Rogue insurance broker admits £10m scam selling bogus policies
Key quote "Had any large claims been made or a large number received, Tribune would have had insufficient funds to meet them." - FISCAL DEPUTE LORAINE HIRST
Story in full A ROGUE insurance broker yesterday admitted selling 10 million worth of bogus policies, bringing financial ruin to one customer and misery to tens of thousands more.
John Walker, 57, ran a company named Tribune Risk & Insurance Services, based in Eskbank, Midlothian, which lured 43,000 people to take out home insurance policies. But Edinburgh Sheriff Court heard that Walker had failed to ensure they were underwritten, meaning no money could be paid out for claims.
One policyholder whose house was partially destroyed by fire was left 46,000 in debt to a builder who had already carried out renovation work. The building firm was forced to lay off staff as it tried to recover the money.
Yesterday, Walker, known as Jack, pleaded guilty to obtaining 10,945,000 by fraud by selling unauthorised policies. Edinburgh Sheriff Court heard he had lied to the Financial Services Authority when a complaint was made by a former customer. He misled his company's 100 staff about the fraudulent dealings by pretending that firms such as Lloyds of London were underwriting the policies.
After two years of rogue dealing, an investigation finally revealed he was issuing home insurance documents without proper cover. Tribune Risk & Insurance Services Ltd was liquidated on 10 December, 2003. Customers in the middle of claims were left out of pocket and 43,000 policyholders discovered their documents were not covered by insurers.
"The biggest impact of the crime could be said to be in relation to individuals who believed they were fully insured, only to discover they had no insurance in place," fiscal depute Loraine Hirst told the court yesterday.
"There was a fairly small number of people who were making claims at the time of the liquidation, but the effect on these individuals was substantial."
When the company was shut down, staff were immediately laid off just two weeks before Christmas. Some also had their own insurance policies through the broker, which became defunct.
Can Do, a finance company which gave Tribune a commission for loans generated from its clients, lost about 2 million in unpaid instalments. Ms Hirst explained that Tribune customers who could not afford lump-sum payments were directed to Can Do to pay the annual amount in monthly instalments.
Meanwhile, the Walker family had taken 550,000 from the company between 2001 and 2003 to buy a Lexus car, make pension contributions, pay 25,000 towards a flat and as wages. The court heard that money had also been ploughed back into the business and Walker's home had been remortgaged.
Ms Hirst told Sheriff Kenneth MacIver that Walker had set up the company in February 1999 with his wife, Evelyn, 57, and son, Paul, 31. The broker did not deal directly with customers, but sold policies through financial and mortgage advisers and other agencies who received high rates of commission. Initially, he had traded properly with household policies underwritten by Highway Homes. But in December 2001, this main insurer pulled out of the arrangement.
Walker, of Marchwell House, Penicuik, Midlothian, still had underwriters for commercial policies but failed to get new insurers for individual householders. Despite this, he continued with this side of the business.
"Tribune was receiving payments from agencies and issuing policy documents, but not placing them with authorised insurers," Ms Hirst said.
Staff were required to put stickers referring to Lloyds of London over the Highway Homes name on documents. The broker covered claims with the money brought in by premium payments, but Ms Hirst said: "Had any large claims been made or a large number received, Tribune would have had insufficient funds to meet them."
Walker, who has a previous conviction for fraud, sank into financial problems and gave staff weekly budgets for claim pay-outs. When a retired lawyer was unimpressed by her paperwork, she cancelled her policy and contacted the FSA.
Sentencing on Walker was deferred yesterday pending reports. His wife and son were also accused of the same charge, but their not-guilty pleas were accepted by the Crown.
Search for a job
Search for a car
Search for a house
Weather for Edinburgh
Friday 24 May 2013
Temperature: 2 C to 12 C
Wind Speed: 21 mph
Wind direction: North east
Temperature: 5 C to 17 C
Wind Speed: 13 mph
Wind direction: West