong. It's not the sort of thing the solicitor would have been likely to have confirmed to them in writing.

And that can be a problem in other walks of life. For example, a political Party reluctant to enrol an individual as an approved candidate could hardly face down a response that they had known of that person's character when the self same person had performed a previous valued service for them. Nor indeed could they take immediate disciplinary action once matters became public. "It wouldn't look very good if Paul Hutcheon got to know how long you've known about this".

But unless the findings of the SSDT are wholly inaccurate, and you will note that the facts were agreed by Mr Hales, Thomson personally is toast. The sentencing guidelines are here. It qualifies for what is commonly known as exemplary sentencing so she'll probably get several years in jail giving rise to an interesting by-election.

With Bill Walker the SNP got away with murder. I wrote about that at the time here and here. It was simply unsustainable on the known facts that they were unaware of his history at the time he was selected as a parliamentary candidate. But the Nats simply stuck to that line and somehow got away with it.

This time, once the dust settles, there must be a more thorough investigation as to who in the SNP knew what and when. The only pity is that this is unlikely to be before next May.

*Unfortunately the Sunday Times second article doesn't appear to be online.

Tuesday, 15 September 2015


In 2010, I voted for Ed. Well, actually, I voted for the other Ed, for I was a Broonie to the end. But by the time I did so it was clear that my second vote, for one bro or the other, was the important one.

To be honest I didn't cast either of my Eds votes with any great enthusiasm. It was more that neither was David. For David was Blair. And Blair was Iraq.

And Iraq was unforgiveable.

I read with interest the Lord Ashcroft focus group report. Patently it reflects that Corbyn has no chance of winning a General Election. Which is why I didn't vote for him.

But, let us be clear. Sure there were lots of £3ers whose loyalty to the Labour Party, or anything,  is, at best, ephemeral. Sure there was some dodgy dealing when it came to affiliated members. But Corbyn won among full members of the Labour Party. Peter Kellner's research seems to indicate that he probably won among Party members of more than five years standing. Even if he might have, among that group, ultimately faltered after transfers, nobody doubts that he won a plurality.

And the reason was Iraq.

Not actually Iraq but what Iraq represented.

The vast majority of Labour Party members knew Iraq was a mistake. Obviously we have within our ranks a peacenik cadre who think any war is a mistake. That appears to include our current leader. But most of us don't take that view. We are certainly for the use of military force. But only when it is for a justified purpose and reasonably clear as to its objectives.

And we simply could not see the justified purpose of Iraq. Or, in so far as it seemed to have objectives, agree with these objectives.

But even that wasn't the point. The point was that something opposed by the vast majority of Labour Party members; that something opposed in their hearts by a majority of Labour MPs; that something which the second most important figure in the Party (Brown) could send coded signals was not his doing; that this something happened anyway.

For the iron grip of New Labour was such that the Party's view was irrelevant. And worse still that for anybody even at the very top of the Party to dissent was instant political death. When Robin Cook resigned he did so in the certain knowledge that he wouldn't be back. Any back bench MP, no matter how able, joining the rebellion, knew that doing so would end their career. Forever. You can't help feeling the younger Miliband was only saved from this fate by not being an MP. That is, of course, assuming he would truly have voted with his conscience if he had actually been there.

It would be an interesting exercise, if you could, to go back to that 2003 PLP and ask them, unattributally, how they would have voted in a genuinely free vote. Not hiding behind the "if we knew then" formulation but, truly, what was their view at the time. My feeling is that even among the "Red Tories" there was nothing like a majority for participation. For all of these people had been elected as Labour MPs. And nobody achieves that imprimatur without some feeling for our Party. And the Party's view was more or less unanimous. But they knew that dissent was suicide.

In Scottish terms there was the march. I was on that march. It was a great day. Possibly the last great march of my lifetime. NUS Scotland reunited over several generations. And now able to afford a good lunch afterwards. But where were my comrades of twenty years standing? Jack, Wendy, Frank, Pauline, Jackie and so many others? They were at the march's destination, inside the SECC. For Blair was there and as MSPs they were expected to stand beside him. Or die. Who knows, perhaps if I'd been an MSP I'd have made the same call. Although I can't help feeling that last September the 15% who got the blood and soilers to their 45% were incubated that day.

And then of course we, Party majority opinion, after Iraq, were proved right. And yet, under the iron diktat of New Labour, even that could not be acknowledged. No matter how patently true subsequent events proved it to be.

