Mobile phone traders sentenced

Two directors of mobile phone traders have been sentenced after pleading guilty to fraudulent trading following an investigation by the Serious Fraud Office (SFO).

Jonathan Shulton and James Cahill were sentenced at Southwark Crown Court to two years, three months imprisonment and 240 hours community punishment order respectively.

Directorship disqualifications apply and confiscation proceedings are underway.

The fraud worked like this: mobile phone network companies such as Orange have agreements with a number of agent companies to distribute their phones, accessories and airtime contracts. The agents in turn use dealers who sell the equipment to consumers via mail shots, telesales and adverts. An agreement is made between the agent and the dealer, that for every successful connection, an introductory commission is paid to the agent. The agent then pays a reduced commission to the dealer.

Should a connection be unsuccessful, say a customer changes their mind, or never makes an order, a ‘clawback’ ensues, where the mobile phone company gets its money back from the agent, and the agent receives it from the dealer. If the dealer fails to give the money back, ultimately the agent takes the loss and has to pay back the mobile phone network company.

Shulton and Cahil managed and controlled a number of ‘dealer’ companies under the ‘Global Group’ and 'Bellstar Telecom' brand, and had allegedly realised early on that if a company is liquidated the debts can remain unpaid. Various companies owned by the pair were liquidated, with a new company being incorporated and trading exactly the same as before, with the same premises and staff.

The total loss caused by both companies, according to the SFO, amounted to £1.6m.

According to the SFO Shulton used the proceeds of the fraud to live an extravagant lifestyle, buying a house in an exclusive area of London and owning several fast cars. He and his family also enjoyed regular expensive holidays.

The SFO investigation began in August 2003 and the two men were charged in July 2006, pleading guilty in July and August 2008, just before the trial commenced in September this year.

Shulton pleaded guilty to three counts of fraudulent trading, one count of retaining a wrongful credit and one count of acting in breach of a director’s disqualification. He was sentenced to 27 months in prison and disqualified from acting as a company director for eight years.

Cahill pleaded guilty to one count of fraudulent trading and was sentenced to 240 hours community punishment order. He was also disqualified from acting as a company director for four years.

Confiscation proceedings have been adjourned until 4 March 2009.