Paul Smith, director of Blue Force Property Limited, a letting agency in Hornchurch in Essex, has been disqualified for nine years for losing 1.2m belonging to over 300 British Armed Forces personnel. The disqualification follows an investigation by the Insolvency Service.
Mr Smith, 47, of Manningtree, Essex, gave an undertaking to the Secretary of State for Business, Innovation and Skills, that he will not act as a director of a limited company from 11 February 2013 to 11 February 2022.
The investigation found there was inadequate ring-fencing of Mr Smiths business accounts which meant that, when his company went into liquidation in March 2011, there was a 1.2 million gap in the books - all owed to armed forces personnel.
Blue Force Property was set up in 2004 exclusively for clients from the forces, to assist them in buying residential properties and letting them out while they were serving overseas or living in armed forces accommodation.
The company managed these lettings, collecting rents and encouraging its customers to pay into property management accounts which were supposedly set up for each client individually, from where the mortgage, bills and expenses for their property would be paid.
Mr Smith and his staff repeatedly assured the soldiers that any surplus funds they paid in would be held securely in a ring-fenced account. But in reality, all of the money went into one central client account from where thousands of property-related payments were made.
The company then moved funds from this client account into its own trading account and also to the accounts of an associated company. These transactions meant that when the firm went into liquidation, the soldiers lost their money.
David Brooks, a Chief Examiner for the Insolvency Service stated:
Many of the people who lost out as a result of this companys demise were stationed overseas and had no choice but to trust Blue Force to look after their affairs on their behalf. This trust was broken and the money money that many of them had risked their lives to earn - was lost.
Directors who seek to gain an unfair advantage over their competitors by using clients funds to prop up their own accounts will be investigated. This behaviour is unfair to those who play by the rules and protect their clients funds and, most of all, it is unfair to the clients who risk losing their money.
The Insolvency Service will seek to remove these people from the business environment.