Edward Cosgrove was sentenced at Southwark Crown Court today to 4 years' imprisonment after admitting he attempted to obtain by deception a grant of £84,000 from the Welsh Assembly Government and to raising false invoices of nearly £2 million to a trade finance firm in order to keep his ailing Deeside-based CD/DVD packaging business afloat.
Edward Herman GuyCosgrove (dob 28/12/49), had pleaded guilty earlier this month to seven counts of False Accounting (totalling around £2million), contrary to Section 17 (1) of the Theft Act 1968 and one count of Attempting to Obtain a money transfer of £83,910 by deception contrary to Section 1(1) of the Criminal Attempts Act 1981.
Background
Edward Cosgrove was the founder, principal shareholder and managing director of Cosgrove Packaging Ltd, a business that manufactured and supplied video and DVD cases for the media industry. The company was based at Trafford Park Industrial Estate in Manchester until February 2003 when it relocated to Deeside, North Wales.
The relocation to Deeside gave rise to considerable financial and operational difficulties. In or around June 2003, to offset these financial difficulties, the defendant directed that false invoices and despatch notes be raised and submitted to the factoring agents, Davenham Trade Finance Ltd, the trade finance company used by Cosgrove Packaging Ltd from May to July 2003. His best estimate of the value of these false invoices was "no higher than £1.9m". Cosgrove indicated that his motive was to see the company through what he anticipated would be short term cash flow difficulties. Six of his customers identified over eighty invoices as false. It is these false invoices that led to the seven counts of false accounting. The customers in respect of whom the false invoices were generated were selected by Cosgrove on the basis that they were likely to place and pay for similar orders before the debt to the finance company became payable; in fact the orders did not materialise.
The defendant maintained that the monies obtained from the finance company were used to pay company creditors, wages and running costs and denied that towards the end of the period monies so obtained were being used to repay the finance company in respect of the earlier false invoices. In fact, although the majority of monies received as a result of the false accounting appear to have been applied on behalf of the business. Payments were made from the company bank account for the defendant's personal use and in particular a payment of £25,000 to his girlfriend. The defendant continued to receive his director's salary throughout the period covered by the charges.
In anticipation of the company's relocation (due to the expiry of its Trafford Park lease) Cosgrove Packaging Limited commenced an application for Regional Selective Assistance from the Welsh Assembly Government in June 2001. A relocation grant of £390,000 was awarded which was subsequently to be paid in instalments of £260,000, £50,000 and £80,000. The first instalment was paid on the 5 December 2002.
On the 23 April 2003, prior to payment of the second and third instalments, Cosgrove Packaging Limited applied for a second grant. The information from Cosgrove Packaging Limited, for the Welsh Assembly Government, was expected to be "correct and complete…in respect to company accounts". Additionally Cosgrove was required to confirm that the business was "not in default of, or in arrears with, any finance lease, hire purchase or extended credit agreement". The grant conditions specify a number of circumstances in which the Welsh Assembly Government may withhold payment and requires that any occurrence of those circumstances should be disclosed as soon as possible, this includes the company becoming insolvent. The application for a second grant which commenced in April 2003 also indicated that "the company is still trading profitably". In reality Cosgrove Packaging Limited was by this stage dependent on monies obtained from false accounting in relation to the finance company. As a result of this second application further assistance in the sum of £200,000 was approved on 29 June 2003. On 28 August 2003 Cosgrove Packaging Limited applied for an interim payment of the second grant. An interim payment of £83,910 was approved on the 7 October 2003. The payment was due to be made on the 9 October 2003 but in the event was stopped because the Welsh Assembly Government became aware that Cosgrove Packaging Limited was going into receivership. This second application resulted in the count of attempting to obtain money by deception.
Proceedings
Cosgrove Packaging Limited entered into administrative receivership in October 2003. Kroll were appointed receivers and on discovery of the false invoicing, the matter was reported to the Police and referred to the Serious Fraud Office in March 2005. The case was accepted in May 2005 and a joint investigation with North Wales Police ensued. During the investigation Cosgrove moved to Germany and he declined to return to the United Kingdom to be interviewed. Consequently the Serious Fraud Office obtained a European Arrest Warrant and Cosgrove was arrested in Germany and returned to the UK by the German authorities. He has been remanded in custody since his return in June 2006.
Cosgrove was sentenced today at Southwark Crown Court by HHJ Rivlin to 4 years' imprisonment on each of the 7 counts of false accounting to run concurrently and 3 years on the one count of attempting to obtain a money transfer by deception also to run concurrently. He is to serve half of the term and will be released on licence. The 143 days that he spent in custody in the UK awaiting sentence will be deducted from his time served.
A count of Fraudulent Trading was not proceeded with and was left to lie on file.
The SFO Case Controller was Philip Blakebrough.
Serious Fraud Office
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