But, and I emphasise the but, the long term significance of this was not really about Iraq. It was about the disconnect between the leadership of the party and the opinions of the thousands of activists who had worked to get them elected which that represented.  Iraq was just the lightning rod.

And, twelve years on, Corbyn has proved to have been the earth to that lightning rod.

Almost all the post election analysis has been about why Corbyn won. But, at least as importantly to those of us who haven't given upon the Labour Party altogether is why the others lost.

None of them offered any role to the wider Party except followship. To the right for Liz; straight on for Yvette and whatever the day of the week the polls suggested for Andy.

Corbyn, if not perhaps many of his ultra left allies, suggested that we let a thousand flowers bloom. It's hopeless politics in the real world. But he wasn't appealing to the real world. He was appealing (as it turns out very appealing) to the Labour Party.

He won't last.

But let us be clear. If next time round any of the contenders stand on a platform of "I'll be your leader and you'll shut up" then they'll suffer the same fate as Andy, Yvette and Liz.

For we remember Iraq.

Saturday, 12 September 2015

Refugees Welcome?

I've been a legal aid lawyer all my life.

And what goes with that is a lot of interaction with homelessness.

Not just in relation directly to "housing" matters. To people losing their home for reasons related to the house itself: its uninhabitable condition; its occupants inability to meet the continued cost of living there or its owner's unwillingness to allow their occupation.

No, homelessness also arises for other reasons: domestic violence; pathologically antisocial neighbours; vigilantism against certain types of offenders; chronic private debt; failed business ventures.

It is all part of my "daily grind".

And I do what the law allows me to do to help while recognising that, to some degree at least, many of the clients are the partial, or more, authors of their own misfortune. And regrettably, even some of those who are not, would not be people with whom you would wish greater familiarity.

But, every so often, you do get a case where you have someone who seems a genuinely decent individual, or family, who is facing uncertainty as to where they would be sleeping that very evening.

And here is the thing. I've got a big house. Until Maureen became ill, we had three spare bedrooms and one spare bathroom. We even have a largely unused garage that could be used for storage. Arrangements that have, now that we have to accommodate Maureen's illness and the carers who go with it, proved to be a Godsend but which were, for many years, a middle class indulgence. We bought the house perhaps in anticipation of kids who never came but we stayed in it because we liked it and we could afford it. Simple as that.

But for fifteen years I dealt with all these homelessness cases without once considering that, as a final resort, these clients could come and stay with me.

Now, you can rationalise this in any numbers of ways. That individual acts of charity only excuse the failures of the system. That there is "no point" in helping help only some when you can't help more. That it is patronising to select the deserving case(s). Less charitably, that perhaps there is something, on wider acquaintance, that might reveal them to be not quite so deserving.

All of these things might have a grain of truth although similar arguments have never stopped me making any number of charitable donations to domestic causes that I properly believe should be funded by general taxation. Or indeed stopped Maureen, before she was ill and in a way I have continued, sponsoring individual African children, through a charity of her choice.

No, the reason in the end I never took any of these people in was selfishness. I like where I stay and I have no desire to share it with anybody else, no matter how deserving.

So, if I had been a politician asked to take in a Syrian refugee, my answer would have been "Sorry, but no."

And it is utterly delusional to suggest that this would not be the similar response of the vast majority of other British people asked the same question. Not just to their home but to their Country.

So why are we pretending otherwise?

Because no-one wants to admit being selfish. Or at least no decent liberal, let alone socialist, does.

Britain is proud of the 0.7% of GDP we spend on foreign aid and it is to he credit of the Prime Minister that he has maintained that New Labour commitment in the face of siren calls from his own right wing. But could we do more? Of course we could. A 1% increase in the basic rate of income tax could significantly enhance that commitment and, yet, even then, the poorest British citizen contributing to that would remain infinitely better off than every single recipient of that aid.

The right might trot out their arguments: "too much would be diverted to corruption"; "it would still be a drop in the ocean"; "the Lord helps those who help themselves"; etc, etc. But the left should be more honest. The British people wouldn't vote for this. Nor would the Scottish people. The Scottish Government does have devolved competence to develop its own aid programme, notably to Malawi, but why is it not much larger? Because Scots would rather have no tuition fees. Here. And free prescriptions. Here. And, it would appear shortly, to have reduced Air Passenger Duty. Here.

I say all of this only to expose the hypocrisy of those whose response to the Syrian Refugee crisis is apparently "let them all come here."

