Defending allegations of benefit fraud

Why defend benefit fraud?

On the face of it, benefit fraud is very hard to defend. Faced with an allegation that a certain amount of benefit has been claimed to which you are not entitled it is difficult to see how a criminal defence can be mounted. The amount claimed appears to be black and white – taken from the relevant DWP record. The circumstances of entitlement appear to be clear, you would have failed the entitlement test if you had ticked the correct box on the form. So you end up going to prison for two months for receiving a duplicate payment of £90.38 Jobseeker’s Allowance! This was an actual case reported by Northern Ireland’s Department for Social Development in May 2011.

It is clear that there may be cases where a robust defence should be mounted to what might appear to be a heavy handed and possibly a knee jerk reaction by the authorities to what is a massive problem within the UK.

The Problem

Benefit fraud is one of the most insidious crimes that we experience in the UK. Not only does it reduce the funds available for the genuinely disadvantaged, but it increases the tax burden of the generally hard working population who then feel less charitable to the worse off.

It is generally accepted by the Government and reputable commentators that the level of benefit fraud within the UK is at least £3.3 billion out of a total welfare bill of some £200 billion. In addition there are some £2 billion losses due to tax credit fraud – bringing the total to more than £5 billion.  This is a massive sum of money, and very likely to be under stated. However, there is some resistance by the DWP and a raft of the more liberally minded to these statistics because they say it is propaganda to scare claimants into feeling guilty. One thing is certain, most fraudsters will never feel guilty unless caught!

According to the 2010 National Fraud Authority 1st Annual Fraud Indicator (based on 2008 statistics) fraud against the public sector amounts to 58% of all total fraud. The NFA’s figures are unlikely to be accurate, and are somewhat historical anyway, but there is no doubt that welfare benefit fraud and tax evasion together must form a very large proportion of the UK’s total economic loss to fraud, probably measured in several £tens of billions.

Is there a solution to benefit fraud?

Finding a solution to the problem of benefit fraud has eluded administrations past and present. The levels of benefit fraud have risen dramatically year on year in line with the massively increasing benefit budget.  What started out as a half billion give-away in 1950 (about 4% of GDP at the time) has risen to a £200 billion annual bill (now 14% of GDP) today.  The answers probably lie among the following:

  • An improved benefit system
  • Better trained benefit staff
  • Better fraud prevention controls
  • More focus on organised benefit fraud crime

What perhaps shouldn’t be a focus without a better, fairer system is a crackdown on the disadvantaged claimant who is tempted into some extra money due to the lax fraud control procedures and ease with which money can be claimed. Although I feel very strongly that new migrants who take money to repatriate it, building houses and living lavish lifestyles abroad, should have swinging confiscation orders made against them and deported – there are many people at the other end of the scale who deserve better help and a proper defence when things go wrong.

An example of defending a benefit fraud

I am using a hypothetical example of a benefit fraud, as I do not want to compromise any of the persons that I have assisted as an independent expert forensic accountant.  Mrs A was married for a number of years and had four children. When the eldest was about nine, Mr A felt that he had had enough and left the family home, never to be seen again. Mrs A, having rent to pay and children to feed, was advised to claim a number of benefits – as with the youngest child only a year old, it was impossible for her to do even a part time job. She was able to claim housing benefit and income support allowing her to live anything but an extravagant life with her four children.

As the years went by she struck up a new relationship with Mr X. He would come round once or twice a week for supper. As the weeks and months went by and the relationship developed he would start staying over. Eventually he moved in.

Mr X earned much less than the national average wage, but having him around was obviously an advantage for Mrs A. However, their lifestyle was still not luxurious. Mr X ran a small second hand car, and there was no spare cash. He contributed his share of the food bills and probably helped out with other bills.

Mrs A should have informed DWP immediately Mr X moved in. Because she didn’t, DWP deemed that she was not entitled to benefit dating back to a very early date that they assumed Mr X moved in. They want four years of benefits back and are prosecuting for the criminal offences – the amount would merit a custodial sentence. Confiscation proceedings could follow.

The problem

It would be difficult to say that Mrs A was not guilty of benefit fraud. However, she has not benefited by the amount that is being reclaimed. The housing benefit and income support that she received went into her living expenses and for her children’s welfare. Any extra money she received from her partner went to pay for his food and the additional costs she incurred for him. She probably benefited from being taken places in the car (thus avoiding public transport costs when shopping etc) and it is likely that there would be some additional financial benefit – more cash for Christmas, birthdays etc. It is also very important to note that had Mrs A declared her new “lodger” or “common law husband” her existing benefits might decrease or even disappear – but she was potentially eligible for different benefits such as working tax credits on the level of household income and child tax credits for her four children.

How Mark Jenner & Co can assist in such cases

By taking a common sense view on such cases, which initially seem to be black or white, it is possible to present a more rational scenario that may in some cases find favour with the prosecutors and the court.

Using hypothetical figures:

£
Total benefit claimed in four years 40,000
Partner’s income after tax in four years 40,000
Total household income in four years £80,000
 £
Partner’s income after tax in four years 40,000
Child tax credit 10,000
Working tax credit 12,000
Income support 0
Other benefits 0
£62,000

In this case, Mrs A and Mr X lived in a household that is £18,000 better off than it should have been.  In actual real cases it may be that the alternative benefit entitlement is more than that claimed, or other mistakes have been made. In one real case I had proposed this type of work for a solicitor on behalf of his client. The Legal Services Commission had actually agreed the funding and I was ready to start. However, I was instructed not to proceed because once the Crown learned that a forensic accountant was appointed they dropped the case!!

Even if a case isn’t dropped, it is hoped that some sensible level of community service is awarded in lieu of a custodial sentence, and a manageable level of real benefit, if paid back over a number of years, will satisfy the demand for justice.

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About Mark Jenner

Mark Jenner is an experienced forensic accountant specialising in fraud and white collar criminal matters. He provides independent financial investigation and expert accounting witness services to police forces, fraud regulators and criminal defence lawyers, also providing assistance and solutions to organisations embroiled in financial disputes.

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