The one thing you can say about the Greens is that they have a, sometimes unworldly, honesty. Caroline Lucas last week pointed out that if Britain took our share of the Syrian refugees currently wishing to resettle in the EU then that would amount to "only" 240,000 people. A figure Ms Lucas, with commendable consistency, suggested we volunteer to accept as it was "only" 0.4% of the UK population. Although presumably as she trotted out her "we've got room" message she wasn't proposing them housed anywhere in the green belt. Despite that being where the room is.

Nicola, never wishing to be outflanked by the evil Tories, has largely stuck to suggesting Scotland could take "more" than whatever Cameron is suggesting but the only figure that she has actually given is "at least 1000". Which is actually less than our share of Cameron's belated figure of 20,000. But Scotland's share of Ms Lucas's figure would be about 20,000 for us alone. Maybe another 19,000 is implied in the First Minister's "at least" formulation but somehow I doubt it. It seems improbable anyway that the leader of a Party predicated on getting back the money "the English have been stealing from us" wishes to do so only to give it away to people of some other nationality.

For all of these people would need housed; their children educated; their health care needs attended to and, not least, they themselves ultimately found employment. Now, all this could be done. We live in one of the very richest countries in the world. Taxes could be raised; money could be borrowed; the world scoured for the professionals to come here to deliver the support services required

Except that there is no sign at all that the electorate are prepared to make such a sacrifice to address poverty and disadvantage here. So, really, are they going to do so for people from half way across the world?

We should stop kidding these poor refugees on. "Refugees Welcome" might give a warm feeling to those expressing that sentiment but even most of those asserting that are not truly proposing to welcome them in the numbers remotely necessary to solve the problem within these shores alone.

The evil Tory Government is right. Not because they are evil Tories because they are the Government. Any British (or Scottish) Government. Not just people holding up signs. We can only do so much here. Because that is all the electorate will be prepared to fund. The solution lies not in misleading people risking drowning off the Turkish coast that if they are persistent enough they will one day find themselves in comfortable British suburbia. In the short term it can only be by mitigating the conditions in the refugee camps on Syria's borders. And in the longer term by somehow resolving the modern Hell that Syria itself has become.

For the British people are selfish. So, for what its worth, are the peoples of all other Countries in the West. There might be a small minority among us who, genuinely, would make the financial sacrifices involved to make a difference. But it is beyond cruelty for them to ignore their own minority status and, in the process, to give desperate people utterly false hope.

Thursday, 3 September 2015

It's Still Over.

And so, almost exactly a year on from the last one, we have an opinion poll indicating that Scotland would vote Yes in an Independence Referendum.

Now, logically, this should be a problem for those of us who oppose Scottish Independence. Our majority is apparently slipping.

Except it is not. For an instant answer to an unspecific proposition is of course very different from what would be involved were there to be another referendum.

Ironically, the people for whom this poll is a problem are the leadership of he Nationalist movement. Not the common herd, who even now are no doubt seized with a spirit of "one more heave". Hope over Fear as they would have it. Hate over Sense might be a more accurate description. Whichever, not much thinking is involved. But the Nats do have a thinking element.

That thinking element went for broke last September. Until late on, they hadn't ever really thought they had a chance. Notwithstanding the enthusiasm of their tartan clad foot soldiers, they had read all the polling data. More to the point, they knew that they were walking an intellectual tightrope on the economic argument; that the truth was that an Independent Scotland would lead to an immediate reduction in living standards. Some genuinely thought that in the medium to long term this would be reversed. Others that, even if it wasn't, the sacrifice was nonetheless worth it for a flag. But, of course, neither scenario was the proposition being put to the electorate. Although that was covered up as best as possible the thinking element feared at one point the curtain would be pulled back to reveal not the Wizard of Oz but an old man with a trumpet.

Then suddenly and unexpectedly they thought they might actually win. And these people, the thinking Nationalists, genuinely believe in independence. So they thought "to Hell with it!" and allowed themselves to become allied with a complete absence from economic, even factual, reality.

So we had tens of thousand of Yes leaflets issued maintaining there were secret oilfields whose existence would only be revealed after the vote; we had the nonsense of an entirely invented "export duty" which allocated much of the value of the Scots whisky industry to its English ports of export; above all we had fantasy spending promises predicated on a price of oil that bore no resemblance to any respectable independent forecasters view or even the affordability of these spending promises no matter what the conceivable price of oil. All of this then whipped up into a hysteria over the failure of the "Main Stream Media", and particularly the BBC, to "reveal the truth".

All of this would inevitably have unraveled had there been a Yes vote but the Nationalist calculation then was that it would be too late to go back. As I pointed out before the vote, the stated intention that independence would have been achieved by March 2016, before the next Scottish Parliament elections, was precisely to rule out any opportunity for second thoughts then on the part of the electorate.

Now the problem with this was what happened if the Nats didn't win. As they didn't. It is clear now there are no secret oil fields; export duty no more exists today than it ever did and oil is now trading at something south of $50 a barrel as compared to the"predicted" $113 in the White Paper. Any early rerun of the referendum would therefor start with it being clear, not based on simple opposition assertion but by by now established fact, that the proponents of independence in 2014 had been proven to be, at best,  lunatically optimistic and, at worst, actively deceitful. Yet it would be the same people who would be asking the electorate to "trust" them with their support in any re-run.

It is for that reason alone that there will be no cast iron commitment to a second referendum in the SNP's 2016 manifesto. Not that they couldn't win the election on that basis but rather that they would simply lose any Referendum again. Memories will need to have faded a bit before this problem goes away. The same thinking Nats know that.

But there is something else that would need resolved before a second referendum but which cannot. Cannot ever I'm afraid. That is the issue of currency.

There is an emerging consensus on the Nationalist side that they were badly damaged in 2014 by their adherence to the Pound and events since in Greece have demonstrated in spades the illusory nature of suggesting that a significantly different economic policy could be pursued, within a currency union, against the wishes of the larger partner(s) to that union.

So, the nationalist argument, is shifting to suggesting that an independent Scotland should, at any re-run referendum, be proposed to have its own currency. With one bound they would thus be free, they claim.

But say what you like about Alex Salmond, he is not daft. Would he, in an ideal world, have preferred to have fought in 2014 on the proposition of a separate Scottish currency? Of course he would. He's a nationalist and proper nations don't use another nation's currency Why didn't he then? Because, as I say, he is not daft.

If there was the proposition for a separate Scottish currency that currency would immediately have a shadow value on the international trading exchanges. And if that shadow currency was predicated on Scotland emerging into the modern world with a massive public spending deficit and no governmental proposals to address that, (the current SNP proposal), then you can be guaranteed that the value of the shadow Pound Scots would trade internationally at significantly less than the value of the Pound Sterling.

Now what would that mean in base politics? It would mean that the proposition being put before the electorate at any future referendum would be that anybody in Scotland paid by the Government (pensioners, Civil servants, the chronically sick and the unemployed) would, immediately on independence, suffer a significant cut in their own standard of living. The Scottish Government might tell them that their payment in Pound Scots was worth as much as their former payment in Pound Sterling but that assurance would last no further than a trip to Tesco to buy an imported banana, never mind the outcome when they tried to convert their currency to pay their (still Sterling denominated) mortgage or car loan. This was why, in the end, Syrzia realised that they couldn't "end austerity" by leaving the Euro. The value of the New Drachma wouldn't be simply what the Greek Government said it was worth. It would be what the World was prepared to pay for it. But private and public debts owed in Euros would still be payable in Euros. Even if the debtor only had Drachmas.

And that's why Eck stuck so firmly to Plan A a year ago, even when it clearly was damaging his own cause. It was still doing him less harm than any alternative.

This problem won't go away. And there is one other new factor and that's the Tory majority government. When Osborne, Balls and Alexander ruled out a currency union, there was at least something to the bluff the Nats pulled. I paraphrase: "Osborne might be a Tory Bastard but Labour and the Libs are Parties with big supports in Scotland. If it comes to it, they'll prove more flexible".

Well, Balls and Alexander are no more, alongside their big supports in Scotland. There is only the Tory Bastard now. When he says no it will lack all credibility to insist he doesn't mean it.

But between the Scylla of the redundant plan for a currency union and the Charybdis of a devalued free floating currency, there is no electoral safe passage for the good ship Independence Referendum II. And there never will be.

So it is all very well for the Bravehearts to demand another go as soon as possible. As indeed it is all very well in a random poll for people to answer Yes to an unspecific proposition. The thinking Nats realise that before you can request a meaningful answer however you need to have framed the question. And they are scratching their heads how to do that in a way with any realistic prospect of success.

I'll save them the bother. As I say, they can't.

The problem for the thinking Nats is that it isn't entirely clear a majority of the SNP membership appreciate that. After all, thinking and nationalism have seldom been easy bed fellows and this poll only strengthens the internal hand of those not particularly given to the thinking. So the poll might indeed hasten an attempt at a second referendum. The problem, as the thinking Nats know, is that it wouldn't unfortunately affect the inevitable result.

To lose one Referendum might be unfortunate but to lose two might look awfully like carelessness.